Transferring Petroleum Products through the Global Supply Chain Business Using TTV Procedure

@M. Enamul Hossain* and Nataliia Nykonenko**

*CEO and President, NSRIC Group, Toronto, Canada and **Marketing Manager, NSRIC Green Supplies Inc., Toronto, Canada

^@Corresponding author

Dr. Hossain: [email protected], [email protected]; Dr. Nykonenko: [email protected]

Abstract: The global energy sector is undergoing a transformative shift toward cleaner and more efficient fuels, with different petroleum products such as Diesel Oil EN590–10 ppm, Jet aviation fuel (Jet A1), Liquified Natural Gas (LNG), Liquified Petroleum Gas (LNG), etc., emerging as a key player in this transition. However, transactions involving these fuels often face significant challenges due to trust issues between sellers, suppliers/refineries, and end-buyers. These trust concerns frequently lead to disruptions in negotiations, impacting agreements between buyers, sellers’ agents, and refineries. Key challenges include variations in procedural requirements for closing deals, pricing disputes, transportation methods, differing attitudes of buyers and sellers, trust levels, commitment from both parties, and the consistency of these commitments. Addressing these issues is essential for ensuring the smooth transfer of petroleum products through the global supply chain business via Tank-to-Vessel procedure (TTV).

This article studied two TTV procedures and presented a critical analysis and guideline. An improved TTV procedure is proposed as a balanced procedure which will reduce significant uncertainty and risk involved in this business. The usage of proposed procedure will enhance the trust level and will increase the success rate significantly.

Keywords: Tank-to-Vessel (TTV) procedure, Title Take Over (TTO), petroleum supply chain, trust issues in petroleum transactions, buyer-seller negotiation, Proof of Product (POP), Dip Test Authorization (DTA), Quality and Quantity (Q&Q) testing, international petroleum trade, financial commitment and risk.

1. Introduction

The petroleum industry operates through a complex global network known as the petroleum supply chain, ensuring the smooth supply of crude oil, refined oil, and gas. This intricate system encompasses domestic and international transport, trading, shipping, ordering, and inventory management. Through this network, petroleum products reach consumers worldwide, making it one of the most valuable industries globally. Key supply chain elements include material handling, import/export facilities, and the delivery of refined energy products from production sites to end markets. The journey of oil and gas from source to end-users involves multiple stages, each playing a critical role in maintaining the global energy supply.

A comprehensive understanding of the petroleum supply chain highlights the industry’s complexities and the challenges it faces. Typically, the supply chain is divided into three segments called stages. Stage 1 (Upstream) involves the exploration and production of crude oil and natural gas through drilling operations. Stage 2 (Midstream) focuses on processing, storage, and transportation of crude oil and gas through pipeline networks. Stage 3 (Downstream) includes refining, further transportation via vessels, railroads, boats, trucks, and the distribution of refined petroleum products to retail outlets and natural gas companies. Oil companies and their agents collaborate with logistics providers to ensure the timely delivery of petroleum products, meeting both consumer and industrial demands. Given the market’s dynamic nature, the downstream segment requires flexibility to respond to evolving consumption patterns and regulatory changes.

However, a major challenge in the petroleum supply chain today is the trust deficit between product suppliers (or refineries) and end-buyers. This issue primarily stems from the presence of fraudulent intermediaries often referred to as scammers who infiltrate the industry. These individuals may act as suppliers, refinery mandates, agents, or buyer representatives, creating obstacles in transactions. On the seller’s side, scammers (i.e., not real refinery or suppliers) often demand various payments under false pretenses, such as Tank Storage Agreement (TSA), Tank Storage Receipt (TSR), Notice of Readiness (NOR), Clearance Access Entry Permit (CAEP), Tank Farm Access Permit (TFAP), and dip test fees for tank rentals. If a seller is legitimate, these payments serve as a means to confirm the buyer’s commitment to closing the deal. Conversely, if the buyer is fraudulent, they may attempt to obtain sensitive documents such as fresh Société Générale de Surveillance (SGS) reports or injection reports either to secure bank loans due to insufficient funds or to deceive other genuine buyers by misrepresenting the transaction.

As a result, the petroleum trading business has become increasingly risky, with trust issues significantly hindering smooth transactions. This article explores the key challenges contributing to these risks and examines potential solutions to enhance trust and efficiency in the challenging global petroleum supply chain.

2. Key Challenges in the Petroleum Supply Chain

Numerous challenges can hinder the efficiency and reliability of the petroleum supply chain, including those discussed in the introduction. In addition, some of the most significant obstacles include:

Trust Issues: A lack of trust between sellers and buyers frequently results in stressful negotiations and failed transactions, further complicating petroleum trade.
Geopolitical Risks: Political instability in oil-producing regions can lead to price volatility, supply shortages, sanctions, and even conflicts that disrupt the supply chain.
Environmental Regulations: Stricter environmental laws aimed at reducing spills, emissions, and other ecological impacts have significantly increased operational costs.
Infrastructure Limitations: Outdated or inadequate infrastructure in certain regions hampers the smooth flow of oil, leading to bottlenecks and inefficiencies.
Market Fluctuations: Constant adjustments in production and distribution are required to respond to shifts in demand and price volatility.
Energy Transition: The global shift toward renewable energy sources necessitates innovation and diversification within the oil industry to remain competitive.

Addressing these challenges is crucial for ensuring a resilient and efficient petroleum supply chain products procedure such as TTV.

3. Petroleum Product Trade Documents and Transaction Procedures

International transactions for the sale and purchase of petroleum products require a clear and structured procedure to ensure transparency, efficiency, and security. A well-defined transaction process provides a clear sequence of actions, outlines the responsibilities of each party at every stage, and minimizes risks. Establishing such procedures is crucial for fulfilling transaction terms successfully while preventing potential conflicts and misunderstandings between parties. When developing these procedures, it is essential to consider transaction-specific complexities, potential sources of confusion and mistrust, market requirements, and international standards and best practices.

Attention to detail is key when designing and implementing transaction procedures, as potential challenges may arise at different stages. A successful transaction framework should incorporate legal considerations, a structured approach that fosters trust between buyers and sellers, risk management related to transportation and storage, financial safeguards, and other critical aspects. Given the complexity of international petroleum transactions, developing an effective and reliable procedure is fundamental to ensuring business success.

This article presents two common transaction procedures used in the petroleum and gas industry. These procedures are analyzed and discussed, with a focus on their effectiveness in facilitating successful deals. Based on this analysis, two balanced transaction models are proposed to enhance the likelihood of deal closure. A comparative analysis is also provided to illustrate how a structured approach can create a win-win situation for all parties involved.

4.0 Petroleum Product Trade Documents and Transaction Procedures

This article presents two common transaction procedures used in the petroleum and gas industry. These procedures are analyzed and discussed, with a focus on their effectiveness in facilitating successful deals. Based on this analysis, one balanced transaction model is proposed to enhance the likelihood of deal closure. A comparative analysis is also provided to illustrate how a structured approach can create a win-win situation for all parties involved.

4.1 Tank-to-Vessel (TTV) Transaction Procedure

Transferring petroleum products from a storage tank to a vessel is a critical logistical operation known as the TTV procedure. This process necessitates precise coordination between buyers and sellers, incorporating structured documentation, rigorous inspections, and systematic payment protocols to ensure a seamless transaction.

The procedure typically commences with the exchange of essential documents, including commercial invoices and product quality certificates. Subsequent inspections are conducted to verify compliance with agreed-upon specifications. Upon successful validation, the seller injects the petroleum product into the vessel. Quality assurance measures, including laboratory testing, are performed, and upon confirmation of compliance, the buyer proceeds with payment. Once the transaction is finalized, the seller transfers the requisite ownership documents, enabling the buyer to take possession and transport the goods.

4.1.1 A Seller’s Standard TTV Procedure by Dip & Pay

The procedure below is called the seller’s procedure which is needed to be followed by the buyer to get the products. Majority of the sellers say that this procedure is non-negotiable.

Step	Activity
1	The buyer accepts the seller’s working procedure and issues an Irrevocable Corporate Purchase Order (ICPO) on company letterhead. This document must include the seller’s working procedure, company Client Information Sheet (CIS), and the vessel Charter Party Agreement (CPA), which must be verified and approved by the buyer’s shipping/logistics company. Additionally, it should include the buyer’s passport, banking details, and proof of fund ((POF) for the transaction.
2	The seller issues a Commercial Invoice (CI) detailing the available product quantity in the storage tanks at the designated port. The buyer reviews, endorses, and returns the signed invoice to the seller.
3	The seller provides the Tank-to-Vessel Injection Agreement (TTVIA) for endorsement by both the seller’s and buyer’s logistics companies.
4	Upon receipt of the signed TTVIA, the seller releases the partial Proof of Product (POP) documentation, including: a) Authorization to verify (ATV) via call or email b) Commitment letter to supply c) Letter of guarantee of products d) Statement of products availability e) Tank storage receipt (TSR)
5	The buyer contacts the seller’s storage company to verify product availability and obtain access to conduct a dip test in the storage tanks. The buyer is responsible for associated costs.
6	Upon confirmation that the buyer has secured legal access to the product, the seller issues a Dip Test Authorization (DTA) for the buyer to proceed with the dip test.
7	Upon satisfactory completion of the dip test, the seller’s storage company issues the NOR for the product injection process to commence.
8	The buyer submits the Q88 vessel questionnaire and ensures the vessel is available for the scheduled injection process.
9	Upon successful completion of the injection, the seller releases the following POP documents to the buyer: a) Authorization to sell and collect (ATSC) b) Certificate of origin c) Injection report d) Non-Circumvention, Non-Disclosure Agreements (NCNDA)/International Master Fee Protection Agreement (IMFPA) e) SGS Q&Q report
10	The buyer immediately processes the total payment for the injected product via MT103 TT wire transfer. Upon receipt of payment, the seller transfers the title of ownership to the buyer and compensates all intermediaries.

4.1.1.1 Critical Observations

The TTV transaction process presents numerous challenges, primarily centered around trust, financial commitments, and procedural complexities between buyers and sellers. This section analyzes critical points of contention and proposes research-based solutions to enhance transactional efficiency and reliability.

A significant complication arises in Step 3, wherein the buyer requests verification of the petroleum product before signing the TTVIA. This request stems from the financial implications associated with signing the agreement, which often includes non-refundable fees. Buyers seek tangible proof of the product’s existence in the declared storage tanks before committing further. Conversely, sellers aim to ensure that buyers are financially engaged and committed before proceeding with subsequent transaction stages. The absence of a structured verification protocol often results in failed negotiations.

Empirical evidence suggests that a financially capable and serious buyer should be prepared to pay for the TTVIA, as this document is a prerequisite for obtaining authorization from the tank farm company to execute the injection process. Implementing standardized procedures that mandate this financial commitment can reduce uncertainty and enhance the probability of transaction completion.

A recurring challenge in petroleum transactions is the buyer’s demand for full POP documents and fresh SGS reports before finalizing the deal. Sellers are often reluctant to comply with such requests due to concerns regarding potential misuse. Specifically, sellers argue that issuing these documents prematurely may enable buyers to engage in speculative trading, seek alternative buyers, or use the documents to secure financial leverage from banking institutions.

A structured framework for balancing risk and transparency is essential. Research indicates that sellers can mitigate risks while ensuring buyer confidence by providing full POP documentation, excluding the fresh SGS report, upon receipt of the following verifiable buyer credentials:

CAEP verifying regulatory compliance
POF demonstrating financial capacity
Q88 vessel documentation confirming the buyer’s operational readiness
Signed TTVIA indicating the buyer’s legal commitment

This structured approach ensures that buyers obtain sufficient verification while safeguarding sellers from potential document misuse. Additionally, incorporating legally binding agreements such as the NCNDA and the IMFPA can strengthen contractual integrity and minimize transactional risks.

Another critical issue arises in Steps 5 and 6, where buyers frequently request an Unconditional Dip Test Authorization (UDTA) instead of the conventional Dip Test Authorization (DTA). The primary motivation behind this request is the buyer’s reluctance to incur additional costs, such as tank farm access fees and storage rental fees, which can range between two and three days for Q&Q verification. From the seller’s perspective, these costs are not directly beneficial, as they are payable to third-party entities such as storage facility operators and regulatory authorities. This misalignment in financial expectations frequently results in stalled negotiations and failed transactions.

To address these concerns, the following recommendations are proposed:

Buyers should anticipate covering these operational costs unless the seller explicitly agrees to an exemption.
In scenarios where full POP documents have already been provided, Q&Q testing may be unnecessary, allowing buyers to negotiate waivers for associated fees.
If the seller has not provided complete documentation, Q&Q verification remains a crucial step, necessitating buyer-funded testing to confirm product integrity before proceeding with the transaction.

The final stages of the transaction process (7-10), encompassing product injection, final document release, payment execution, and ownership transfer, are generally well-structured with minimal ambiguity. Research indicates that adherence to predefined contractual agreements significantly reduces the likelihood of disputes at this stage.

4.1.2 A Buyer’s Standard TTV Procedure by Dip & Pay

Buyers have specific requirements to ensure confidence in the successful execution of a deal. Their expectations primarily revolve around verifying the authenticity and availability of the petroleum product before making financial commitments. The following structured procedure outlines the standard steps followed by buyers in a TTV transaction using the Dip & Pay method.

Step	Activity
1	Buyer provides ICPO and CPA.
2	Seller issues the CI and Buyer returns the CI with signature and stamp to the Seller.
3	Seller provides fresh SGS report (not older than 48 hours) and Certificate of Origin.
4	Buyer verifies the fresh SGS report in less than 24 hours.
5	Upon successful SGS verification, Buyer provides POF.
6	Upon the successful verification of the fresh SGS report, Seller will provide Tank-to-Vessel Injection Schedule. Buyer will provide Q88, and vessel will be in the port ready to take the cargo in 24 hours.
7	Seller injects the cargo into the Buyer’s vessel and provides final CI for the exact injected quantity.
8	Buyer will pay MT103/TT all amount of the product, while Seller will provide transferred ownership title and all export documents at the same time.

4.1.2.1 Critical Observations

The buyer and seller generally have no disputes up to Step 2. However, in Step 3, the buyer requests a fresh SGS report that is no older than 48 hours. Based on our extensive research of over 100 seller procedures, we found no instance where a seller provides a fresh SGS report without a financial commitment from the buyer. This commitment typically comes in the form of a TSA, TSR, TTVIA, CAEP, tank extension, or a Dip & Pay arrangement. Therefore, buyers should not expect to receive a fresh SGS report immediately upon signing the agreement without demonstrating financial involvement.

Steps 4 and 5 are generally not applicable, as obtaining a fresh SGS report under the conditions outlined in Step 3 is nearly impossible. If a buyer insists on receiving this document without prior financial commitment, the seller is likely to question the buyer’s credibility and financial capacity, which could lead to the deal’s termination. Consequently, serious buyers are strongly advised to submit POF along with the ICPO, rather than waiting until Step 5.

In Step 6, if all preceding steps are successfully completed, the seller should issue the TTVIA for the buyer’s signature. At this stage, the buyer must gather the Q88 form, the signed TTVIA, and any necessary tank farm entry permits, such as the CAEP, and submit them to the seller. If these requirements are met, Steps 7 and 8 will proceed smoothly as planned.

The analysis of the TTV procedure reveals several critical areas where discrepancies between buyer and seller expectations often lead to transactional delays or failures. Our comparative analysis highlights the primary discrepancies between buyer and seller expectations and provides recommendations based on research findings in the chart that clearly illustrates the major contention points and potential resolutions to bridge the gap between buyer and seller expectations.

Table 1 shows a comparative analysis between seller’s and buyer’s expectations. In addition, the research findings and recommendations are presented to consider by both seller and buyer.

The findings of this study underscore the critical need for structured protocols in petroleum transactions to bridge the gap between buyer and seller expectations. A lack of alignment in financial commitments, documentation requirements, and procedural steps often leads to transactional delays or deal failures. Sellers typically prioritize financial security, seeking guarantees before releasing sensitive documents or proceeding with product verification. Buyers, on the other hand, require assurance of the product’s existence and quality before committing financially.

Table 1: Findings and Recommendations on Balancing Buyers’ and Sellers’ Expectations

Step	Seller’s Expectations	Buyer’s Expectations	Findings & Recommendations
Step 3	Buyer must show financial commitment (TSA, TSR, TTVIA, CAEP, or tank extension) before receiving a fresh SGS report.	Buyer wants a fresh SGS report within 48 hours before signing the TTVIA to verify the product’s presence.	Sellers do not issue fresh SGS reports without financial commitment. If the buyer is serious, they should pay for the TTVIA, as it is required to complete the deal.
Step 4	Seller rarely issues full POP documents and fresh SGS reports before financial commitment due to concerns over misuse (e.g., securing bank loans or engaging in speculative trading).	Buyer requests full POP and fresh SGS report to gain confidence before proceeding with the deal.	If the buyer provides POF, signed TTVIA, Q88, and CAEP, they should receive full POP (excluding fresh SGS report). Signing NCNDA and IMFPA can increase trust and reduce misuse risk.
Steps 5 & 6	Seller issues Dip Test Authorization (DTA) but does not prefer issuing Unconditional Dip Test Authorization (UDTA) since the tank farm access fees are paid to third parties.	Buyer wants UDTA to avoid paying tank farm access fees and storage rental for Q&Q testing.	Buyers should cover these costs unless the seller explicitly agrees to an exemption. If full POP has already been provided, Q&Q may not be necessary. Otherwise, buyers must pay for verification.
Steps 7–10	Seller expects a smooth final transaction process with predefined contractual agreements.	Buyer expects a seamless injection, payment, and title transfer process.	No major conflicts—both parties typically align on the final steps.

These opposing priorities create friction, particularly in the TTV procedure, where both parties must agree on terms related to Proof of Product (POP), dip test authorizations, Q&Q testing, and final payment. Sellers insist on financial commitments, such as POF and payment for TTVIA, before releasing critical documents like the fresh SGS report. Buyers, however, are often hesitant to make financial commitments without first verifying the product’s authenticity.

Standardizing verification procedures, document issuance policies, and cost allocation strategies can help streamline the transaction process and mitigate risks for both parties. Additionally, the integration of emerging technologies, such as blockchain-based smart contracts, has the potential to enhance transparency, security, and efficiency in global petroleum trading.

The following comparison chart outlines the key differences between seller and buyer expectations in the TTV procedure and provides insights into areas where compromises or structured protocols could improve transaction success rates.

Therefore, successful execution of TTV petroleum transactions requires a delicate balance between the expectations of both buyers and sellers. While sellers prioritize financial security before proceeding with product verification, buyers seek assurance regarding the product’s existence, quantity, and quality before making any financial commitments. These opposing priorities often lead to prolonged negotiations, transactional delays, and, in many cases, deal failures.

Table 2 shows the aspects of different expectations between Buyers and Sellers. Comparative analyses are presented based on extensive research.

Table 2: Aspects of Different Expectations between Buyers and Sellers

Aspect	Seller’s Expectations	Buyer’s Expectations
Financial Commitment	Buyer must provide POF and pay for TTVIA.	Wants evidence of product before signing TTVIA, as it incurs costs.
Proof of Product (POP)	Releases limited POP documents before full commitment.	Requests full POP and fresh SGS reports before proceeding.
Dip Test Authorization	Issues Dip Test Authorization (DTA) after legal access is secured.	Prefers Unconditional Dip Test Authorization (UDTA) to avoid additional costs.
Payment for Q&Q Testing	Buyer must cover tank farm fees and Q&Q testing costs.	Seeks exemption from paying storage and testing fees.
Trust & Risk Management	Prefers legally binding agreements (NCNDA, IMFPA) to mitigate risks.	Wants greater transparency and early access to documents for security.
Final Payment & Title Transfer	Transfers ownership only after full payment via MT103 TT.	Expects smooth title transfer upon payment completion.
Timing of Document Release	Provides additional documents only after buyer commits financially.	Wants key documents upfront to reduce risk before commitment.
Seller’s Control	Ensures buyer is financially engaged before proceeding.	Prefers flexibility in verification before financial commitment.

4.1.3 Proposed Standard TTV

Our research highlights key areas of contention, including the issuance of Proof of Product (POP) documents, the timing of fresh SGS reports, financial commitments, and responsibilities for tank storage and testing fees. Sellers are reluctant to provide full POP documentation and fresh SGS reports without tangible financial involvement from the buyer, fearing document misuse for speculative trading or fraudulent financial activities. Conversely, buyers are hesitant to invest financially without first verifying the product, as signing agreements such as the TTVIA incurs additional costs.

Taking into consideration these challenges, we propose a compromise model for the TTV procedure that ensures both parties’ concerns are addressed while maintaining efficiency and trust in the transaction process. This model introduces structured verification steps, clearer cost allocation, and defined responsibilities, enabling both buyers and sellers to proceed with greater confidence. This compromise model aims to streamline the TTV transaction process by fostering mutual trust, reducing risks, and ensuring compliance with industry best practices. By implementing these structured steps, the likelihood of successful deal completion is significantly improved.

The Compromised Model for Enabling a Successful and Safe TTV Procedure shows the steps that should be followed by the seller and buyer to enhance the chances of improving the success rate of the deals.

Step	Activity
1	The buyer initiates the process by providing an official ICPO, company registration license, a copy of the buyer’s passport data page, POF and a letter of acceptance for the seller’s transaction procedure, along with the CPA.
2	Subsequently, the seller generates a CI for the available quantity of the product stored in the seller’s leased tank, and the buyer signs and returns the CI along with their Buyer’s CPA.
3	The seller then issues a TTVIA to be endorsed by both the seller and the buyer, as well as the buyer’s logistics company.
4	Upon the return of the endorsed TTVIA, the seller provides the following Partial Proof of Product (PPOP) documents to the buyer: a) ATV [through a call or email] b) Commitment letter to supply c) Export License d) Letter of guarantee of products e) Product’s SGS report f) Statement of products availability g) Tank Storage Receipt (TSR)
5	The buyer contacts the seller’s leased storage company to verify the product’s availability and to obtain access at buyer’s costs, allowing the buyer and their inspection team to conduct a dip test on the product in the tank. The seller issues a Use of Dip Test Authorization (UDTA) for the buyer to proceed with the dip test once legal access to the product is secured. It is noted that the buyer should do their due diligence on tank storage company, tank farm company and finally the seller.
6	The buyer, accompanied by their SGS inspection team, conducts the dip test on the product in the tank. Upon receiving a satisfactory result of quantity and quality from the dip test, the seller’s storage company issues the NOR to the buyer, indicating that the product can be injected to the buyer’s vessel.
7	The buyer issues the Q88 for seller to verify and confirmation in the same day of Q&Q so that there will be no time lapse. Buyer should confirm the validity and genuineness of the Q88.
8	After the successful injection, the seller releases the following POP documents to the buyer: a) Fresh product SGS report b) Injection report c) Authority to sell and collect (ATSC) d) Product passport (analysis test report) e) Certificate of Origin
9	NCNDA/IMFPA is signed by intermediaries representing both the seller and the buyer.
10	Without delay, the buyer makes the full payment for the total cost of the product value injected into the tank through an MT103 TT wire transfer.
11	Upon receipt of the payment, the seller pays all intermediaries involved in the transaction and proceeds with the title change/transfer of the product to the buyer.

5.0 Research Findings: Discrepancies in Buyer and Seller Expectations in the TTV Procedure

The TTV procedure in petroleum transactions presents multiple challenges due to misaligned expectations between buyers and sellers. These discrepancies are rooted in differences in risk perception, financial commitment requirements, and verification processes, often leading to delays or failed transactions. Our research, which analyzed over 100 seller procedures, highlights key points of contention that impact transaction efficiency.

At the initial stage of agreement, both parties typically encounter minimal conflict. The buyer submits an ICPO, proof of funds, and necessary documentation, while the seller issues a CI, which the buyer signs and returns. Since no financial commitment is required at this point, the process is usually smooth, serving primarily as a procedural formality that sets the foundation for trust. However, inefficiencies in document processing or communication at this early stage may indicate deeper challenges that could emerge later in the transaction.

A primary source of conflict arises when buyers request a fresh SGS report before signing the TVIA. This request is driven by the buyer’s need to confirm the presence and quality of the product before committing financially. However, sellers consistently refuse to provide fresh SGS reports without securing financial commitments, citing concerns that buyers might use these documents for speculative trading, alternative negotiations, or securing financial leverage from banks. This tension reflects a trust imbalance—while buyers seek early assurance to mitigate fraud risks, sellers must protect themselves from the potential misuse of documentation. Since no legitimate seller provides a fresh SGS report without financial commitment, buyers should expect to cover initial costs, such as the TTVIA and CAEP, before requesting such verification.

Closely related to this issue is the buyer’s demand for product verification before signing the TTVIA. Many buyers hesitate to proceed without direct confirmation of the product’s availability, whereas sellers require a demonstration of financial commitment before granting product access. This dilemma represents a classic risk-commitment trade-off in high-value transactions. Buyer’s fear committing to a deal without verification, while sellers worry that buyers will walk away after obtaining sensitive transactional information. The economic risk asymmetry is evident: buyers risk financial loss if the product does not exist, whereas sellers risk transaction abandonment after releasing confidential product details. A structured compromise—where buyers bear the cost of initial verification while sellers provide limited documentation—could help resolve this recurring dispute.

Another significant point of contention is the request for full Proof of Product (POP) documentation, including a fresh SGS report. Buyers view POP documents as an essential means of verifying transaction legitimacy, while sellers fear premature disclosure could lead to document misuse, fraud, or unauthorized deal restructuring. Given the prevalence of fraudulent activities in petroleum trading, sellers are reluctant to release full POP documentation without binding commitments. Our research suggests that a balanced approach where buyers provide verifiable proof of funds, a signed TTVIA, vessel documentation (Q88), and a CAEP before gaining access to full POP documents. This is the most viable solution. However, even under these conditions, sellers generally withhold the fresh SGS report until the final transaction stages. To reinforce transactional security, the implementation of the NCNDA and IMFPA is advisable, as they help ensure contractual integrity and prevent circumvention.

Another area of dispute involves the cost of dip test authorization and product verification at the tank farm. Buyers prefer an Unconditional Dip Test Authorization (UDTA) to avoid paying tank farm access fees and temporary storage rental costs. However, sellers do not benefit financially from these fees, as they are collected by third-party storage operators. This raises the question of who should bear the cost of Q&Q verification. From an industry perspective, it is common practice for buyers to cover the expenses of independent verifications of products just as in real estate transactions, where buyers typically pay for home inspections. Therefore, unless explicitly agreed otherwise, buyers should expect to bear the costs associated with Q&Q verification, particularly in cases where full POP documentation has not yet been provided. However, if sellers have already furnished all necessary product documentation, buyers may be in a position to negotiate a partial or full waiver of these fees.

Despite the various disputes in earlier stages, the final phases of the transaction, product injection, final documentation release, payment execution, and ownership transfer are generally well-structured and less contentious. Research indicates that adherence to predefined contractual frameworks significantly reduces uncertainties at this stage, ensuring a smoother transfer of product ownership. Sellers issue the final POP documents, including the injection report, fresh SGS certificate, and product passport, while buyers finalize payments through a standard MT103 TT wire transfer. The transaction is completed once the title is transferred to the buyer, and intermediaries are compensated according to NCNDA/IMFPA agreements.

These findings emphasize that the core challenges in TTV transactions stem from risk misalignment and information asymmetry. Buyers seek maximum verification before financial commitment, whereas sellers require financial commitment before verification. To bridge this gap, a standardized transactional framework is essential. Such a framework should establish clear documentation release protocols, escrow-based SGS issuance models, and predefined cost allocation structures. Additionally, the integration of blockchain-based smart contracts could enhance transactional transparency, preventing document misuse and ensuring compliance with contractual obligations.

By addressing these fundamental challenges, petroleum transactions can become more efficient, reducing deal failures and fostering trust between parties.

6.0 Conclusion & Recommendations

The findings of this study emphasize the necessity of standardized transaction protocols to mitigate trust issues and financial discrepancies within the petroleum supply chain. Misaligned expectations between buyers and sellers, particularly regarding financial commitments, document issuance timing, and cost allocation, frequently lead to transaction delays or failures. Establishing clear guidelines for pre-signing verification, structured document release, and fair cost distribution can significantly enhance transactional efficiency. Moreover, technological advancements such as blockchain-based smart contracts have the potential to further streamline, secure, and automate petroleum transactions by ensuring transparency and preventing document misuse.

A critical insight from this research is that buyers should not expect a fresh SGS report upfront without first demonstrating financial commitment. Sellers, aiming to protect their assets and prevent speculative misuse of documentation, typically require buyers to sign the TTVIA and POF before releasing sensitive verification documents. A structured approach to POP documentation access where buyers receive key verification documents in stages, based on their level of financial engagement can help balance transparency with seller protection.

Additionally, cost allocation disputes remain a major challenge in petroleum transactions. Buyers often seek waivers for tank storage, Q&Q testing, and dip test authorization fees, yet these costs are necessary for ensuring product quality and logistical coordination. Our analysis suggests that unless a seller explicitly agrees to cover these expenses, buyers should be prepared to assume these financial responsibilities as part of standard industry practice. Contractual safeguards, such as NCNDA and IMFPA, further reinforce transaction security and prevent conflicts, ensuring smoother deal completion.

Adherence to predefined contractual terms and clear procedural frameworks plays a vital role in reducing disputes, minimizing delays, and improving transaction success rates. By integrating transparent verification procedures, predefined financial responsibilities, and technology-driven authentication methods, both buyers and sellers can establish a more secure and efficient transactional ecosystem.

To further enhance the security and reliability of petroleum transactions, future studies should focus on:

Blockchain-based smart contracts as a means of automating transaction verification, reducing fraud risks, and ensuring compliance with contractual obligations.
Digital verification methods, such as AI-powered authentication systems and real-time transaction tracking, to streamline product verification and prevent document fraud.
Industry-wide adoption of escrow-based models for SGS issuance, allowing buyers to verify product quality without requiring premature financial commitments.

By addressing these ongoing discrepancies and implementing structured, technology-driven transaction protocols, the petroleum industry can enhance efficiency, foster trust, and reduce the rate of deal failures in global trading.

7.0 References

Website Link: Visited on January 26, 2025 – https://refrat-oil.com/en/2024/03/04/procedure-2/#google_vignette

Step	Activity
1	The buyer accepts the seller’s working procedure and issues an Irrevocable Corporate Purchase Order (ICPO) on company letterhead. This document must include the seller’s working procedure, company Client Information Sheet (CIS), and the vessel Charter Party Agreement (CPA), which must be verified and approved by the buyer’s shipping/logistics company. Additionally, it should include the buyer’s passport, banking details, and proof of fund ((POF) for the transaction.
2	The seller issues a Commercial Invoice (CI) detailing the available product quantity in the storage tanks at the designated port. The buyer reviews, endorses, and returns the signed invoice to the seller.
3	The seller provides the Tank-to-Vessel Injection Agreement (TTVIA) for endorsement by both the seller’s and buyer’s logistics companies.
4	Upon receipt of the signed TTVIA, the seller releases the partial Proof of Product (POP) documentation, including: a) Authorization to verify (ATV) via call or email b) Commitment letter to supply c) Letter of guarantee of products d) Statement of products availability e) Tank storage receipt (TSR)
5	The buyer contacts the seller’s storage company to verify product availability and obtain access to conduct a dip test in the storage tanks. The buyer is responsible for associated costs.
6	Upon confirmation that the buyer has secured legal access to the product, the seller issues a Dip Test Authorization (DTA) for the buyer to proceed with the dip test.
7	Upon satisfactory completion of the dip test, the seller’s storage company issues the NOR for the product injection process to commence.
8	The buyer submits the Q88 vessel questionnaire and ensures the vessel is available for the scheduled injection process.
9	Upon successful completion of the injection, the seller releases the following POP documents to the buyer: a) Authorization to sell and collect (ATSC) b) Certificate of origin c) Injection report d) Non-Circumvention, Non-Disclosure Agreements (NCNDA)/International Master Fee Protection Agreement (IMFPA) e) SGS Q&Q report
10	The buyer immediately processes the total payment for the injected product via MT103 TT wire transfer. Upon receipt of payment, the seller transfers the title of ownership to the buyer and compensates all intermediaries.

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Glossary of Terms Used in the Petroleum Oil and Gas Products Shipping and Trading

M. Enamul Hossain There are many acronyms and terminologies used in the petroleum oil productstransport, supply, business, trading and international shipping and transportation ofpetroleum commodities.