How to Build a Safe Long-Term Diesel Supply Contract

For power plants, mining operations, and large logistics fleets, securing a long-term contract for diesel (EN590) provides supply security and price stability. However, drafting these contracts requires careful attention to pricing mechanisms and performance guarantees.

Key Contract Elements

• Pricing Mechanism: Avoid fixed prices for long-term contracts. Use a formula tied to a recognized benchmark, such as Platts (e.g., Platts Arab Gulf + Premium).
• Quality Guarantee: Explicitly state the required specification (e.g., EN590 10ppm) and mandate third-party inspection (SGS/Intertek) at the loading port.
• Performance Bond (PB): The supplier should provide a 2% PB against the buyer's LC to guarantee delivery. If the supplier fails to deliver, the buyer cashes the PB.