Crude Oil Purchasing Procedure

Before SOMO proceeds with allocation, the Buyer should submit a comprehensive pre-qualification package demonstrating its financial capability, relevant crude oil trading experience, and a credible end-use or downstream arrangement for the crude oil.

• Signed SPA / Offtake Arrangement — where applicable, a signed Sale and Purchase Agreement (SPA), crude oil offtake agreement, supply agreement, refinery processing agreement, or equivalent binding commercial contract with a refinery or qualified downstream buyer demonstrating the intended destination and use of the crude oil.
• Ownership / Joint Venture / Refinery Relationship — evidence of ownership, shareholding, joint venture participation, or an established commercial relationship with a refinery or downstream facility capable of receiving and processing crude oil.
• Previous International Crude Oil Purchases — where applicable, documentary evidence of relevant purchases or transactions in international crude oil markets demonstrating practical trading experience.
• Previous SOMO Purchases — where applicable, documentary evidence of previous crude oil purchases from SOMO, including contracts, invoices, bills of lading, certificates, or equivalent transaction records.
• Financial Capability / Proof of Funds — evidence demonstrating sufficient financial capacity to perform the proposed transaction, including acceptable bank evidence, proof of funds, bank capability documentation, or other financial evidence requested for the transaction.

• The Buyer submits a written request to SOMO specifying the desired crude oil quantity and grade.
• SOMO responds in writing confirming whether it will allocate the requested quantity.
• Allocation is described as being on a first-come, first-served basis and subject to SOMO's applicable contractual terms and conditions.
• The allocated quantity is scheduled for loading on an FOB basis at the Basrah Oil Terminal (BOT) and associated facilities.

Before signing the sales contract, the Buyer must issue a valid, unconditional Performance Guarantee by letter of guarantee.

• Issuing bank — a bank licensed by the Central Bank of Iraq (CBI) and listed on the CBI electronic platform.
• Guarantee amount — 1% of the estimated total contract value.
• Validity — the guarantee remains unconditional and effective for 90 days after contract expiration.
• Return — after at least one lot has been loaded, the guarantee is returned less a 0.3% administrative fee, provided the Buyer has satisfied the other contractual conditions.
• Forfeiture — if the Buyer fails to load any lots during the scheduled month, the guarantee is fully forfeited. The source states that the Buyer has no right to claim forfeited amounts or pursue legal action in that regard.
• If the contract quantity is increased, the guarantee amount increases by 1% of the value of the additional quantity.
• Any amount due back to the Buyer is returned only to the Buyer's own bank account, which must be provided to SOMO after contract signing.

Banking / issuance requirements stated by SOMO:

• SOMO identifies approved Iraqi government banks as the issuing-bank requirement and identifies Trade Bank of Iraq (TBI) as the foremost preferred issuer.
• Where the Buyer's own bank is not an approved Iraqi bank, a correspondent counter-guarantee (for example, from TBI) may be used.
• The counter-guarantee is described as being on URDG 758 terms and subject to Iraqi law and Iraqi court jurisdiction.
• The Buyer's bank is responsible for related fees and commissions.

Once allocation terms are agreed, SOMO issues the Crude Oil Sales Contract for signature. The contract consists of two sections:

• Section One — Specific Provisions — Definitions, Period and Destination, Quantity and Quality, Price, Payment, SOMO Standard Documentation, Special Conditions, Addresses.
• Section Two — General Provisions — Measurement and sampling, Title and risk, Lifting programme, Vessel nomination, Vessel berths, Loading conditions, Demurrage, Taxes and duties, Termination for liquidation or default, Assignment, Destination, Damages, Arbitration, Notices, Applicable law.

Where the two sections conflict, Section One (Specific Provisions) governs over Section Two. The contract runs for the calendar month stated in the allocation, from the 1st through the 31st of that month. The Buyer's signature is treated as final confirmation of readiness to lift the full contractual quantity during that period.

• The Buyer should be prepared to nominate the vessel promptly after acceptance of the allocation terms.
• SOMO allocation letters typically require the Buyer to reply with vessel nomination within 24 hours of receipt.
• Nomination remains subject to available quantities and the first-come, first-served allocation basis described in the source.

The Buyer selects any three consecutive days within the offered laycan window. SOMO may then narrow the Buyer's selection to a single loading day and notify the Buyer of the expected loading date.

• Laycan 1 — three consecutive days selected within the first laycan window; price is the destination market benchmark less an agreed differential per barrel.
• Laycan 2 — three consecutive days selected within the second laycan window; price is the destination market benchmark less a separately agreed differential per barrel.
• The final applicable discount is determined by the loading period corresponding to the date on which the nominated vessel tenders its Notice of Readiness (NOR).

• The Buyer opens an irrevocable documentary Letter of Credit (L/C) or revolving L/C.
• The L/C must be issued through a bank acceptable to the Central Bank of Iraq (CBI).
• The L/C must be confirmed and advised to SOMO at least seven calendar days before the laycan.
• Payment is drawn through the CBI's account at the Federal Reserve Bank of New York.

After the nominated vessel tenders NOR at the assigned port, loading proceeds under SOMO's standard measurement, sampling and inspection procedures. The ports identified in the source are:

• Basrah Oil Terminal (BOT)
• Khor Al-Amaya Oil Terminal
• Single Point Mooring (SPM)

The loading documentation and inspection process includes:

• Independent measurement and sampling of quantity and quality during loading.
• Shore Quantity Report.
• Ullage Report.
• Bunker Inspection Record.
• Laboratory Report of Quality.
• Sample Receipt.
• Third-party inspection, such as Bureau Veritas, typically verifying vetting and inspection documentation alongside SOMO.
• Time Log and Load Port Inspection Checklist recording commencement and completion of loading.

• Upon completion of loading, SOMO issues the Certificate of Quality and Quantity, Certificate of Origin, and Bill of Lading.
• The Bill of Lading date is the reference point for the payment deadline under Article Five of the contract.
• SOMO prepares the final Commercial Invoice based on the actual quantity lifted and the OSP less the applicable discount for the relevant laycan.
• Within 48 hours of loading, SOMO advises the Buyer of the vessel name, loading port, commencement and completion dates, sailing date, and gross/net quantities in metric tons, long tons and barrels.
• Two full sets of shipping documents are handed to the vessel Master, with one set intended for the consignee.

• After loading is certified and the Bill of Lading is issued, SOMO, through the Central Bank of Iraq, presents the required documents — including the Commercial Invoice and Bill of Lading — to the Buyer's confirming bank for negotiation against the L/C.
• The source states that funds are typically released approximately 5–10 business days after the vessel departs Basra, once the presented documents are reviewed and accepted.
• Full and final settlement is due no later than 30 days from the Bill of Lading date.
• Payment is made directly to the Central Bank of Iraq's account at the Federal Reserve Bank of New York.
• If the due date falls on a Saturday or a New York bank holiday other than Monday, payment is made on the preceding New York banking day.
• If the due date falls on a Sunday or a Monday holiday, payment is made on the next banking day.
• Charges incurred within Iraq are for SOMO's account; charges incurred outside Iraq are for the Buyer's account.