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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Jalal Bezee Mejel Al-Gaood & Partner & Anor v Innospec Ltd & Ors  EWHC 3147 (Comm) (08 October 2014)
Cite as:  EWHC 3147 (Comm)
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QUEEN'S BENCH DIVISION
London EC4A 1NL
B e f o r e :
| JALAL BEZEE MEJEL AL-GAOOD & PARTNER
FUTURE AGENCIES COMPANY LIMITED
|- and -
Jeffery Onions QC and Derek Spitz (instructed by K &L Gates LLP) for the First and Second Defendants
Hearing dates: 14, 15, 19-22 May, 3, 6, 9-12, 16, 25, 26 June and 1 October 2014
Crown Copyright ©
The Honourable Mr Justice Flaux:
Oil refining in Iraq
TEL and MMT
"Nothing but anecdotal on the MMT + TEL in Iraq.
They did the testing themselves in house and we only heard of the resulting +5 or 6 from MMT.
This was far beyond our expectations, much more likely to see +1 or 2 RON at 54 mg with the TEL.
Not impossible to get an odd result as Assuit base fuel is not typical of a finished gasoline (ie 100% naphtha) but best not to bank on it.
The predictive equation for MMT + TEL is not much use. It appears to be bound by tight limits outside of which gives nonsense results (eg +100 octane). The big problem being those limits are not defined which leaves us guessing."
The political and economic situation in Iraq
"1.1 The Iraqi government's control collapsed from 2003 onwards. Following the fall of the Saddam regime, administrations were unable to consistently and formally maintain law and order across the country.
1.2 Criminality motivated by profit increased significantly. Contributing factors across Iraq included a rise in unemployment, increased circulation of convicted criminals released from prison, and opportunism stemming from the post-Saddam governments' inability to impose law and order.
1.3 A major deterioration in security took place after 2003. Iraqi government and coalition forces were faced with civil war-like conditions. Large scale violence and population displacement occurred. Many areas fell under the control of militia forces. Security conditions were worst in 2006-8, particularly in central Iraq.
1.4 Security conditions were not uniform. Criminal gangs and non-governmental militias proliferated in all areas, but their impact on overall stability varied. Central Iraq experienced greater levels of violence than southern Iraq.
1.5 Security conditions adversely affected transportation. Delays in journeys were routine; traffic was also exposed to significant security risks. Security-related factors impacting traffic included delays at checkpoints, road closures, travel curfews and physical attacks. Highway 10 to Jordan was particularly dangerous. In conjunction with non-security issues such as bureaucracy relating to imported goods, these factors often caused delays. Such obstacles were a significant factor in transportation-related decisions.
1.6 Despite obstacles, the movement of goods and people by road still took place. Journeys often faced delays and/or added costs, but were nevertheless mostly able to be completed. The volume of goods and people in circulation was lower than if "normal" conditions had prevailed; security-related considerations often discouraged unnecessary travel by road.
1.7 Iraq's hydrocarbons infrastructure was in a poor condition. Poor infrastructure condition dramatically affected performance. Despite Iraq's level of crude oil production, the domestic market relied on imported refined products to make up the shortfall. Contributing factors were the low level of investment in infrastructure, in particular, as well as security conditions affecting refineries and pipelines.
1.8 Baiji, Daura, and Basra refineries all faced attack and threats of attack. Attacks took place on staff, supply of crude oil and raw materials, refinery facilities, and refined output. Security considerations combined with under-investment to affect refinery productivity.
1.9 Refineries continued to operate throughout 2003-2010. Refineries operated for the majority of the 2003-2010 period, albeit at a lower level of productivity than before 2003. Baiji refinery, in particular, did cease operating on a number of occasions, but functioned for the majority of the relevant period.
1.10 Iraqis endeavoured to "keep the system" going as best as possible. In most areas of political and commercial life, Iraqis endeavoured to "make do" and adapt to the restrictions of the operating environment.
1.11 Despite obstacles and disruptions, deliveries of consignments to and from refineries took place. However, the security environment incentivised refinery operators to restrict the volume of incoming cargo to a minimum.
The findings and admissions in the criminal proceedings
"The investigation by all these authorities included Innospec Inc's involvement in the UN Oil for Food Programme for Iraq (OFFP). The facts in relation to the OFFP as they emerged were that between 2001 and 2004 Innospec entered into five contracts under the OFFP with the Iraq Ministry of Oil to sell them TEL, paying approximately 10% of the contract price as a bribe. After the termination of the OFFP, Innospec agreed with the post Saddam Ministry further contracts under which further bribes were paid. The total paid or promised to be paid as bribes was $5.8m."
"There can be no doubt that corruption of foreign government officials or foreign government ministers is at the top end of serious corporate offending both in terms of culpability and harm. It is deliberate and intentional wrongdoing. It causes serious harm. In the foreword to the 2004 UN Convention against Corruption Kofi Annan, the Secretary General described its effects:
'Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish. This evil phenomenon is found in all countries - big and small, rich and poor - but it is in the developing world that its effects are most destructive. Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government's ability to provide basic services, feeding inequality and injustice and discouraging foreign aid and investment. Corruption is a key element in economic underperformance and a major obstacle to poverty alleviation and development.'
It is no mitigation to say others do it or it is a way of doing business. The international community has taken its stand in the OECD Convention on Combating Bribery of Foreign Public Officials 1997 to which the UK is a party. Article 3.1 requires State parties to the Convention to apply criminal penalties which are 'effective, proportionate and dissuasive'."
The period prior to the allied invasion in March 2003
"It is the client in Iraq who request from U.N. to include the additives required by them into the distribution plan. And since MMT was not used by client before, therefore, it was not requested to be included in the U.N. distribution list. Now, in order to include MMT on the U.N. list for phase 9, we must convince client that MMT is better alternative for T.E.L. Then, client will submit a request to U.N. representative for the distribution plan for phase 9 to include MMT in the list."
"This is in reference to our meeting about your request to find an alternative to the tetraethylene lead (TEL) substance.
Per the request prepared by the Ethyl Company, kindly clarify the reasons that led the Iraqi Ministry of Oil to convert from use of the TEL substance to the MMT substance."
"The technical department at the Ministry is asking our help in making determination whether to use MMA or not, especially in light of our letters warning them of the side effects of using MMA both for Environment &human health. They have confirmed to us that their priority for RON increase will be through utilizing MMT as much as possible. However, given their pool they will need other materials to boost the RON to the required levels."
From the invasion until the entry into the 2004 LTPA
"Unaccountably inconsistent results were achieved from these evaluations, without any obvious cause.
Subsequent examination and a trial calculation strongly suggest that the contents of the container were of a higher concentration than declared, possibly undiluted TEL B.
TEL and MMT have, historically, been tested in combination and blends containing low and equal metal contents have been found to give valuable contributions from each anti-knock. Economic reality and progress away from the use of TEL led to their early discontinuation for road gasoline."
"Since the war the newly constructed Iraqi Min of Oil has confirmed the original decision to move to MMT and is now working with both the UN and The Coalition Provisional Authority to implement this change. The visit of Min of Oil personnel and Iraqi refinery representatives to Jordan to meet with Ethyl for a demonstration of MMT was part of this ongoing process.
From our meetings with USCOE's and KBR last week it became apparent that because of the contaminated state of the Iraqi refineries, the USCOE's had instructed KBR to find a suitable alternative to TEL and KBR identified MMT as the best alternative. This is a completely separate decision to that of the Min of Oil, there is no apparent co-ordination between the activities of USCOE's/KBR and the Min of Oil. However we did seem to have all 5 interested parties arriving at the same conclusion.
During our discussions last week, we were told by USCOE/KBR that USCOE had uncovered either a 2 year supply agreement for TEL or a strategic stock pile of TEL which would last 2 years. Although details remained very sketchy and neither Capt Kirkpatrick nor KBR had seen any documentary evidence of this agreement, never the less USCOE have instructed KBR to defer their MMT project for 2 years. Kirkpatrick will continue to press his superiors for more detail and we did suggest that moving forward with MMT at just one refinery whilst continuing with TEL at the others would be a better approach. At this moment there is no USCOE/KBR programme to introduce MMT to Iraq."
"Min reports they have about 6 months supply of TEL.. 2 other companies (non Octel!) have signed agreements under the UN programme but the feeling in the Ministry is they will not deliver. The Min of Oil has recommended the Minister to establish a Task Force to implement MMT purchasing. This is on his desk and should be approved Saturday.
..The Min of Oil confirmed they have no knowledge of any USCOE/KBR purchasing deal for TEL, they will not accept such a deal and are continuing with their proposal to purchase MMT.
To support this they have organised an MMT training session for the major Iraqi refineries at Daura refinery for this (now last) weekend. Azad Nuri for Nass lubricants will attend to assist with the training.
From these reports it seems that the Min of Oil, supported by CPA and UN who will have to fund this venture, are pressing ahead with their plans to move to MMT. How they propose to do this whilst KBR are operating the refineries for USCOE is a little unclear to me, although USCOE and CPA must have an interface somewhere. Once the TEL supply position is clarified and these 5 groups come to realize they are all of the same mind we could be back on track very quickly. Assessing the USCOE's position I'm sure we would be tempted to wind down our own activity of looking at production levels, stock levels, delivery vessels, delivery routes etc but given the activity of the Iraqi Min of Oil, which must have the blessing of the CPA, I strongly recommend we continue with our programme, particularly of trying to build stock levels."
"Accordingly, KBR advised the Ministry of Oil that they are able to change the TEL system in all refineries in Iraq within very short period (few months) to be able to use the MMT product, which is cheaper in price, feasible and is the future as they threaten if Alcor insisted on selling the TEL at higher price to take advantage of monopoly.
Our contacts at the Ministry of Oil advised us that they do not want Alcor to lose the opportunity and lose the market in Iraq for the benefit of all parties (including their benefit from Alcor contracts), as KBR is capable to change the system (this proposal is already submitted to Ministry of oil by KBR USA) and import the MMT, the decision is for CPA and US Administration, above the will and desire of the Ministry of Oil KBR have a lump sum contract for distributing of fuel inside Iraq and they are allowed to make any changes in the old systems of the Iraqi Refineries to perform their contract obligations, so we have to be careful".
"I have been following up on the MMT story in Iraq. I spoke to Chris Niakaros, the Senior Purchasing for Brown and Root based in Kuwait. He was aware of MMT and also "MME and MTBS?" as alternative octane enhancers. He said that they had no plans to use any of these products and mentioned that the blending facilities in Iraq were only geared up to handle TEL. He knew nothing of the offer to provide blending units for MMT as mentioned by Naaman and said that if they were to be used he would certainly be involved and no such requisition had been processed by him. Rather encouragingly he was aware of some of the technical shortcomings of MMT which obviously I took the chance to discuss in greater detail!"
"MMT is very sensitive to light and decomposes to give a black sediment within a few hours of exposure. Blends containing MMT must therefore be stored in non transparent containers."
"1- The efficiency of MMT to increase the Octane Number does not exceed 7 Octane Numbers as RON; therefore it is preferred to add maximum 54 mg/L to the current Pool.
2- The efficiency of TEL is large with wide range in terms of capability of dosing or increase in Octane Number; it has been observed that the maximum dose of TEL is 3.6ml/400 is capable of boosting Light Naphtha RON 66 to RON 92; whereas adding MMT at the highest dose of 72 mg Mn/l increases the Octane Number to RON 85 from Pool of RON 77.
3- Sensitivity of MMT to light; as it precipitate heavy metal components when exposed to normal light (chemically unstable), therefore this product should be dealt with in specific manner in the units and laboratories.
4- It is observed from .consumption schedules that it is possible to reduce the consumption of TEL by 400 Ton/year when adding 54 mg Mn/l instead of 36 mg Mn/L which means an increase in consumption of 129 MT/year from MMT product. And from this it is possible to calculate the economical feasibility based on the price per ton for each product.
5- It is observed from the graph that the addition of 36 mg Mn/L behaves in a linear manner after which the line deflects to the dosage access. Whereas it is observed that the graph for TEL dosage more linear for a bigger range.
6- It is observed from the regular report that MMT product is less toxic than TEL and less pollutant to the environment and considered as a replacement to lead compounds.
7- No field test has been carried out on MMT to observe the consumption level of gasoline (km/L) and the stability of engine operation for limited period of times. Nor its effect on Valve Seat Recession (VSR) due to inability to perform that test at this time."
The special committee on MMT Purchasing decided on submitting a recommendation to the Minister for purchasing 1000 tons of (H.3062).
We hope this will be accepted soon.
Meanwhile, they asked for the following (I sent a message on 24/8/2003 about these requests):
1- Two samples of (H.3000) Dilute.
2- Three pipettes.
3- Electrodes and chemicals used in measuring amount of Manganese in Gasoline samples, by using Atomic Absorption (AA) Method."
The committee has met and a recommendation has been issued for the approval of the minister to purchase 1000 MT of MMT. We expect very soon a tender will be issued for this project.
Please obtain all the necessary information for available dosing Units that can be mobilized within the next few months.
They will proceed with the program of TEL-MMT dosing. Will keep you updated when the minister will approve the purchase, which is a matter of days."
"Incidentally, under item 1 you refer to TEL-MMT dosing programme, what does this mean?
Ethyl may be able to use existing TEL equipment for MMT but if we instal new kit it will not be able to handle TEL as the injection equipment will not work at the high treat rates required for TEL.
Is there a TEL project running alongside the MMT project or was this just an 'expression' on your part to describe the process?"
"Regarding TEL-MMT dosing program: Client seem to be convinced that MMT & TEL work synergetically. So, they will go with partial treatment with TEL along with MMT for the first year until they finish their stocks of TEL.
Today it has been confirmed by the deputy minister that the decision has been made absolutely to go fully to MMT."
"2. They plan to produce regular Gasoline with 83 RON for the time being, by using both TEL & MMT with their pool with an average RON of 77, according to the following program (tentative):
TEL 0.027 gm Pb/Litre
MMT (H.3062) 0.036 gm Mn/Litre
This means they require 1130 T/Y of MMT for all the refineries (total Gasoline Production 13,000 M3/Day).
3. When they start producing Premium Gasoline (RON 92) their approximate plan is as follows:
TEL 0.411 gm Pb/Litre
MMT (H. 3062) 0.054 gm Mn/Litre
Thus they require about 1700 T/Y of MMT (H. 3062)
8. The Ministry informed me that this tender will be based on single source with direct negotiations.
9. A final decision should be forthcoming on this tender, together with more details on the dosing systems within two weeks from now."
"I discussed in the Ministry this morning the report sent by you with the message dated 10/11/2003:
1) The ideas and principles listed in the report will be accepted by the Ministry, once the whole strategy is explained to the Ministry and the conditions of an agreement are set. Also, the commercial aspects of such an agreement must be fully discussed.
2) A meeting in the Ministry and the three refineries can fill all the gaps and finalize the matter.
3) Further to our message of yesterday, following are more details obtained from the Ministry:
a) The Director General of the Technical Department has been replaced. So we expect some delay in making a final decision on the MMT Tender, as the new D.G. is not very familiar with the subject. But we hope things should start rolling soon.
b) The dosages of Pb and Mn mentioned in our letter are based on actual tests carried out by the Refineries' Team last month at Daura Refinery.
c) When producing only regular Gasoline (RON 83), a third alternative will also be considered, that is using MMT alone and this means: MMT (H. 3062): dosage = 0.054 gm Mn/Litre
Thus, for a total production of 13,000 M3/D, the amount of MMT required in this case will be: 1700 T/Y."
"MMT implementation Committee have reported back to Minister of Oil. Their brief was to determine how much MMT was required for the first order, when/how to start, and how to fund. The committee have asked that the initial order be for 1000 MT MMT as Hitec 3062. The plan, based on their octane study within Iraq, is to use MMT in combination with Lead until the contract expires and beyond that time to use MMT alone. (Estimated annual requirement based on 54mg Mn/litre is 1800MT H3062)
- the Minister has signed the letter of intent.
- a tender for 1000 MT H3062 is expected to issue in the next few weeks"
"MMT: Till now no decision has been taken, due to several changes in the Ministry's top ranking personnel. A new counsellor for refineries has been appointed, who will be involved in the MMT discussion."
"The Iraqi oil ministry chemicals personnel I have been working with are considering a 3 year TEL supply offer from Alcor. I had mentioned the Octel/Alcor association as best I remembered it to the ministry in the past. They inquired about a contact for Octel, so I have passed this information on to them. You may be contacted by phone by Ms. Fatin Estephen, Planning Directorate, or Mr Karim Al-Aibi, Technical Directorate, Chemicals Dept Manager, or both. They do not have email addresses, except for one common oil ministry address."
"We have discussed the LTPA with the acting President Mr. Thamir Al Ghadhban and Under Secretary for Economic Dept. Dr. Radwan Al Saadi and Head of Chemical Dept., Mr. Karim La'aybi.
They have agreed in principle to sign LTPA with us for the quantity conservative of 2,000 M. Tons/year up to 4,000 M. Tons/year depending on production capacity of the local refineries. To get a proper assessment of the quantity, they have floated a written enquiry to all refineries asking them to abide in writing with their requirement having in mind, the refinery expansion volume forecast duly approved so they can discuss with us on solid ground their demands.
I have met as well the American CPA (Coalition Provisional Authority) responsible for the Ministry of Oil for budgeting decision and day-to-day functioning of Ministry of Oil They are:
Mr. Gary Vogler Ex-Mobil
Mr. Bob Robert Mackee Ex Conoco
I met them on 16th Nov 03 at the Ministry of Oil in Baghdad. They approved the LTPA emphasising the fact that it is a good solution for both parties. The Ministry of Oil will have a steady flow of TEL with a fixed price for the coming 3-5 years and Alcor will have a steady demand for TEL from Iraq to build their production accordingly. So, in general, the meeting went well on this subject. We are waiting to receive their response in Dec 03 and I hope we can sign a contract by Jan 2004. What they are looking at is a price of €10,000 pmt to finalize such an agreement."
"The Ministry of Oil has taken the decision to adopt the resolution of signing the LTPA with Alcor Chemie. This is final as this has been adopted by Mr. Vogler and Mr. Mackee, the two American interlocutor[s] in the Ministry of Oil."
That report also demonstrates that the decision to enter the LTPA had to be and was endorsed by the American authorities. Since there is no basis for saying that they were corrupted by the payment or promise of bribes, that is further demonstration that the LTPA was not procured by bribery.
"Reference to the offer and to the Benzene Enhancer Committee that agreed in your Dept. on 15/12/03, they have studied the Long Term Contract (LTC) proposal presented by the Alcor company, which is the only approved supplier to us today for the supply of TEL to our refinery and after the study of the LTC we confirm the following points: (1) In case we want to reach Octane Enhancer on Benzene to reach at 80 per cent as an assumption and the fact today we are reaching 73 per cent, we will need 1,500MT per year of TEL. (2) In case we need Octane Enhancer on Benzene to reach 85 per cent, having in mind as well the present level of 73 per cent, we need 2,500MT per year. (3) We recommend signing a long-term agreement for purchasing TEL to the fact that we will have a constant supply of this material at regular basis and with fixed price for the coming three years with the possibility of extension."
"We have no objection to sign long-term agreement with one of the producers and approved suppliers for the coming fiscal year (2004, 2005, and 2006) at fixed price so as of each refinery will have its own contract and study the terms of the contract in detail before final approval. (2): Stock of TEL in our refinery company is enough for one year production having in mind that we are reaching octane level at 81 per cent."
"The gasoline production in Iraq has deteriorated significantly in 2003 especially after the war, which started towards the middle of March of that year and the subsequent occupation of Iraq. The reasons for this deterioration were not only the general conditions of the refineries which was created by the years of sanctions on Iraq but also because of the conditions created by the war and its aftermath. All the refineries were unable to reach their intended production capacities due the lack of security, often-inadequate crude oil supply, lack of sufficient and stable power supply and the need for major maintenance and repairs. Such maintenance and repairs could not be done when market demand is so high and there was no longer sufficient inventory in the country to allow shutting down the plants and maintain them properly. The loss of materials after the war due to pillage and looting may have also contributed to this situation. To meet the demand, Iraq resorted to importing large amounts of gasoline and other petroleum products. Nevertheless shortages were noticed throughout the year and they are unlikely to disappear during 2004.
TEL use in the refineries went down in line with the reduction of the quantity of gasoline produced and the discontinuation of blending natural gasoline in the gasoline pool.
There are some indications that the Iraqis, faced with growing demand and the difficulties associated with gasoline imports, are likely to blend some natural gasoline in Baiji and Basra refineries. In this case the TEL use could go much higher. The blending with imported gasoline could encourage this operation though imported gasoline, which is much better in quality, does not normally go to the refineries. It is difficult to make an accurate assessment of TEL use in this case but an informed opinion would put it at not less than 1500 tons.
In conclusion, it is evident that TEL use in Iraq will continue to be higher than other countries, which are still using this material for octane boosting, as is evident by the analysis for 2003 and the estimates for 2004. There has been no additional production facilities or octane boosting process units in the last 20 years. Until this is done, Iraq will continue relying on TEL for that purpose."
" - the dire position of the Iraqi refining industry was confirmed; the three main refineries have averaged about 40% of normal throughput for the past 12 months. Operations in the last few months have deteriorated further. Power failure, maintenance problems but mainly the unreliability of crude supply due to terrorist activity all contribute to the on going problem.
- Daura refinery (commissioned in 1955) is serviced by three pipelines, mainly from Kirkuk and Basrah with additional supplies from a small field near the Iranian border and with many hundreds of miles of pipelines, interruptions to supply are unavoidable. Crude storage at the refinery amounts to only 300,000 barrels, or a maximum of three days usage at optimum operations.
- the Daura refinery has "a very good vacuum system for the offloading of containers but the TEL injection facility is rather primitive".
- Daura refinery produces RON 86/88 reformate and is blended with the naphtha to produce gasoline of RON 81. This requires a TEL usage of only 6 or 7 t/month.
- total TEL stock in the country is enough for about 6 months usage.
- problems at the largest refinery, Baiji are more severe. The reformer is operating poorly producing reformate of only RON 73. However, the compressors are not functioning properly and crude oil is contaminating the reformer catalyst. The refinery seems to be in something of a catch 22 situation, it desperately needs to shutdown for maintenance and to resolve this problem but due to the extreme shortage of refined products in the country the pressure is on to continue operations for fear of increasing the already enormous bill for imports ($200 million/month).
- Dathar was able to confirm what I reported at the LABT last week, before the war demand for gasoline was about 15 million l/d. The refineries were producing about 16 million l/d with the excess being put in strategic stock. Now the production from the refineries has fallen and demand has risen to about 18 million l/day. Most of this in Dathar's view is due not to the huge increase in consumption linked to the dramatic increase in the number of cars in the country (500,000 used cars imported in the last 12 months) but due more to the huge demand from small petrol driven generators which it will seem will reduce once normal electricity supply has been resumed."
"I must ask you (once again!) to refrain from any urge to "reengineer" the text of the agreement and to submit it as is to the customer. If any modification of the document is requested by the customer it must first be accepted by us in writing. We will then proceed to integrate any changes in the final document and send it back for approval in Iraq.
The rate of commission to Interact will be 3% based on the CIF Baiji Refinery price. This commission will be payable after collection of the proceeds from each shipment made under the terms of this agreement."
"ONE MAJOR POINT: I NEVER AGREED TO MAINTAIN A FIXED PRICE BEYOND 2005. This must be perfectly clear to you and if YOU have committed to obtain this it is your problem!"
"Although I believe bulk will be the optimum approach long term I expect that the first order will need to be shipped by ISO. The agent is expecting the first order to be for a "trial quantity" and estimates this will be for between 100-300 MT."
This suggests that, by this stage, Mr Al-Gaood did appreciate that, in the first instance, the MOO would order a much smaller trial quantity and not the 1,000 metric tons. That ties in with the MOO wanting to conduct a field test and market trial quantities of gasoline with MMT as an additive, before committing to further larger purchases.
"MMT was selected as the preferred alternative and subsequent testing (post war) of MMT confirmed this selection. MMT has completed all of the testing required by Iraq and is fully approved by the Ministry of Oil for use in gasoline.
In a separate, independent, evaluation engineering group KBR also selected MMT as the most suitable alternative to TEL for Iraq.
It is not possible for Iraq to eliminate TEL in one stroke and this has become a longer term objective as refineries/refining improves.
Initial proposals are to increase the 82 RON main volume fuel to 86-88 RON with 54mg manganese from MMT, making this fuel more suitable for use in second-hand imported vehicles."
"Only a fraction of the expected response from the MMT is obtained in the leaded blends. Taking into account the precision of the ASTM methods employed, there is no substantial effect upon the RON of the high octane leaded blends by manganese The average percentage loss in MMT response due to the addition of lead for each of the blends is shown below.
60 RON Blend 33% loss
70 RON Blend 15% loss
80 RON Blend 60% loss
90 RON Blend 95% loss
95 RON Blend 95% loss
These results demonstrate that MMT is more effective as an antiknock at low octane (below 80) and without the presence of lead alkyl compound. Upon the addition of lead, the ability of MMT to act as an octane enhancer is severely effected, especially at high octane, where the presence of MMT has no substantial additional effect on the RON of the gasoline."
"Overall MMT displays a degree of effectiveness as an antiknock, at its maximum recommended limit, but will not replace lost octane from the removal of lead. As a co-antiknock with lead a certain amount of octane gain can be expected in low octane gasolines. However there is not the observed synergistic octane effect with lead as has sometimes been claimed."
That last sentence echoes the doubts Mr Lecuyer and Mr Knapton had expressed in their emails of 6 January 2003 about the effectiveness of MMT when combined with TEL and the similar concerns expressed by Mr Williams of Ethyl in his email of 28 April 2010 (referred to at  and  above). This all demonstrates that, to the extent that the claimants are now seeking to suggest that MMT could have been added to a gasoline which had already been boosted to 81 RON by the application of TEL, they are clutching at a straw which is technically unsound. To be fair to Mr Gourgey QC, he did not put the claimants' case on this basis, although Mr Al-Gaood in his fourth witness statement did advocate such a case.
From the purchase of 120 metric tons of MMT to the Field Test
"The [MoO] is looking at this matter from a different point of view. Our people want to process L/C and TEL of fastest ways since they are getting their remuneration. Our adversaries don't want this L/C to proceed since they are importing unleaded blended benzene from Kuwait and Turkey and making a lot of money. Sabotaging our business means the loss of both our companies. Alcor/Octel does not sell TEL since Iraq is importing unleaded blended benzene and we lose our interest with the Iraqi Ministry of Oil."
"As discussed during the meeting regarding MMT product in Iraq, the Ministry of Oil were scared that Alcor/Octel will intentionally shut down their TEL facilities due to governmental pressure and environmental reason. You confirmed to them that the UK factory will remain working for at least 15 years more. They asked you if you can provide them with this information in writing and you promised that you will send it on Monday (06/03/06) upon your return to your office in UK, so the Ministry of Oil will confirm to you in writing their willingness to buy TEL product from Alcor/Octel for the next ten years minimum. Also, we agreed that the next LTPA duration will be for five years instead of three years."
"I think it is perfectly fair for the Iraqis to attempt to do a field test. I would observe that given their finite financial resources and security situation in Iraq, they may well not have been able to do an ideal field test consistent with European or North American standards. However, in my view, that doesn't mean they should not have tried…to do what they appear to be trying to do, which is monitoring the mechanical conditions of the test vehicles, measuring the vehicle emissions and performing medical testing on individuals who handled MMT"
(1) MMT was light sensitive and decomposed when exposed to light and needed to be stored in a closed system.
(2) The optimal dosage of MMT of 54mg Mn/l will only raise the octane of the gasoline by 6 RON whereas the maximum dose of TEL of 0.84g Pb/l will raise the octane by 20 RON.
(3) International reports reviewed demonstrated that MMT was less polluting environmentally than TEL but dealing with it for long periods would have negative impacts on health.
(4) In the six months of the test, a relatively short period, no technical problems had been noted with the cars used, but they had not been driven for long distances or at high speeds because of the security situation. In view of this relatively short period of the test, the engines of the cars were not opened as the test team thought this would be useless.
(5) MMT was more expensive than TEL. The quantity needed to boost the RON by six would in effect cost half as much again as the equivalent TEL.
"In the case of extreme necessity to use this MMT material at the present time, the committee recommends the following:
1. Do the utmost to have all arrays, developed for preparation, storage, processing, and handling, tightly closed.
2. Contract for limited quantities,
3. Look for more cost-effective and efficient material than the said material above.
4. Communicate with the company to provide us with a certificate indicating more accurately the validity of material so it can be used as an official document adopted if otherwise happened to take the legal necessary actions against the supplier company."
"In summary, I find the recommendations of the MMT Field Trial report to be reasonable. My review of the MMT Field Trial report does not support a conclusion that it was designed to reach negative conclusions or was a farce, as alleged by Dr. Habeeb and Mr. Al-Gaood, respectively. Indeed, my overall impression of the MMT Field Trial report is that the Iraqis had no substantive technical objections to MMT, but were mostly concerned about its higher cost."
"Research / Mr Lateef
Extraordinary efforts and close monitoring. Thus, please write to the Technical Department at the Ministry to inform them of the success of the experiment within the specifications of this substance. This is because, to date, it has been unable to find a better alternative to replace the TEL substance. Also write to obtain the approvals necessary to purchase quantities thereof and distribute them among the remaining refineries. This will allow for the gradual reduction of TEL consumption until such time as we are able to produce NAPHTHA at a high octane level, then REFORMATE at the highest levels. Use of both substances should be defined, in the future, once the new isomerization equipment and new benzene improvement units are organized."
"Attached please find the report pertaining to the field experiment performed for the (MMT) substance intended for use as an alternative for tetraethyl lead (TEL) currently used with the benzene produced in Iraqi refineries. Therein, we affirm that, in the event of urgent need and due to lack of a better alternative at this time, we should defer to the conclusions and adopt the recommendations set forth in the aforementioned report. This should be done until such time as units for isomerization and for improvement of the benzene are established, etc. It will be possible to obtain (light Naphtha) and high octane (Reformate) substance and accordingly it will be possible to gradually get rid of the environment polluting tetraethyl lead (TEL)."
"As you will find out from reading the enclosed official report, the (MMT) field trial test has failed, or we made it to fail against all odds. The recommendation is to use the present stock of 120 tons inside the refinery (in a restricted place and environment) that they have already bought, as they can do nothing else with it (they paid for it), but to use it under a very special circumstances, i.e., in a closed system, otherwise, they would have fires and abrupt explosions. They want to finish with this 120 tons as they have paid for it, but there is no recommendation to buy any other quantity of MMT.
1- Accordingly, the purchase order of 350 tons of (MMT) has been cancelled.
2- (MMT) failed as octane enhancer vs. (TEL).
3- (MMT) failed financially vs. (TEL).
4- (MMT) is not a good replacement to (TEL), even on environmental and health reasons."
"In the extreme case of using the (MMT) with the present stock that has been ordered for 120tons, the committee recommendations are as follows:
2. We don't recommend to buy additional quantity to the 120 tons ordered."
The translation was evidently doctored by Mr Naaman to make it appear that MMT had failed the field test and to support his assertion that no more MMT beyond the 120 metric tons would be ordered by the MOO. It was no doubt because Mr Naaman appreciated that the recommendations in the actual field test report did not demonstrate that it had been a failure, that he created the false translation.
l-Comply with the clause (1) of the recommendations conducted by the midland co.
2-Ministry of oil shall design a wide promotional campaign explaining the MMT compound.
3-The Ministry of Oil departments shall take the required action to contract with the NAAS Co to purchase MMT compound with quantities cover the production of the main three refineries.
4-In case of orders to produce benzene of octane rating exceeding the current product 81 and to keep the momentum of production quantity until finding alternative options as isomerization etc. A certain proportions [sic] of TEL shall be sued [used] with MMT."
The aftermath of the MMT field test and the 2008 LTPA
"Reference to the studies and tests conducted with respect to use of MMT as a gasoline booster, we would like to inform you that the manufacturing company, Afton chemical, is fully ready to support your Ministry's efforts to start using MMT as an alternative to TEL. In order for the company to be able to do so, it asks the Ministry of Oil for official confirmation of its willingness to abstain from using TEL and transform its procedures to use alternative gasoline octane boosters, especially as TEL is now monopolised by one company and offered at a very high price, in addition to the significant environmental reservations over its usage."
"Kindly note the following: 1. We are in process of issuing a detailed report for the performance of MMT in improving the octane number. 2. We have bought the 120MT of MMT for testing this product as an alternative of TEL in case TEL product is no more produced or sold."
The "detailed report" referred to was evidently a reference to the field test, as Mr Al-Gaood accepted in cross-examination.
"We would like to inform you that your letter dated 6th February does not explain that your decision to shift toward finding an alternative for TEL is only because of your concern that the manufacturer of the substance will stop.
Accordingly, this means that if Octel company, the sole manufacturer of the substance gave you the necessary guarantees of their commitment to manufacture the substance especially for Iraq for the next ten years, does this mean that the Ministry in this case will not find an alternative for the substance, because practically, this is in the context of the discussion taking place between Afton company, the marketer and Octel the manufacturer, as what Afton company needs in order to be able to continue supplying Iraq's future needs of MMT is to have a strategic decision from the Iraqi Ministry of Oil regarding its desire to shift from the use of TEL as a gasoline booster to other substances that are less harmful to the environment and to people.
We hope you will reformulate your letter if you are convinced, and issue such an explicit letter so we could continue to support your efforts in substituting the gasoline booster."
"He is in agreement with the Technical Directorate I Ministry of Oil and the Director of the Chemicals Section Ms. Nadia, and refuses to make any negative remarks about their position. Their position is the position agreed upon by the Committee, specifically the decision to purchase 120 tonnes of MMT for a long-term trial and as a backup for TEL in the event its supply is suspended.
TEL is still being amply supplied, is easy to get, and the laboratories that produce it are still in business. TEL is also still the best because it is the cheapest and can increase the octane number by a large amount. This is particularly true when we learn that the octane number for the gasoline from the South and North Refineries is 68-70. TEL orders have been announced because there are contracts for it ... The environment issue ranks second!!"
"On 30/10, I visited Daura Refinery and met with the Director General, as a start to follow up the two samples of the gasoline blends containing (MMT). He acknowledged the status and efficacy of TEL in raising the octane number and of course the need to increase the amount thereof added to low octane number gasoline. However, he also acknowledged, at the same time, that it is a dangerous environmental pollutant and a highly toxic substance, and that most countries no longer use it. I suggested that Daura Refinery to continue using (MMT) in order to increase the octane number to (85) for gasoline marketed in the first phase. However, he expressed his reservations because low octane gasoline is produced in the remaining refineries ... (it is just important to cover the market)..."
"As I discussed in our meeting, this fee was not the real cost of rejecting MMT and MTBE. The real cost should be the increase of our remuneration on TEL for future business, i.e., the remaining 2000 tons of fiscal year 2007 and the new LTPA will be 5%. This additional money will cover my promise to these people for the loss of their remuneration from MMT, which is a very small price we are paying versus the loss of my money and your money if MMT were admitted in. I trust that you will approve this. As I have already promised them rather than pay a hefty amount up front, which I was sure that you will refuse to pay, but I trusted that you will be willing to pay from future order TEL business. They agreed, I agreed, and I hope that you will agree as well, so we can put this story behind us and move in with our orders and shipments."
"Baiji Refinery & Basrah Refinery are in such a bad situation that their pools are around 67 - 68 RONS and for that they have to boost 16-17 RONs to get it 83 level. The technical depart is arguing that it is not possible for MMT to do this. Therefore, their strategy is to implement upgrading of the refinery in which they will eventually no longer in need to boost more than 3-5 RONs; at that stage MMT would be good candidate to be used in North and South refineries. We have to concentrate on Daura Refinery and we should support their efforts to maintain their utilization of MMT (they have now around 68 MT of MMT). We are coordinating with Daura refinery to insist on the Ministry to maintain their production of Lead-free Gasoline as per their current situation..."
"We were surprised however with your reply, because for the last fifteen years, we have been working with Mr. Ousama Naaman, your ALCOR Middle East Office representative, and with Mr. David Turner, your Innospec Commercial Director, with whom we have met in Lebanon in January this year, and we have agreed and signed the terms and conditions of the new LTPA contract. With all our due respect to you, we prefer to keep the same old channels with your company, for logistical reasons and to avoid shipping complications, which is for the best interest of our two organisations."
The fate of TEL and MMT after July 2008
"Neither Daura nor Iraq's other refineries produce now (or have produced) unleaded gasoline. This is because their facilities (reformer units, etc.) can't produce high enough octane gasoline to meet MOO's marketing minimum of 81 octane without adding quantities of tetra-ethyl-lead (TEL), thereby making the product leaded gas. Daura (MOO's most efficient refinery) has, over the past 12 months, mixed the additives TEL and some MMT together with the raw product but it cannot reach the 81 octane minimum using MMT alone.
Dathar appreciates the environmental benefit from using MMT instead of TEL. But he noted that if MOO did that no gasoline would be for sale in Iraq presently in light of the min. 81 octane standard. Raw product coming out of Basrah is 71 octane, with Baiji and Daura producing 75 octane on average.
Daura is awaiting final GOI OK on its proposed contract for a installed Isomerization Unit which will produce naphtha at 82-85 octane. The work under this turnkey Contract with Italian Co., STP will take 3 years to complete. Similar projects are currently being designed by SCOP for the Basrah and Baiji Refineries. Once this Unit is operating Dathar thinks Daura won't need to use TEL. Dathar also said he's trying to get GOI OK to install a new reformer unit at Daura thereby increasing the quantity of higher octane naphtha than is presently possible with Daura's existing reformer.
Additive costs are currently $24,000 MT for MMT and $17,000 MT for TEL Dathar does not consider comparative costs a factor in MOO's continuing the use of TEL."
"Basrah refinery TEL injection unit is not working and additions are made by hand from drums into buckets. I don't think MMT would survive the rigours of this process! Given the poor RON of pool gasoline at Basrah and Baiji refineries TEL is really the only route to provide sufficient RON lift to meet their local spec of 80."
"Understandably, Iraq has other priorities and no interest has been shown on the phase-out of leaded gasoline. As follow-up, the CH will support a representative of the Iraq Oil/Environment Ministry to attend the leaded gasoline phase-out workshop in Jordan this year."
No decision to replace TEL with MMT in October/November 2003
Was the 2004 LTPA induced by bribery?
"I would further add that using manganese at this kind of addition level, 54mg per litre, and using lead at these kinds of levels, so 0.4 or 0.2, in my knowledge it has never been done anywhere in the world. I mean, you are in virgin territory in terms of understanding how well this is going to perform in the field, in the engines. Indeed, the paper by Gibbs that I attach as an exhibit to my first expert report expresses concern about using high levels of manganese in gasolines that simultaneously include high levels of lead."
"As lead content began to be phased down in the late 1970s as a result of federal regulations, the use of MMT in combination with lead increased. To ensure satisfactory exhaust valve seat wear and spark plug life, it was recommended that the use level of manganese decrease with increasing lead content. Thus, if 2.0g Pb/gal was present, a maximum of 0.05 grams of manganese per U.S. gallon (Mn/gal.) was recommended. If only 0.1g Pb/gal was used, then 0.1 g Mn/gal was recommended. In 1986, as lead was phased down to 0.10 g Pb/gal averaged by refinery for the leaded pool, MMT in a mixture with TEL became a widely used antiknock. It was added to gasoline to provide 0.10 g Mn/gal with 0.10 g Pb/gal. This combination is still being used by many refiners in regular-grade leaded gasoline in the U.S. The combination of the MMT and TEL helps prevent exhaust valve seat recession, which can be a problem for older engines designed to use leaded gasoline."
"We now find ourselves in this matter in the unusual circumstances where it is suggested that using manganese in high concentrations and lead in significant concentrations may be appropriate. My technical observation is I would urge caution with that, based on the recommendations or these observations made by Mr Gibbs of Chevron Research and Technology."
"If I had knowledge of this, then that would be a concern. If I was advising them, I would say: what are the potential outcomes of this? If it is that basically the only option would be for the arrangements to be terminated and no further business to be conducted, then I would say, well, that would make the expectations of future income from this uncertain, very uncertain."
Note 1 Although in the United Kingdom the fuel is referred to as petrol, I will refer to it as gasoline throughout the judgment. [Back] Note 2 At the end of the resumed hearing on 1 October 2014, there was an unresolved difference between the parties as to the correct translation of the Arabic in this recommendation as to whether it read “to purchase” or, as the defendants’ translator stated “to work to purchase”. It does not seem to me this difference is of any great significance. [Back]
Note 1 Although in the United Kingdom the fuel is referred to as petrol, I will refer to it as gasoline throughout the judgment. [Back]
Note 2 At the end of the resumed hearing on 1 October 2014, there was an unresolved difference between the parties as to the correct translation of the Arabic in this recommendation as to whether it read “to purchase” or, as the defendants’ translator stated “to work to purchase”. It does not seem to me this difference is of any great significance. [Back]