USEFUL BUSINESS INFORMATION
OIL BUSINESS FACTS
THE UDTA IS DEAD
Buyers of fuel products, who plan to use their exit buyer’s logistics, are “flippers”. They are always seeking procedures that give them a (less than 48 hours old) Fresh SGS report, and an Unconditional Dip Test Authorization (UDTA) which means no conditions prevent them from testing the fuel, getting Proof of Product (POP) before they are required to make any payments for the fuel.
Why? Finding a true, Unconditional Dip Test Authorization (UDTA) doesn’t exist in Rotterdam anymore. Even if the procedures, you negotiate with your supplier, do not state that a TSA or tank farm endorsement of the TSA is required, the Port Authority now is frequently requiring the buyer’s Tank Farm to issue an Authorization to Verify (ATV) their Tank Storage Agreement (TSA) before they will admit the buyer into the tank farm to do test the fuel.
Post-September 2018, this is a condition. Therefore the UDTA is non-existent. To get a (DTA), the port authority in Rotterdam requires a tank farm endorsed TSA, essentially a Notice of Readiness) NOR, be provided, which depending on your tank farm, can cost you 10K-85K before you can get in to test the fuel.
Just because the procedures state UDTA, does not mean that the Port Authority will let you enter to dip the product, without the Port Authorities “condition” that your TSA be endorsed. Why? Because if your Exit buyer fails to pay for the fuel in a timely manner or has a problem with their TSR, the fuel will be moved into your leased tank farm and you as a flipper need to have the money to pay for the tanks.
Most flippers are not prepared financially for delays or defaults, and the number of failed transactions in 2018 was backing up the port, which is why the Port Authority is now essentially requiring NOR’s on buyer’s TSA’s even if they never plan to use their own tanks as they are planning to exit to their exit buyer’s tank farm.
MITIGATING RISKS
The Fuels Trading Industry is full of new players trying to enter this lucrative business sector. They come in aggressively wishing to connect to buyers and sellers to penetrate the trade. It is seen as an easy way to make money. This has opened up a venue for scammers and fake deals that is doing a lot of harm for all. Jargons never heard before in the industry started appearing. Financial instruments such as POF, BCL, SBLC, DLC, etc started floating around on WhatsApp and other social media platforms. Many started losing money to scammers and fake deals because of their greed and ignorance of reality, more than anything else. Now they have started treating everyone as untrustworthy and are imposing conditions that are also not the norm in this industry, such as asking for Past Performances, Proof of product, SGS Reports visits to tank farms, etc, before even starting a formal process of purchasing the product. Sellers who provide all the proof of product, etc. even before even an LOI can be issued, demonstrate their non-experience or their incapability to perform or transact in this industry, no matter what their reasons may be. They may even be scammers for all you know. Their naivety, inexperience and greed has resulted in many losing money in this trade. This is not a burden that they can unload on a bona fide seller or buyer in this industry. This appears to be a right of passage a newcomer has to go through, even though the real reason is the desire to make huge amounts of profits (a myth) in a short period of time (another big myth).
In conclusion, the main reason there are scammers is because there is a big influx of clueless and greedy buyers, agents, brokers, intermediaries and the lot.
So when a buyer comes to you and starts making all these demands to seek proof of sale or products, etc, it shows that they are not prudent in their past transactions and now view everybody else as fake or scammers. Yet, they are still desirous to be in this industry. The rewards are seemingly very ‘intoxicating’. What we also have discovered is that 99% of these ‘buyers’ are brokers who are trying to get high net worth individuals to invest in this industry. It becomes a case of the blind leading the blind.
A real buyer ascertains the bona fide of a seller by scrutinising the sale procedures. In the procedure the buyer will weigh his risks. Whatever the risks may be, there is one constant, there is no such thing as getting any proof of product without any cost of sale incurred by both parties.
The cost of sale for the buyer would be having an active Tank Services Agreement (TSA) with a minimum of 3 days paid rental/credit. Please be advised that in every actual TSA there is a refund clause that can be activated, if any transaction fails to materialise. So if a buyer says to you that he has to pay his tank farm before getting any proof of product, tell him while he has a refund policy for his tank rental, there is no refund policy for the seller to fall back on from SGS for conducting a test within 48 hours, to submit as the initial proof of product, if the buyer pulls out of the deal at this stage. The risk is all borne by the seller.
Once the buyer’s tank management company verifies the SGS report, both the buyer and seller will be successful in proving each other’s operational ability to carry out this transaction. The POP is issued, any Dip Test is made, payment is issued and cargo is injected into buyer’s tank. As you can see the process in the procedure filters both the buyer and seller.
11 DEADLY DON’TS FOR OIL BROKERS IN CLOSING OIL DEALS
How to Close Petroleum Trade Deals – 11 Deadly Don’ts for Oil Brokers in Closing Oil Deals
By Benjamin Anosike, PhD
There are some common deadly don’ts and mistakes frequently made by brokers in trying to close deals.
Most (in deed, just about ALL) brokers and intermediaries that one meets on the Internet who send out “offers” and “deals” each day claiming they have oil or oil products to sell, haven’t got even the foggiest clue of what is even proper trading, or what is involved in proper trading or how it works or is done. Almost to a man or woman, they essentially think that all there is to oil “trading,” is basically to accumulate any number of some copied generic documents they can find – ‘SPAs,’ ‘LOI,’ ‘FCO,’ ‘ICPO’ and what have you – with almost none of them ever verified, and just keep passing them around on the Internet to potential buyers or their agents, asking them to “just sign,” “just sign”! In deed, what is even worse, they hardly ever have the foggiest idea of even what their PROPER function and duty is as an intermediary in the modern Internet era of too much information but too little quality or genuine data!
ROLES AND RESPONSIBILITIES OF INTERMEDIARY
Any appointed Intermediary by Lionstone Energy (“Company”) plays an important and crucial role in the Fuels Transaction Process. They must be qualified and experienced in the Process with good exposure and knowledge of the activities. The Intermediary shall properly screen and validate the Buyer (or Seller Source, as the case may be) before bringing to the attention of the Company. This role is certainly NOT for novices aspiring to learn the ropes.
1.1 The Intermediary shall carry out, perform, and discharge the following services (“Services”), which shall include, but not be limited to, the following:
- Introducing the Company to the properly validated Buyer (or Seller Source, as the case may be) and facilitating all efforts such as communications, negotiations, and ongoing interactions with the Buyer, to sell the Product to the Buyer and promote a good business relationship between the Company and the Buyer.
- To keep theCompany fully informed of the progress of the any negotiations and communications with the Buyer with respect to the Proposed Transaction.
- To be proactive in identifying and highlighting all potential problems and risks arising from or caused by the Services, including but not limited to any delays that is foreseen or occurs in the performance of the Services, technical, commercial, safety and applicable rules and regulations of local authorities.
- To assign sufficient, suitable, qualified, and experienced personnel to execute the Services
- To undertake any reasonable instruction ancillary to the Intermediary’s scope as directed by the Company from time to time;
- To ascertain for itself any other information or data which may be necessary and/or incidental to the proper performance of the Services
1.2 The Intermediary hereby warrants, represents, and holds itself out to the Company that it possesses the requisite knowledge, skills, expertise, abilities, business acumen and capacity to provide the Services.
1.3 The Intermediary agrees and undertakes not to become involved in any agreements, schemes, or arrangements of any description (whether of a contractual nature of not) that may give rise to an actual or perceived conflict of interest in relation to the Proposed Transaction.
1.4 The Intermediary shall devote time, attention, and effort as are required to perform the Services fully and properly.
1.5 The Parties shall promptly give each other (in writing if so required) all such information and explanations the Company and/or Intermediary may require in connection with the Proposed Transaction.
ICC GUIDELINES ON AGENTS, INTERMEDIARIES AND OTHER THIRD PARTIES
These ICC Guidelines on Agents, Intermediaries and Other Third Parties voluntary guidelines provide companies with advice on how to choose and manage third parties.
Third Parties can sometimes present the “weak link in the chain” in terms of an enterprise’s anti-corruption policies and practices. That is why these Guidelines are presented as a useful guidance tool for enterprises to help them manage third parties and reduce the risk of reputational damage to the enterprise.
It is envisaged that these Guidelines are to be referred to only where a structured risk management approach indicates that one is confronted with a sensitive choice in the vetting or managing of a Third Party.
RENEWABLE ENERGY BUSINESS FACTS
BATTERY ENERGY STORAGE SYSTEMS (BESS) DEFINITION
A BESS is a type of energy storage system that uses batteries to store and distribute energy in the form of electricity.
These systems are commonly used in electricity grids and in other applications such as electric vehicles, solar power installations, and smart homes.
At its most basic level, a BESS consists of one or more batteries that store electrical energy for use at a later time. This stored energy can then be drawn upon when needed to meet various demands for power across different applications.
BESS can also provide advantages over other energy storage systems, including greater efficiency and flexibility, faster response times when powering equipment or devices, and lower costs overall.