Between August 1993 and December 1996, 32 cargoes of crude labelled as Iranian Heavy or Gulf of Suez Mix crude oil were supplied to a Romanian oil refiner. Some years later, as the result of a whistle blower, the receiver became aware that the supplier defrauded them by supplying blended crude oils that were of an inferior quality to the contractual grades. The receiver claimed that, had they known that the cargoes supplied were not Iranian Heavy or Gulf of Suez Mix, they would have asked for a substantial discount to the price they agreed to pay for the genuine crude oils.
We were asked to give an opinion on what difference (if any) there was between the price paid by the refinery for the bespoke blends supplied by the seller and their actual value and, if different, market value, having regards as appropriate to any relevant discount for delivery of a blend.
To undertake this analysis we determined the value of each component in the cargoes which included a variety of crudes and products, some of uncertain quality, deducted freight/pipeline fees to get the component to Constanza and then pro-rated this delivered Constanza value in accordance with the alleged composition of each cargo. A further discount was included to compensate for the fact that these were blends of uncertain composition and not recognised grades of crude oil. The claim amounted to around US$50 million.