Essential Key Terms and Abbreviations in Petroleum Product Transactions

A comprehensive glossary to clarify the meanings and applications of these key terms.

Step into the dynamic world of petroleum product trading, where business communication is enriched by a unique lexicon of acronyms, terms, and abbreviations. In this industry, conducting transactions and preparing documentation involves navigating specialized terminology that can occasionally perplex even the most experienced professionals. To simplify this, we’ve created a comprehensive glossary to clarify the meanings and applications of these key terms.

Whether you’re a newcomer or a seasoned trader, this resource is designed to enhance your confidence in navigating petroleum trading and achieving success in your negotiations. Let’s delve into the terminology that will serve as your steadfast guide in this field.

Key Terms and Abbreviations in Petroleum Product Transactions:

• LOI – Letter of Intent This optional document expresses a buyer’s intention to make a purchase. Although it doesn’t commit the buyer to a transaction, it signals genuine interest to the supplier.
• ICPO – Irrevocable Corporate Purchase Order Similar to an LOI, this document details a company’s intent to transact, including purchase terms, banking details, and financial confirmation.
• Spot A one-time transaction without any long-term commitment.
• Trial Refers to the initial or trial delivery under a long-term supply agreement.
• NCND – Non-Circumvention Non-Disclosure A document safeguarding an intermediary’s commission by ensuring their role is recognized in connecting buyers and suppliers.
• SPA – Sales and Purchase Agreement A formal contract outlining the terms for the purchase and supply of resources.
• IMFPA – Irrevocable Master Fee Protection Agreement This ensures fair compensation for intermediaries, setting clear terms for commission payments.
• FOB – Freight on Board A delivery term under which the seller delivers goods to a port and loads them onto the buyer’s nominated vessel. Risk transfers to the buyer once the goods cross the ship’s rail.
• CIF – Cost, Insurance, and Freight A trade term where the seller covers shipping costs, insurance, and transport to the buyer’s destination.
• ICC – International Chamber of Commerce A non-profit organization established in 1919 that develops global trade standards and resolves commercial disputes.
• ATS – Authority to Sell A refinery-issued document confirming authorization to sell resources, often used by intermediaries as proof.
• POP – Proof of Product A vital document verifying the existence of a product. It must include third-party confirmation to ensure credibility.
• PPoP – Partial Proof of Product A partial documentation package verifying the product’s existence.
• TTT – Tanker to Tank A procedure in FOB transactions where the product is transferred between storage facilities within a port.
• TTO – Tanker Take Over A procedure involving the sale of resources and the assignment of the seller’s tanker lease.
• DIP & PAY A FOB procedure allowing the buyer to test product samples at the supplier’s storage, followed by immediate payment upon confirmation of quality and quantity.
• VTO – Vessel Take Over A transaction process where the supplier sells the resource while it is on the high seas, along with the vessel itself. Once the ship is accepted on the high seas, the buyer typically covers the freight cost to transport the ship to its destination.
• TTV – Tanker to Vessel A classic FOB procedure in which the supplier transfers the resource from their onshore oil storage to the buyer’s ship, in accordance with Incoterms.
• ASWP Though not an official Incoterm, this phrase is commonly used in seller quotes such as “CIF ASWP.” It indicates that CIF shipping costs are consistent for delivery to any safe port worldwide, regardless of distance from the source.
• ATB – Authority to Board Authorization issued for boarding a vessel carrying crude oil or petroleum products. Typically, this comes as a SATCOM message from the ship’s master, allowing the buyer to board and verify the cargo’s presence, quantity, and quality. Supercargo teams and inspectors often use this for conducting dive tests, as boarding without authorization is not permitted.
• SATCOM A series of communication satellites operated by RCA American Communications, primarily used by ship captains for secure messaging and communication.
• Q&Q – Product Analysis Report A form documenting laboratory testing and analysis of a product.
• ATSC – Authorization to Sell & Collect A document issued by intermediaries to prove their authorization from refineries to resell resources.
• Q88 – Vessel Passport A detailed ship document containing comprehensive technical information about the vessel.
• NOR – Notice of Readiness A notification stating that the oil depot or buyer’s vessel is prepared for fuel injection, including full coordinates of the storage facility.

• ETA – Estimated Time of Arrival: The expected time at which a ship or cargo is projected to arrive at its destination.

• SGS Report An analysis provided by SGS, a Swiss company specializing in independent inspections, testing, and certifications. This report includes verification of product quantity, quality, and compliance with various standards.
• TSA – Tank Storage Agreement An agreement between a buyer and an oil storage facility for the storage of fuel.
• TSR – Tank Storage Receipt A receipt outlining details of an oil storage tank and authorizing the use of that tank. It is issued under a TSA to permit fuel injection into the specified storage unit.
• DIP Test/DTA – Dip Test Authorization Authorization permitting the buyer’s representative to test the fuel in the supplier’s tank for quality, quantity, and presence.
• UDTA – Unconditional Dip Test Authorization A permission granted without conditions, allowing the buyer’s representative to test fuel samples to confirm quality, quantity, and presence before any payment obligations.
• CIS – Company Information Sheet A comprehensive document detailing company information, including banking and constituent documents as well as signatory identifications.
• ATV – Authorization to Verify Permission for the client’s representative to inspect a ship or oil storage facility to confirm fuel availability.
• CPA – Charter Party Agreement A contract between a shipping company and a charterer for vessel usage.
• TTTIA – Tank to Tank Injection Agreement An agreement allowing the transfer of fuel from one tank farm to another within FOB transactions.
• FCO – Full Corporate Offer A formal, binding supplier offer to deliver goods under specified terms, valid for a predetermined period.
• SCO – Soft Corporate Offer A non-binding document initiating trade negotiations, where the seller outlines preliminary terms and conditions.
• R&E – Rolls & Extension Contract A long-term export contract, functioning similarly to a Sales and Purchase Agreement (SPA) but extended over a longer duration.
• JVA – Joint Venture Agreement A contract for joint operations or establishing a shared virtual enterprise. In cases where commissions for intermediaries exceed legal thresholds, this agreement is often used as a substitute for a commission agreement.
• IPA – Injection Programming Agreement A document specifying agreed-upon dates between the buyer and seller for resource injection into the buyer’s storage facilities.
• P.A.S CODE – Port Authority Security Code Refers to the security code required to access documentation or information about oil storage facilities at a port.
• Title Transfer Affidavit A notarized legal document from the seller certifying property ownership and confirming the absence of legal encumbrances. It protects buyers by documenting title details.
• CI – Invoice A standard payment invoice for transactions.
• Injection Report A document from the seller as proof that the resource has been injected into their storage facility.
• MOU – Memorandum of Understanding An agreement signaling the intent of parties to cooperate or pursue a common objective. In petroleum transactions, it is used after an ICPO to document agreed procedures, though it is rare.
• TTVIAC – Tank to Vessel Injection Agreement Contract This agreement formalizes the process of transferring a resource from the seller’s land-based storage at a port into the buyer’s chartered vessel.
• EL – Endorsement Letter Used when the supplier requires confirmation from the buyer’s contractor (e.g., a tank farm) to confirm readiness for the transaction.
• DD – Due Diligence The process of auditing and verifying a counterparty’s documents and credentials.
• Additional Financial and Transactional Terms:
• BCL – Bank Comfort Letter A letter issued by the buyer’s bank via SWIFT, confirming the buyer’s financial capacity. Not a valid banking instrument but serves as proof of fund availability in petroleum transactions.
• BG – Bank Guarantee A banking instrument sent via SWIFT, indicating funds have been set aside to facilitate a purchase. While stronger than a BCL, it is not legally a valid banking instrument for the seller’s bank.
• POF – Proof of Fund A document verifying that an individual or entity possesses the necessary funds to complete a transaction, typically issued by a commercial bank.
• SBLC – Standby Letter of Credit A bank’s assurance to pay the beneficiary if the client fails to meet financial obligations, with funds frozen until transaction completion or a specified period ends.
• DLC – Documentary Letter of Credit A bank’s payment guarantee upon receipt of shipping or contract fulfillment documents. Widely recognized in international trade as a secure financing tool.
• RWA – Ready, Willing, and Able (SWIFT MT799) A preliminary bank message confirming the availability of temporarily set-aside funds for a transaction, often issued before a bank guarantee.
• PB – Performance Bond A supplier-issued guarantee against non-performance. Generally worth 2% of the contract value, it provides financial compensation to the buyer in case of contract breaches.
• RB – Reference Bank A general bank reference letter issued in any format.
• SWIFT MT103 A standardized SWIFT message type used for international bank-to-bank transfers, representing direct cash payment.
• SWIFT MT199 A free-form interbank communication message, often used to convey a buyer’s financial standing in petroleum transactions.
• SWIFT MT760 A SWIFT message format used for issuing a bank guarantee, securing the buyer’s obligations to the supplier with confirmation through the international SWIFT system.