Report: Asia-Bound Contaminated Crude Cargo Could be Destined for Bunker Markets

The so called "orphaned oil" was said to be so contaminated with organic chlorides that it would corrode the insides of a refinery.

After sitting in San Francisco for three years, Chevron Corp. Sunday was said to be loading one million barrels of contaminated, orphaned oil onto tankers bound for Asia that could eventually make its way into the bunker markets, Bloomberg reports.

The organic chloride-saturated oil was flushed from a pipeline delivering crude to San Francisco-area refiners in September of 2012 and, with the recent collapse in oil prices, has since dropped in value by $50 million, Bloomberg calculates.

Gordon Schremp, a senior fuels specialist at the California Energy Commission, was notified by industry representatives that Chevron would be exporting the crude, and Bloomberg reports that the crude will be transported in two tankers, Hellespont Protector and Energy Champion, the latter bound for Qingdao, China, a place with no refineries.

Schremp was not informed of where the outcast barrels are headed, and he speculated that they could be used as bunker fuel or burned in a power plant.

The so called "orphaned oil" was said to be so contaminated with organic chlorides that it would corrode the insides of a refinery.

"It's really kind of a bizarre incident," said Schremp.

Since 1992, an exemption has prevented all but limited amounts of California oil to leave the country, but Chevron this month obtained an export license from the state's Commerce Department.

Bloomberg estimates it will be the first and last California oil that Asia sees for a while, and Schremp told the organization that "It's not like it makes perfect economic sense to move barrels that way into the world market - this was an export of circumstance."

Last month Chevron made headlines when it looked to sell its 50 percent stake in refining company Caltex Australia Ltd. for $3.6 billion.