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Hi,
I would like to answer to the archived discussion from the Tutorial: XQuery Transformation - Unhandled event loop exception link.
I and my colleague have had the same problem in OBS 11gR1.
The solution is to do transformations in an OSB Project only.
See https://vmvtechlogs.wordpress.com/2013/11/22/how-to-create-deploy-and-test-a-simple-http-osb-service/
I hope this will help somebody. I have spent many hours to sort it out.