BP violated contract when it blended Texas crude: Monroe Energy

A British Petroleum (BP) logo is seen at a petrol station in south London April 27, 2010. REUTERS/Toby Melville

NEW YORK (Reuters) - BP PLC violated its supply contract when it sold oil to refiner Monroe Energy that was a blend of lower-valued Texas crude with premium varieties, Monroe alleged in a federal court filing last week.

Monroe Energy, a subsidiary of Delta Air Lines that owns a 185,000 barrel-per-day refinery outside of Philadelphia, said the blending of lower quality crudes is prohibited under the supply contract. The company asked a U.S. District Court judge in New York on June 7 to dismiss BP’s April lawsuit alleging Monroe wrongfully severed the deal.

The motion for dismissal has not been previously reported.

BP was allowed to blend Eagle Ford crudes from different wells under its contract but only if each blend met specific API gravity and vapor pressure requirements. Blending lower-grade crude is an industry tactic used to boost returns on less desirable oil, said Monroe, which filed a motion to have the suit dismissed.

BP said in its initial complaint that it blended batches of crude out of Texas’s Eagle Ford shale play prior to delivery. The company said the two parties specifically discussed such blending before a three-year deal was signed in 2014. Monroe unilaterally ended the deal in June 2016.

“Monroe Energy has breached the contract for delivered crude product in an apparent attempt to avoid paying the agreed-upon price for the crude BP supplies,” BP said in a written statement on Monday, adding that Monroe had accepted the product without complaint.

Monroe declined comment on Monday.

Reporting By Jarrett Renshaw; Editing by Cynthia Osterman