IOC nears deal with Exxon over contaminated diesel

Vol 6, PW 10 (17 Jul 02) Midstream & Downstream

Indian Oil is nearing the end of an intractable five-year-old legal and technical dispute with Exxon over a shipment of contaminated diesel.

At issue is liability for the contamination of 43,286 tonnes of high speed diesel that IOC bought from Exxon in Singapore on a CIF basis back in March 1997 for delivery to Vizag and Haldia. Who should take the blame Exxon, IOC or the tanker owner When the diesel arrived at Vizag, samples failed the contract specification tests for 'total sediments'.

Separate samples from the port in Singapore - where the diesel was loaded - passed the test, apparently absolving Exxon. Yet British tests carried out on behalf of the tanker owner blame Exxon.

As accusations flew back and forth, the tanker was detained in port for 38 days at Vizag raising demurrage claims. Exxon began arbitration in London against IOC, while IOC hit back with a counter claim and filed cases in the Vizag court seeking monetary compensation from Exxon and the tanker owners.

Separately, the tanker owners began arbitration in New York against Exxon. We now learn that IOC wants to bring the matter to a close.

In a counter-proposal to Exxon last month IOC offers a separate "negotiated settlement" with the tanker owners and Exxon with a promise to drop legal proceedings in Vizag and London. IOC also offers help to Exxon in its New York legal arbitration against the tanker owners.

Separately, IOC continues to demand $200,000 in compensation from the owners of the MT Nedimar tanker. IOC has rejected an earlier offer from the tanker owners to pay $75,000 as "trifling".

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