Newfoundland refinery to set up crude desk before BP contract expires - sources

By Jessica Resnick-Ault and Jarrett Renshaw

NEW YORK, June 22 (Reuters) - A team of former Wall Street oil traders who own the Come By Chance refinery in eastern Canada are forming their own crude supply desk ahead of the expiration of their fractious contract with oil major BP Plc , according to two sources familiar with the plant's operations.

The small commercial desk at the 115,000 barrel-per-day refinery in the province of Newfoundland will rely largely on the spot crude market, but will also ink term deals, the two sources said.

The refinery is operated by North Atlantic Refining LLC (NARL), which is backed by private equity firm Silverpeak Partners (LSE: 0QOQ.L - news) .

Since buying the refinery in late 2014, the team of traders has shifted from a supply of largely Iraqi crude to a more diverse array that includes U.S (Other OTC: UBGXF - news) . shale oil, West African crudes and oil pulled from nearby offshore fields, such as Hibernian grade.

The sources said the Hibernian grade crude oil will likely be a mainstay and the new commercial desk will look to sell more products into eastern Canada.

The shift to a merchant refiner model from having all crude supplied by a third party, in this case, BP, follows a tumultuous two years under that contract that culminated in lawsuits filed last year.

The traders arranged the supply deal with BP, which took responsibility for providing the plant with crude and for selling its products.

Under the contract, both parties have some control over the crude slate, and the two sides have alleged in lawsuits that the other selected a mix of crudes that failed to maximize profits, among other accusations, court records show.

Two civil suits filed in U.S. federal courts in Texas and New York by NARL have been put on hold while the two parties are in ongoing arbitration, court records show.

NARL and BP both declined comment.

The traders behind Silverpeak Strategic Partners - the commodities side of Silverpeak Partners - include Neal Shear, who helped build Morgan Stanley (Xetra: 885836 - news) 's oil trading division; Kaushik Amin, former chief executive officer of RBS Sempra Commodities and global head of liquid markets for Lehman Brothers, and Harsh Rameshwar from Merrill Lynch Commodities. (Reporting by Jessica Resnick-Ault and Jarrett Renshaw, editing by G Crosse)