Most of the people we are communicating with expect the Seller to show that he is selling to others. They want some verifiable proof of that fact. Those Buyers because they are financially capable of buying, want to work with a Seller that is known to be capable of selling. In many cases they want to start here – who are we dealing with?
This is a rather thorny issue and we apologize in advance because in order to lay out the motivations of all the parties involved and the moral responsibility we have as Seller’s Representative, this article may be longer than one has time to engage in.
First of all, we think it important for us to lay out the section of the oil patch that we are playing in, because that neighborhood has a different agenda than the one that is readily reported to OPEC and the IEA. The marketplace we are playing in is the “Private Marketplace”. Countries selling OFF-OPEC, against the OPEC rules have two really important incentives to keep all of this private;
(1) They do not want to affect the price of oil, driving it down.
(2) They do not want to be caught being naughty.
So, OPEC and the IEA are not given information and the public therefore do not know the true production of OPEC countries (by the way, all OPEC Countries do OFF-OPEC deals). Recently it was found that SGS was sharing the reports of their inspections with OPEC. They were summarily excused and replaced by the other internationally accepted inspection firm, INTERTEK, to do all the terminal inspections. No one is supposed to know about this marketplace.
When someone marches into the NNPC offices in Abuja and starts waving around shipping documents proving unregistered sales for verification purposes, you never get the TRUTH STRAIGHT. The answer you get is this;
“Well, we have never seen those documents. You should know there is no such thing as OFF-OPEC. If you really want to buy Nigeria’s premium crude oil we can register you and introduce you to real Sellers.”
You're surprised right? Or what do you expect them to do?
You cannot blame them. If all of their OPEC Buyers insisted on getting discounted oil they could stand to lose a billion dollars per month in lost revenue. No developing country is going to shoot themselves in the foot that way. If Nigeria is anything it is at least street smart.
Seller, if caught sending out documents, proving that he was selling OFF-OPEC, his Right to Sell would be terminated. From the Buyers’ standpoint, what good is proof if you cannot verify it – so they are going to take whatever they get and march it into the only avenue of verification they are aware of – the offices of the NNPC in Abuja.
Furthermore, as soon as a Seller’s name and documents get leaked into the public sphere the 1% of the more nefarious characters in Nigeria start using that information to extract money from unsuspecting Buyers in the most inventive ways. And then you have more than one entity with the same name marketing. One with the intent of honest business and the other without that intent.
So, now you have the country of Nigeria, the NNPC and the Seller all with strong incentives to keep their extra business private and to comply with NON-DISCLOSURE POLICY.
Now what about the Buyers that have had the courage and good fortune to contract and actually get product delivered? Oil is a natural resource. It is generally believed that natural resources have an inherent diminishing return. In plain English, that means the more you sell, the less you have to sell.
GENIUNE BUYERS will not want their documents being waved around the marketplace in order to bring in even more competition. And due to corruption in the country system.
Every sales contract that we have seen includes verbiage such as this:
“…conditions of the present Agreement on Non-Circumvention and Non-Disclosure, and also considering aspiration of the Parties to ensure confidentiality of the above stated deal and to keep in secret… And further to not disclose... from sources or their affiliates, which sources were made available through this Agreement, without the express permission of the Party who made available the source.”
So it is not legal to send out evidence of past performance documents proving delivery of crude oil to third parties that was not involved in that transaction without permission from those parties that were involved.
Still, Buyers say, “come on, just give us a taste” and we say, NO!
Please look at this from your Buyer's perspective. “Mr. Buyer, we intend to load the vessel in the Seller’s name this time. The reason why is we would like to use these documents proving a sale to you in order to bring more buyers to our Sellers so that they can raise prices by competitive bidding between multiple Buyers.”
This would be the honest way to approach every prospective Buyer if we were intending on giving out their successful sales documents.
When you really look at the business this way, NOBODY, not even the prospective Buyer wants to raise their underwear on the flag pole in their front yard. It is a fault of moral miss-judgement to disrespect anubody’s intent for privacy and be dishonest in order to prove your Seller’s honesty.
Now, the practical nature of this argument...
(1) Buyers cannot verify documents – so why give them out?
(2) Even if they could, it does not mean they are going to get product. We have had a Buyer telling us, “I am notinterested in buying the product you sold last month to somebody else. Show me MY loaded vessel!”
(3) But, “Nobody is loading a vessel without a Buyer putting up a bank instrument for the empty vessel to be loaded for them.”
(4) It does not matter who the Seller is. Sellers in our part of the oil patch must remain invisible, and so too, their transactions. It does not matter how many documents you get showing prior successes.
You can determine the validity of a Seller by the procedure they present and POP verification from the right office.
If it is a safe procedure for the Buyer then your Buyer has nothing to lose by moving forward.
If it is not a safe procedure then one of two things is wrong. The first is that your Buyer has failed to prove that they are financially capable to make the purchase. This does not mean that your Buyer is not capable of performing; it just means that the Buyer has failed to prove his ability to pay for the product. In that case the Seller is forced to protect his interest and demand proof from the Buyer’s bank that they are standing behind the buyer in the deal.
The second reason for a procedure that is not safe for the Buyer, they will say that the Seller is a crook. So as a Buyer’s agent or as a Buyer, please do not ask to see PROOF OF PRIOR PERFORMANCE because we WONT GIVE YOU ANY.
The Buyer has to be willing to contract to comply with the procedure as presented by Seller or look for ex-source for his Crude Oil purchase.
What happens is this...
When a Seller confirms Buyer Bank Instrument, then the Seller loads the vessel and then sends the BOL and Cargo Manifest and his ATS, all issued by the terminal on the loaded vessel, to the Buyer on Buyer’s Name.
The Seller will also instruct the vessel captain to send NOR to the coordinates the Buyer has given, as contracted.
With that information a capable Buyer can completely verify the validity of the offering from multiple independent sources. This is the real POP, not a bunch of numbers on a piece of paper.
Then it is the Buyer’s responsibility to perform according to the contracted procedure.
~Eastern Union Energy