Technical know-how of fuel oil trading process:
- TSA: tank storage agreement
- TSR: Tank storage receipt
- QR Code, P.A.S. Code, Buyer port hub no,
After we get the 3 codes, the seller will give us SGS report and Dip test Authorization letter.
- SGS and Dip test will be done by us (Buyer).
- After we verify the cargo physically, we will immediately book the tank (5days booking).
TSA -Tank Storage Agreement:
In some procedures to carry out oil commodities businesses demand, initially, the issuing or remission of a Tank Storage Agreement -TSA-, but to have it at hand it is necessary to solve some priorities, so let’s see the reality from the point of view of the Buyer in the next step by step:
- The Buyer needs to purchase a refined petroleum product, so he knows the name of the product, the specifications, the quantities he will require and the periods of duration or consumption of the product, which will determine how often there will be acquire the next quantity of the product.
- The Buyer also knows how to acquire the product, INCOTERM, which in turn will determine the port or place where the product will be taken and where it will be loaded in a tanker or through which pipeline will reach the defined destination.
- The Buyer also knows the prices of the product, depending on the place of origin, and consequently, also knows the maximum amount to pay, and also knows how to recognize when an offer with a very low price is at the same time a warning call to a possible fraud attempt.
- The Buyer is also aware that in the case of an FOB negotiation, the product will be taken to a storage tank, as a first step to the process of taking that product from the refinery to its final destination. That first final destination can be a tank inside the refinery tank yards, it can be a temporary storage tank in a tank farm, a tanker anchored in the refinery’s loading docks or a tanker anchored in deep water at the that the product will be transferred from another tanker.
- In the vast majority of cases, the Buyer or end user has their own storage tanks in distant locations of the refineries, so they necessarily need that intermediate step of passing their product through temporary tanks, which need to be rented to companies dedicated to the subject, as are Tank farms.
- The buyer can identify where these temporary tanks will be, because their discipline and work experience allows them to know who and where those Tank farms are; He also knows the dimensions of the tanks he will need, as well as the time of use he will need from those tanks. Also, ultimately, he have notion of the approximate daily rental cost of each tank, so he can prepare an approximate economic analysis of the negotiation, knowing in advance the possible profit he will get from this negotiation.
- Of all the links of the chain of marketing of refined petroleum products, the weakest link, to be defined in a way derived from its condition, is the Buyer, because its costs depend directly on third parties, and its profit goes up and it goes down according to how those “third parties” fix the final prices. Expanding this concept, the refinery always has profits, it never has losses because its process costs include a percentage of unforeseen events that, if not used, become part of the profit; The tank farm has a fixed lease canon for tank capacity and product type, and also includes an amount for unforeseen expenses, which, if not used, enter as a profit the economic result. The Buyer has all his economic studies elaborated, which must include all the variables that affect the final sale price, including also the unforeseen, but in order to establish that final sale price, he must first know all the prices of those “third parties” by which must pass the product, and at some point in the process appears the variable of having to sell below the purchase price … as surely has happened sometime …
- Arriving at the subject that has motivated this publication, when the Buyer has contact with a seller, be it refinery or reseller, a clause appears that is always controversial and even causes the offer to be discarded: attach TSA to the documents initially requested, which may be included in an ICPO.
And here’s my question: How can a Buyer rent a storage tank or sign a rental agreement or take a tanker to the dock of a tank farm, if he still has no proof of the existence of the product, amount available, or the defined specifications?
The Buyer is not willing to invest a certain amount of money, which can be considerable, to rent a storage tank if he is not yet aware that the product he is looking for exists and is within the parameters that the Buyer has to acquire it.
Personally, I think the logical thing would be for the Buyer to issue his product requisition including, in addition to the product data, his corporate profile and a commitment letter type RWA, in which the Buyer’s bank confirms that the customer is in financial capacity and disposition to carry out the negotiation specified there.
Once the Seller has received these data, he can issue a Commercial Invoice or draft contract that allows the administrative process to begin, showing the Buyer that the product exists through a recent SGS and indicating the place where the product is deposited, or demonstrating to the Buyer who can start the administrative process on their side by renting the tank for injection of the product. Also, in this way it would be avoiding that the large number of scammers that are on the internet are requesting documents, including the TSA, and then use it fraudulently to deceive other interested parties.