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Mining & Energy

Contaminated oil sent to China may be blended and grey marketed to an unsuspecting refinery

The tanker Energy Champion

The tanker Energy Champion

Contaminated oil stored at a pipeline terminal in Martinez, California has won rare export approval, and some is headed for China. This is an unusual event since California consumes all the oil it can produce or import. Where will it be used in China?

According to the GCaptain shipping site, approximately 1 million gallons of oil was flushed through a pipeline in 2012 to clear it from oil so corrosive, refineries don’t want it in their facilities. Chevron is reported to have incurred a cost of at least USD$50M from this in storage costs and from the falling value of bulk oil to date.

So where will it be used in China? Speculation is saying it may be consumed as fuel. Let’s hope so. But other possibilities like blending it with other sources to make it saleable, or grey marketed to an unsuspecting refinery somewhere, are being talked about.

Grey marketing is the trading of a commodity through distribution channels which are legal but also unofficial, unauthorised, or unintended by the original manufacturer.

The most common type of grey market is the sale, by individuals or small companies not authorised by the manufacturer, of imported goods which would otherwise be either more expensive in the country to which they are being imported, or unavailable altogether.

Often, this is done without the buyer’s knowledge.

The tanker Energy Champion is sailing to China at this time. Its destination is listed as Qingdao, a port with no refineries. Another vessel is being loaded in California but its destination is unclear.

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