Introduction

Fundamental to each energy Traded Deal, is an agreement on the terms by which the quantity and quality is to be measured, and the associated “title/Risk” changes hands. This is used by counterparties to be clear on their respective risk and insurance needs during the logistical operation of the deal.

Whilst the globally accepted “Incoterms” provides for standard deals, where there is coincidence of measurement and risk/title, there is also increasing use of “Hybrid” terms, where there is a separation between measurement and risk/title. The lack of an industry agreement for how such “hybrids” are coded, is seen as a road block which is likely to frustrate digitisation initiatives currently being planned.

Hybrid Delivery Terms

Having formed earlier in 2021, the Energy LEAP working group established that a proposed coding of Hybrid Terms, would need to understand each of the factors which can vary above and beyond the scope of the incoterms.

The initiative leader has likened the proposed approach to toggling each respective wheel of a machine to find the overall combination, just as one selects a combination lock.

Within this scope, Energy LEAP does not advocate which combinations are permitted, and it is for participating companies to set their own policies on which ones they intend to use.

The working group is currently finalising the associated proposal for hybrid terms around “CIF/CFR” and “ExW” incoterms, which will be published shortly.

The proposed standard can be downloaded here.

The draft version is shared for consultation during Oct/Nov 2021, and we welcome feedback which enriches this standard for adoption across the industry. Should you wish to provide feedback, please use our contact form here, and we will engage with you further.

Peter Harvey, Energy LEAP Programme Director