Houston refinery no longer will buy Kurdish crude

A Houston refinery owner says it will no longer buy crude at the center of a battle between Iraq and the semi-autonomous Kurdish Regional Government over who owns the oil.

Chemical giant LyondellBasell acknowledged past purchases of modest amounts of what it called “Iraqi crudes” to process at its Pasadena refinery but said future buys have been canceled until the ownership dispute is settled.

The validity of Kurdish crude oil became the subject of a U.S. legal battle this week after a tanker carrying 1 million barrels of crude from a newly opened pipeline linking Kurdish oil fields with a Turkish port arrived off Galveston’s coast.

Iraq says the oil was smuggled out of the country through a pipeline that bypasses the state oil company, which claims the right to broker the country’s oil deals. The Kurdish Regional Government says it rightfully owns the crude.

Iraq sued and a federal judge ruled U.S. marshals can seize the oil if it comes within the court’s jurisdiction. The United Kalavryta remained anchored 60 miles offshore Friday, according to the latest ship tracking data.

LyondellBasell was revealed as a buyer of Kurdish oil after shipping and U.S. customs data showed the company received two shipments of heavy, sour crude in May, Reuters and Bloomberg reported.

In a statement released Friday, LyondellBasell said its Houston refining operation bought the oil from a reputable international trader with “a guarantee of title and in compliance with U.S. law.”

The company declined to release further information. It’s not clear whether LyondellBasell also purchased the United Kalavryta’s cargo, which is worth $100 million at international prices.

The Pasadena refinery is among the largest designed to handle heavy, high-sulfur crude and can process 268,000 barrels per day.

LyondellBasell’s announcement will likely deal another blow to the Kurdish Regional Government, which has had mixed success offloading its crude. The company hired to carry the United Kalavryta’s oil to shore received a judge’s blessing this week to terminate the contract, ending its obligation to take the contested cargo. The seizure order and the specter of litigation may deter other ships from touching the tanker, and without a lightering company willing to take the crude, the United Kalavryta may have to sail to another port.

Bloomberg reported Friday that another ship carrying Kurdish oil is headed to the United States, expected to dock in Paulsboro, New Jersey on Aug. 11.