FOB STS PROCEDURE – Oil & Gas

Incoterms: FOB Incoterms® 2020, named STS location. Ship-to-ship is the delivery method, not a separate Incoterm.
Delivery: Ex seller’s performing vessel to buyer’s nominated vessel at an agreed STS area (anchorage, OPL or designated STS zone).
Quantity: As agreed in the SPA (usual operational tolerance ±10%).
Price: Platts (or other agreed marker) related, FOB named STS location, minus/plus agreed differential.
Price settlement: Marker quotations around the offtake Bill of Lading date, as stated in the SPA (commonly B/L date, or 2-1-2 / 3-2 around B/L if no quote on B/L date). Rounded to two decimal places.
Inspection: Independent inspector (SGS / Intertek / Saybolt or equivalent) at the STS — binding for quantity, quality and invoicing.
Payment: Irrevocable documentary letter of credit (MT700), payable against conforming shipping documents and STS Q&Q certificate. Confirmation only if agreed. SBLC only if both parties agree in the SPA.
Offer: Subject to mother-vessel cargo and STS window. Price and STS dates fixed in the SPA before nomination.

This page describes a normal FOB STS cargo between principals. It is not a substitute for the signed SPA.

What FOB STS means here

  • Seller delivers when the agreed quantity is transferred from the seller’s vessel to the buyer’s nominated vessel at the named STS location.
  • Risk passes to Buyer at that transfer, as set out in the SPA (typically when the product passes the seller’s manifold flange).
  • Seller does not pay ocean freight or insurance for the onward voyage. That is Buyer’s cost after FOB delivery.
  • Title passes as set out in the SPA (typically on payment or on endorsement / issuance of the offtake bills of lading).
  • STS is conducted under an approved STS operations plan (MARPOL Annex I), using the OCIMF / ICS / SIGTTO STS Transfer Guide practice: vessel compatibility, STS service provider, fenders, hoses, POAC / superintendent, and local-authority permission where required.

Contract terms are the Special Provisions in the SPA, plus any GTC the parties actually agree (BP, Shell or other). The SPA specials prevail.

Procedure

1. Inquiry and firm terms
Buyer states product, volume, preferred STS area and target window, and whether an offtake vessel is already fixed. Seller replies with specification, mother-vessel status, STS location options, price formula and payment basis. No binding deal until the SPA is signed.

2. SPA
SPA covers: product and spec, quantity and tolerance, price formula, STS location, STS window, inspection, documents, payment, STS cost allocation, demurrage / delay, law and arbitration. Both parties sign. Brokers, if any, receive a copy.

3. Letter of credit
Buyer’s bank issues the LC as per the SPA. Seller’s bank checks the LC. STS does not start on a defective instrument. Seller does not issue offtake bills of lading or final Q&Q before an operative LC is in place. That is the working security — not ATSC, ATV, DTA or other “proof of product” packs.

4. Vessel nomination and STS planning
Seller nominates the performing (mother) vessel. Buyer nominates the offtake vessel. Each side issues Q88 and usual tanker particulars. Parties confirm compatibility, appoint the STS service provider and superintendent, agree the exact STS area, and obtain any required coastal-state or port-authority clearance. Transfer does not start without a written STS plan and a go from both Masters.

5. Approach, mooring and inspection
Vessels meet in the agreed window, weather and sea state permitting. Mooring and hose connection follow the STS plan and industry checklists. Independent inspector boards as agreed. Opening ullages are taken on both ships before cargo starts.

6. Transfer
Cargo is pumped ship-to-ship under mutual supervision. Rates, stops and emergency shut-down follow the pre-transfer conference. On completion, closing ullages and samples are taken. STS Q&Q is issued and is binding.

7. Documents and payment
Seller presents to the LC bank:

  • Full set of clean on-board bills of lading for the offtake parcel, freight as applicable, to order
  • Commercial invoice
  • STS certificate of quantity and quality (independent inspector)
  • Certificate of origin
  • Ullage reports — mother vessel and offtake vessel
  • STS operations log / time sheet

If documents comply, the bank pays under the LC. Seller endorses or issues bills of lading as required. Any agreed quality/quantity adjustment is settled separately under the SPA.

8. Unmooring and close-out
Hoses disconnected, vessels unmoored. STS time sheet and operations log closed. Delay, standing-by and extra STS costs settled as the SPA allocates them. Buyer sails the offtake vessel.

Notes

  • STS FOB is not “STS FOB 2020” as an Incoterm. The Incoterm is FOB. STS is only how delivery is performed.
  • No ATSC, ATV, DTA, tank receipt or “partial POP” pack. Those papers are not regular FOB STS practice between principals.
  • No side fees or “facilitation” outside the SPA.
  • Who pays the STS provider, fenders, hoses, superintendent and inspector is a commercial point. State it in the SPA.
  • Weather, sea state, vessel incompatibility or refusal of local permission can abort or delay the STS.
  • Law and arbitration are whatever the SPA states (English law / LCIA or ICC is common for this trade).
  • Product is offered only if available and only from non-sanctioned origin. Both vessels and the STS location must be workable under applicable sanctions and flag/port rules.

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Disclaimer: We do not accept or source fuel or petroleum products from sanctioned countries.

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