BP Oil International Limited (BP) recently published the 2015 edition of its General Terms & Conditions for Sales and Purchases of Crude Oil and Petroleum Products (GTCs). The previous GTCs were published in 2007, albeit with at least one update since then covering barge deliveries.
BP’s GTCs continue to be widely used in the crude oil and products trading markets. An understanding of the 2015 GTCs is therefore critical to producers, consumers and traders of crude oil and products alike.
The 2015 GTCs now cover sales and purchases of both crude oil and products in a single document. In many instances, the 2015 GTCs reflect changes in market practice that have been widely adopted since the 2007 GTCs (for example, references to Incoterms® 2000 have been replaced with Incoterms® 2010), but the new GTCs also contain other important changes, including to key issues such as operational procedures, payment, events of default and termination, dispute resolution and time limits for claims.
The oil markets continue to witness a trend of convergence between the contract terms used by market participants for the sale and purchase of crude oil and products. Standardisation of contract terms brings many benefits to the market, including the elimination of the ‘basis risk’ for traders that would otherwise result from buying and selling on different contract terms. Such is the level of convergence that for some time it has been hoped that the introduction of standard form GTCs for the trading of crude oil and products will become a reality in the oil markets.
Several industry initiatives for creating such standardised GTCs are ongoing. Reed Smith continues to assist both the Energy Institute’s Hydrocarbon Trading Committee in developing ‘commercially neutral’ crude and products GTCs, and LEAP (Leadership for Energy Automation Processing) in its ongoing initiative for developing standardised Northwest European Barges GTCs. Many of the leading players in the market are involved in these initiatives.
This alert seeks to provide a useful, quick reference guide to some of the key differences between BP’s 2007 GTCs and 2015 GTCs. It is not a substitute for legal advice on the terms of the GTCs themselves as they may affect any person, including in connection with any specific transaction.
Download the reference guide below.
Client Alert 2015-024