(Adds comment from refiner LyondellBasell, U.S. Coast Guard)
By Terry Wade
HOUSTON, Aug 26 (Reuters) - A tanker loaded with $100 million of Kurdish crude oil cannot be delivered in Texas soon because of risks for buyers as Iraq mulls further legal challenges, so a month-long standoff will drag on, a source close to the matter said on Tuesday.
A U.S. court on Monday threw out an order to seize the 1 million barrel cargo from the United Kalavrvta tanker in the Gulf of Mexico, after acknowledging it lacked jurisdiction because the ship is beyond U.S. territorial waters, about 60 miles (97 km) offshore.
But the court did not settle the broader dispute between Iraq and the Kurdistan Regional Government (KRG) over who has the sole right to export the crude, a feud Washington has struggled to mediate as it backs a unified Iraq that can resist Islamist militants.
Buyers of Kurdish crude could face lawsuits from Baghdad if the oil moves close to U.S. soil and would also require the seller to provide costly indemnities against potential lawsuits, the source added.
"I think we're going to be in a bit of a standoff for a while," the source said. "Right now they don't really have a way to get the oil onshore."
Despite the court's ruling, cargo handling companies and a would-be buyer balked at bringing the oil ashore on Tuesday.
U.S. refiner LyondellBasell, when asked if it would receive the cargo as planned at its Houston plant, reiterated that: "(We) will not accept delivery of any of the affected crude until the matter is appropriately resolved." Earlier this year, the company received Kurdish crude cargoes.
In another sign of possible delays, not one cargo handling company stepped forward to say it would transfer oil from the United Kalavrvta tanker to smaller ships that can fit into the port of Galveston, the U.S. Coast Guard said.
Axeon Specialty Products earlier this month refused delivery of Kurdish crude at its Paulsboro, New Jersey, refinery.
Baghdad and the KRG have been locked in litigation, both in the United States and Iraq, over who can sell the crude. More legal action is likely after the U.S. judge on Monday said Iraq could amend its complaint, a move Iraq is mulling. (Reporting by Terry Wade; Editing by Anna Driver and Lisa Shumaker)
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