Navigating Due Diligence: What Serious Buyers Should Know Before Committing

The decision to commit to a petroleum purchase — whether a single cargo or a term supply agreement — should be preceded by a structured due diligence process. In a market where the value of a single transaction can exceed tens of millions of dollars, the cost of inadequate due diligence is not merely financial. It can include reputational damage, regulatory exposure, and the operational disruption of a supply chain that depends on reliable delivery.

Counterparty due diligence begins with identity verification. Who is the legal entity you are contracting with? In which jurisdiction is it registered? Who are the beneficial owners? These questions are not bureaucratic formalities — they are the foundation of any enforceable commercial relationship. A counterparty that cannot or will not provide clear answers to these questions should not receive a purchase order.

Product verification is the next layer. For physical commodities, this means requesting and reviewing product specifications, origin documentation, and — where possible — independent quality and quantity certificates from a recognised inspection agency. For term supply agreements, it means understanding the supply chain from production source to delivery point and identifying any links in that chain that represent concentration risk.

Financial due diligence covers the seller's ability to perform. A seller who cannot demonstrate access to the product they are offering — through warehouse receipts, storage agreements, or confirmed loading allocations — is not a seller you should be paying in advance. The sequence of payment and delivery should be structured to protect the buyer's capital at every stage.

Finally, legal due diligence ensures that the contract you are signing is enforceable in the jurisdiction you would need to pursue in the event of a dispute. Governing law, dispute resolution mechanism, and the counterparty's assets in that jurisdiction are all relevant considerations. A contract that looks favourable on paper is worthless if it cannot be enforced.