May 2, 2021 (Revs. March 28, 2022, February 12, 2022, May 3, 2021)
We’re frequently contacted by parties outside of China who claim to have access to, be in control of or outright own oil products “already on the ground” in tanks in China. These offers typically demand that some kind of “procedure” be carried out that may include proof of funds, identification of a “real buyer”, a bank commitment, appointment of a surveyor, or a combination thereof, all before disclosing any further information.
We are hesitant at best to get involved in such situations because of the low likelihood of a successful transaction.
Scam offers roam around at any given point in time. Offers of large quantities of BLCO in NNPC tanks or vessels in China or Chinese waters are outright fraudulent, for example. To be taken seriously by any real buyer, you need to show that the product is indeed there, by providing identifying information of the cargo being offered. That needs to happen first. When you provide that information, our team can check to find out the circumstances of the cargo, deciding whether to take it down or not. Without such information, people generally assume that the cargo does not exist.
Some intermediaries worry that they may get circumvented if they disclose information. In “oil on the ground” situations, chances are the cargo is already widely known on the ground with local parties already working with a host of known buyers. Your “proprietary information” is not really that proprietary and you are squandering whatever little chance you may have by withholding whatever information you may have.
Even if the product does exist on the ground and is up for sale, it must have at least gone through the Chinese port and/or customs formalities. This by definition would involve a Chinese importer, and there must have been a buyer who presumably has failed thus making the cargo available for sale. Any importer capable of bringing in a cargo of oil has access to a wide variety of end users, and given that the cargo is already in the tank incurring all kinds of costs, they must be doing everything they can to try to sell the cargo. This importer, who is local, in physical possession of the product, in direct contact with end users and anxious to sell, is in a much better position to sell the cargo on a cash basis to a refinery next door than a foreign party. So if a cargo is still available to a foreign party, chances are there’s something wrong with it (for example, price or quality issues, dispute of some kind), such that even a motivated and capable local party is unable to sell it. We need to know the circumstances and then determine feasibility.
As for the demands to identify a “real buyer” on the ground and for a bank commitment, these just show a lack of basic understanding on how the oil supply chain works on the ground. When a cargo of oil is already in China, the only paying buyers are the refineries whose identities are public information. We know almost all of them, but in order for us to go talk to any one of them, we need to have the kind of information we ask for. As for bank commitment, because this would essentially be a local trade of cash for cargo, bank commitment, usually for parties that are physically far away, is not necessary. Moreover, since foreign currency formality is already done when the cargo entered China (otherwise it would not have been allowed even into bonded tanks), no more foreign currency quota is available for this cargo.
We have a line of business on the ground in China selling “stranded” cargoes in Chinese tanks, with complete set of information and physical access from local sources such as the importer. Chances of success when a cargo is being offered by a foreign party are slim. If you still decide to pursue such an opportunity, the least you can do is to offer complete set of information. Without this, we most likely won’t be able to help.