LOI, ICPO, and SPA: Documentation Sequencing in Petroleum Trades

The Documentation Sequence That Survives Scrutiny

A properly sequenced petroleum trade produces five documents in this order, with each gate confirming the next:

1. Soft Offer — seller indicates availability, price formula, volumes, delivery window 2. Letter of Intent (LOI) — buyer indicates serious interest with proof of funds visibility 3. Irrevocable Corporate Purchase Order (ICPO) — buyer formally commits subject to documentation 4. Full Corporate Offer (FCO) — seller responds with complete terms 5. Sale and Purchase Agreement (SPA) — binding contract executed by both authorised signatories

Deviations from this sequence are the single most reliable indicator that the trade is not real.

What Each Document Does

LOI (Letter of Intent)

Issued by the buyer. Non-binding. Indicates serious interest, volumes, product specification (e.g., EN590, Jet A-1), preferred Incoterms, and target delivery window. Often accompanied by a bank comfort letter or proof of funds.

ICPO (Irrevocable Corporate Purchase Order)

Issued by the buyer. Formally commits buyer to the transaction subject to documentation verification. Contains: buyer corporate identity, signatory authority, target product and volume, banking instrument type (LC, SBLC, or other), delivery port, Incoterms.

IMPORTANT: ICPO is not yet the binding contract. It is the buyer's formal commitment to proceed if the seller produces matching documentation. Sellers who treat ICPO as the final binding instrument are not operating to industry standard.

FCO (Full Corporate Offer)

Issued by the seller in response to the ICPO. Contains: full price formula referencing a public benchmark (Platts, Argus), payment terms, inspection nomination, delivery window, force majeure language, performance guarantees.

SPA (Sale and Purchase Agreement)

The binding contract. Executed by board-authorised signatories of both parties. Contains: pricing formula, payment instrument, inspector nomination, demurrage rate, off-spec remedy ladder, dispute resolution forum, governing law.

Red Flags in the Sequence

• Seller demands LOI with banking details before any verification
• Seller's FCO contains a non-standard price formula referencing an obscure index
• SPA is offered before ICPO/FCO exchange
• Counterparty insists on a non-standard documentation flow ('we always do it this way')
• Pressure to sign SPA without independent legal review
• Force majeure clauses that exempt one party only
• Payment instruments that route through unrelated third parties

Why Sequencing Matters for Compliance

Each stage produces evidence. Together they form the trade rationale file that compliance, lenders, and regulators expect to see. A trade with a missing stage cannot be defended on audit.

What Procurement Should Insist On

• All documents on counterparty letterhead, signed by board-authorised parties
• Pricing formula referenced to a public benchmark with explicit pricing date range
• Independent inspection nomination from the buyer's approved panel (not the seller's)
• Buyer's right to retest at discharge
• Clear off-spec remedy ladder (price adjustment → partial discharge → rejection)
• Dispute resolution under English law with London arbitration (or other recognised neutral forum)

Bottom Line

The documentation sequence is not procedural fussiness — it is the structural integrity of the trade. Counterparties who push back on sequencing are signalling that their documentation will not survive verification.