US Pipeline Bookouts Automation

LEAP, in conjunction with refined product and crude oil shippers, are identifying requirements to automate the US pipeline bookout process.  Transport4 is the logistics information hub for communicating petroleum product supply activity in the pipeline-centric supply chain.  The bookout initiative marks the industry’s first automated cross-pipeline, cross-product solution that will allow shippers to find and match trades that will be financially settled via a ‘bookout’.

Bookouts allow companies to fulfill their physical supply obligations (trades) by separately negotiating agreements to offset those obligations via multiparty ‘chains’ and settle the transactions by sending cash that represents the value of the supply obligations on the same date as receiving cash from their suppliers to satisfy their obligations. The use of bookouts reduces or eliminates:

  • Credit risk, since bookouts usually have accelerated payment dates versus the equivalent physically-delivered transactions
  • Delivery and operational risk, as the underlying oil does not need to be nominated,scheduled, flowed, and received
  • Labor costs for schedulers and operations staffs at trading firms, as the effort involved in settling a booked out transaction pair is far less than the equivalent effort in scheduling and settling the physical delivery and receipt
  • Shipping  costs

Before the new bookout solution, schedulers are required to call and Instant Messenger their counterparts at other companies, which is a time-consuming and error-prone task during the most busy day of the week for a products scheduler, ‘scheduling day’.  By using the bookout solution, companies will submit trade data in one of several formats, and the system will propose book-out chains, allowing each counterparty to view/accept/reject each bookout and issue statements to clarify the details of the bookout.

The automated solution has the following additional benefits over the current manual bookout process using phone calls and Instant Messenger communication:

  • Reduced time ‘finding’ bookout chains
  • Fully-documented, auditable bookout chains
  • Ability to find an unlimited series of transactions across an infinite number of counterparts

If you have any questions about the Transport4 Initiative or wish to join the workgroup, please contact Justin Ricketts from Transport4: email Justin Ricketts or call 678-373-0464.