Delek Sues Over Oil 1,000 Times More Contaminated Than Allowed

Oil refiner Delek U.S. Holdings Inc. claims it lost over $30 million after buying a cargo of crude contaminated with more than 1,000 times the acceptable level of a damaging chemical.

Testing of a shipment earlier this year showed that one batch contained 5,600 parts per million of organic chloride, which can harm refineries and equipment in large quantities, according to a lawsuit against Marex Group Plc and BTX Energy LLC filed in state court near Houston.

A spokesperson for Marex, named in the suit as guarantor of a supply deal with its Pinnacle Fuel unit, declined to comment. Delek and BTX, whose terminal allegedly stored the crude before delivery, didn’t respond to requests for comment. Marex is seeking to transfer the case to federal court.

The case is the latest in a handful of significant incidents involving organic chlorides in the oil market over recent years. Delek’s trading arm DK Trading & Supply said that losses as a result of damage to the El Dorado refinery in Arkansas are continuing to accrue.

The volume of chloride in the cargoes “on average is 1,000 times over specifications listed in the agreement and is unacceptable in the industry,” DK Trading alleged in the lawsuit. “The contaminated crude delivered into the refinery caused significant physical damage.”

In 2019, the Druzhba oil pipeline linking Russian to eastern Europe suffered significant contamination.

A lawsuit filed in London earlier this year relating to the Druzhba incident showed that a cargo with 148 parts per million was sold at the time at a discount of $32 a barrel to benchmark global oil prices, underscoring the difficulties in managing heavily contaminated shipments. Azeri oil shipments also suffered from elevated organic chloride levels earlier this year.

Contamination with organic chloride most commonly occurs when leftover residue from industrial cleaning products isn’t fully removed before pipelines, storage tanks or oil refineries return to service after maintenance.

Delek’s El Dorado refinery had to reduce throughput, and lost production and sales of refined products because of the contamination, according to the lawsuit.

The case is DK Trading & Supply v. Marex Group, 3:25-cv-00309, US District Court, Southern District of Texas (Galveston).