Custody Transfer Audit

Custody Transfer Audit


Have you ever had a problem cargo and wished that you had appointed a Loss Control?

Loss Control cannot be assigned to cover every single cargo movement and in some instances your exposure to a loss is deemed small or non-existent.

Have you ever wondered about the accuracy of data and reports presented by inspection companies when you are not protected by Loss Control?

Now there’s a solution, Oil Inspections is pleased to present a new service: Custody Transfer Audit (CTA)
For more than 30 years Oil Inspections has reviewed thousands of inspection company documents and can positively state numerous mistakes are made by the attending inspector and subsequent office processing.

  • A few current examples are:
  • Misreporting analysis results – Water reported as 0.3% and corrected to 0.03%
  • Entering a temperature into a meter API cell - temp was 75°F; API was 33
  • VEFs – incorrectly compiled
  • Incorrectly applying Nett deductions – NSV volume higher than GSV volume
  • S&W determined by In Line Sampler, but vessel free water deducted as well
  • Misreading strapping tables , volumes, critical zones
  • Incorrect closing temps and APIs on shore tanks
  • General typos

Examples found and corrected have literally saved our clients hundreds of thousands of dollars, but ONLY when they have been promptly identified.

The first example occurred twice on the same day for the same client in two separate locations, the corrections added $600,000 to delivered volume.

The "confirmed figures" had been issued to all parties by the inspection company before being sent to Oil Inspections for verification.

The second example had understated the outturn by 1,000 bbls of Crude. The terminal and inspectors had agreed figures and issued their report as confirmed.

Incorrectly compiled VEFs are very common, multi grade or part cargoes are not combined, non-applicable voyages are included.

Discharge VEFs, where applied, are commonly compiled from proprietary data systems or based on terminal bias, where the inspector makes no attempt to verify the accuracy or validity of any of the data.

The above are just a few examples of what we see on a daily basis.
With Oil Inspections in attendance as Loss Control our clients are confident that these and other errors are found and corrected, generally without them being aware they existed.

However , what happens if no one double checks the figures?

Operators are very busy and often do not have the time to analyze the shear volume of data and reported information.

They may realize there is a loss and make a few enquiries to the inspection company, but the chances are small of the inspectors finding and correcting their own mistake.

Additionally unexpected losses can occur if correct API procedures are not followed , such as:

  • No L/D performed , or performed incorrectly – incorrect limits used
  • Ship and shore tanks not gauged or gauged incorrectly
  • Inaccurate data recorded
  • In line sampler used – but did not perform within tolerance
  • Meters used but not proven correctly or at all
  • Non calibrated survey equipment used – inspectors did not use their equipment

Another common occurrence is for the inspectors to totally ignore or be unaware of specific Q&Q clauses in the sales contracts which you have specified in the nomination. We do not recall an inspector EVER telling us a roof is within 6” of the CZ or that a line displacement was out of your stated tolerance. These issues can easily turn an apparent loss into a gain if the terms of the contracts are properly addressed and applied, but what happens if the inspector does not tell you ?

There is generally no provision within an inspectors report to highlight such matters and so no way to draw your attention to them.

Oil Inspections offers a service , Custody Transfer Audit (CTA), where we will review jobs for you, almost in real time. Time is of the essence and mistakes can be more easily corrected before the trade book is closed on a job.

How would this work?

  • You send us the data as soon as possible, or instruct the inspector to send it to us.
  • We will review, identify any clear errors and also provide a list of follow up questions that may need to be further investigated to solve the issue.
  • If good cause is found for a more in depth investigation then OIL will deal directly with the inspectors.

What data would be needed?

  1. Your full nomination to the inspection company
  2. Relevant quality & quantity clauses as agreed with the other party
  3. Inspectors updates, COAs, provisional and/or final reports
  4. If this is a discharge then relevant load port documents would assist.

The key element is a review as close to real time as possible. Errors are more readily corrected before they are published to all parties.

Oil Inspections maintains an active archive of hundred’s of ship VEFs and details which can be used to compare with current details for accuracy. Also we have 30 years experience of attending many terminals across the US and Caribbean and we are aware of many of the specific terminal idiosyncrasies and practices which may not meet the guidelines of API methods; such practices often being ignored by inspectors if no Loss Control is present.

This service does not need to be used only when you experience a problem. OIL will review inspector’s reports for accuracy and content on any assignment. Periodic spot checks and audits of standard jobs can help prevent issues in the future before they may cost you revenue.

Prevention is always better than cure.

We recently saw a report for a loading where 8 shore tanks were used , but the sample receipt only showed 5 tanks. On the same job the inspection company’s sample receipt showed samples would only be retained for 45 days, when this was queried with the client the orders showed that samples must be kept for 90 days.

Both of these items could be a major concern if a quality issues arises at a later date.

What would this cost?

  • Minimum charge of $250 to review documentation and provide initial review
  • Hourly charge $150/hour – billed in 15 minute increments (during regular office hours)
  • Hourly charge $300/hour – billed in 15 minute increments (during out of office hours, weekends and holidays)
  • Site visit (terminal or inspection company office) $150/hour + subsistence and travel expenses as per regular assignment attendance ( miles - $0.75/mile, subsistence $48/day, other charges at cost)

So for a cost of less than 3 barrels of Crude you could recover thousands of dollars.

We hope you find this of interest and will feel there is now a service that can back you up even if no Loss Control was present on site.

If you have any questions or would like to meet and discuss this concept further we would be happy to do so.

Thank you for considering OIL INSPECTIONS USA INC. for all your Loss Control needs.

Petroleum Loss Control Inspection Inspector Ship Vessel Cargo Operation Crude Oil Services Representative Loading Operations Discharge Operations Client Reconciliation Confirmed Shore Outturn Out Turn Cargo Movement Petroleum Movement Tank Terminal Quantity Inspection Shore Tank