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By Jarrett Renshaw
NEW YORK, Sept 1 (Reuters) - A team of former Wall Streetoil traders have won a partial victory in their continuing legaldispute with oil major BP PLC over how to properly run aremote eastern Canadian refinery, according to court documentsfiled Thursday.
The legal fight, first reported by Reuters inMarch, stems from allegations leveled by BP thatequity-backed NARL Refining violated its crude and productsupply agreement when the refiner failed to maximize yields atthe 115,000 barrel-per-day refinery in Come by Chance,Newfoundland.
Among other things, BP alleged that NARL ran the refinery athigh rates when it was not economical, in order to exploit aunique clause in their contract that allowed NARL to earn ahigher profit on oil refined in excess of 90,000 barrels.
The arbitration panel ruled late in August that NARL had nocontractual obligation to run the refinery to the mutual benefitof both parties and tossed out that part of BP's allegations.
"There are no words of any kind requiring to maximizerefinery margins for the benefit of BP," the ruling says of therefiner, which is operated by SilverPeak Financial Partners,formed by a group of Wall Street veterans.
However, the panel agreed to move forward with BP's otherallegation that NARL failed to provide required information,such as economic models, and to discuss possible crude slates,court documents show. Without that information, BP could notevaluate whether the refinery was running optimally.
Geoff Morrell, a senior vice president of U.S.communications and external affairs at BP, said the arbitrationprocess has a long way to go and the company is confident thatit will prevail on the remaining issues.
NARL declined comment.
Arbitration proceedings are typically private affairs, butthe ruling was temporarily posted Thursday on a New York federalcourt website, before it was taken down at the request of BP.The judge overseeing the case has postponed any decisions on arelated case brought by NARL until the arbitration proceedingshave concluded.
At issue is a routine "tolling" arrangement for independentrefineries that lack the trading operations and credit linesnecessary to operate in the global market. BP supplied the crudeto the refinery and took back roughly 82 percent of the refinedfuels, such as gasoline, diesel and jet fuel, paying NARL afixed "toll" of $9.45 per barrel on the first 90,000 barrels ofoil put through each day. NARL could earn more than the tollrevenue on barrels produced in excess of that figure.
The oil company alleges NARL ran the refinery at more than90,000 bpd to capitalize on the incentive - a charge thearbitrators rejected.
In a counterclaim, NARL alleges that BP made only lessergrades of crude available, resulting in "significant andlong-term damage" to refinery equipment, including a vacuumtower that had to be shut down abruptly.
The refinery owners have formed their own crude supply deskahead of the expiration, sources have told Reuters.
The small commercial desk will rely largely on the spotcrude market, but will also ink term deals, the two sourcessaid. (Reporting By Jarrett Renshaw; Editing by Andrew Hay)
