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BP accuses Monroe Energy of wrongfully terminating contract

April 19/2017

MOSCOW (MRC) -- BP Plc has accused Monroe Energy of wrongfully terminating a crude supply contract in 2016, costing the oil major at least USD59 MM in damages, according to a federal court filing, Reuters.

BP said in the filing that Monroe Energy, a subsidiary of Delta Air Lines Inc, terminated the contract after misinterpreting a provision regarding the blending of crude oils. BP declined to comment further on the case and Monroe could not be immediately reached. Monroe has yet to respond to the allegations in court.

The dispute with Monroe marks at least the second time in the past two years that BP has been accused by a refiner of supplying lesser-grade crudes. NARL Refining is embroiled in an arbitration dispute with BP that involves allegations that the oil major was providing crude oil at the company's Come-By-Chance refinery in Newfoundland, Canada, that helped BP's profits but hurt the refinery's equipment.

Monroe Energy inked a three-year contract with BP in August 2014 to supply the company's 185,000-bpd refinery outside Philadelphia with crude oil from the Eagle Ford or Bakken shale fields, according to the lawsuit filed on Thursday in US District Court in Southern New York.

Monroe agreed to pay USD8.35 above the US benchmark price for Eagle Ford and USD7.35 above the US benchmark for Bakken deliveries, according to the lawsuit. The supply contract was favorable for Monroe when US crude sold at a wide discount against the global benchmark during the early months of the deal, but the spread narrowed significantly in late 2015, making global crude more attractive to East Coast refiners.

Monroe notified BP last June that it was severing the contract, alleging the oil major was intentionally blending batches of Eagle Ford crude that did not meet the API gravity grade called for in the contract, according to the lawsuit.

BP said the agreement had no language that barred it from commingling grades of crude oil from the same fields, court papers showed. BP says it blended batches of Eagle Ford crude from different wells, calling it a routine industry practice.

BP also said Monroe used gravity figures measured at the docks in Texas, not at the point of delivery as required by contract, according to the lawsuit. Monroe never complained the delivered crude was not in compliance, BP said.

"Monroe's allegations were nothing more than an unfounded pretext to terminate the (contract)," BP said in the filing.
Author:Anna Larionova
Tags:petroleum products, petrochemistry, Crude oil, British petroleum.
Category:General News
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