Russia under pressure after supplying polluted crude into Europe

WNM | Apr 25, 2019 at 1:46 PM

MOSCOW, April 25 (WNM staff/TASS) - Quality crude oil from Russia will arrive at the border with Belarus on Monday, April 29, Deputy Prime Minister Dmitry Kozak told reporters on Thursday.

“We are making joint decisions now. Trilateral negotiations with participation of Poland will be held tomorrow. We are responding promptly. A considerable portion of poor quality oil has already been evacuated to tanks in the territory of Russia. Clean and quality crude oil will be at the border with Belarus as early as on April 29, on Monday,” Kozak said.

Major Russian oil buyers Poland and Germany have suspended imports of Russian crude via a major pipeline, citing poor quality.

The very rare suspension of oil flows could also trigger a flurry of legal claims by western buyers against Russian suppliers who will in turn seek compensation from the Russian pipeline monopoly Transneft.

Bloomberg writes: "The outage, which is very unusual, comes at a time when the global oil market is already short of supply of crude of similar quality to Urals. The combined impact of U.S. sanctions on Iran and Venezuela, OPEC+ production cuts, and lower-than-expected output in Mexico has reduced worldwide shipments of so-called denser, medium-heavy crude with high sulfur content."

From Ust Luga, at least five contaminated tankers have sailed belonging to oil firms Rosneft, Surgut and Kazakh producers and bought by traders and majors such as Equinor, Vitol, Trafigura, Glencore and Total.

The possibility of partial pumping-out of poor quality oil from the pipeline on the territory of Belarus and Poland is planned to be discussed on April 26, the official said. “The issue of compensation has not been raised so far. The issue was put forward regarding the need to increase indicative balances for oil product supplies to the domestic market. Discussion is in progress,” Kozak said”.

Head of Belneftekhim concern Andrey Rybakov is negotiating questions connected with settlement of the Russian oil supplies issue in Moscow, the company’s press service said on Thursday.

"Head of the concern is currently in Moscow. The issue of providing (Belarusian refineries) with oil up to standard is still being discussed," the press service said.

Earlier reports said that the Russian government would hold a meeting on April 25 on the issue of the Russian export crude contamination in the Druzhba oil pipeline, Belarusian representatives would participate in the talks.

As reported earlier Belarus revealed excessive content of chlororganic compounds that are used as a technological component for oil production at some fields, in crude oil supplied through the Druzhba pipeline. Chlorides are highly corrosive contaminants for refining equipment. On Wednesday, Poland informed Belarus on suspension of oil transit via the oil pipeline due to a high content of chlorides.

Poland’s decision on suspension of Russian oil pumping will not affect the quality and availability of that fuel, the country’s oil refiner Lotos said in a statement on Thursday.

"The present situation does not affect the availability and quality of the fuel sold at Lotos chain stations. It meets all requirements and highest quality standards," the company said.

Another major Polish oil refiner Orlen made a similar statement earlier.

Key Polish refiners, PKN Orlen and Grupa Lotos, said Thursday the operations of their refineries have not been affected so far by a halt in crude supplies from Russia at the Adamowo entry point on the Druzhba pipeline on quality concerns.

Poland's Ministry of Energy said late Wednesday the country had suspended taking delivery of contaminated Russian crude oil supplies because it may "cause physical damage to refineries."

"Standards were also not met in crude oil transported to Poland," the ministry said. "In order to protect the Polish transmission system and refineries, the acceptance of contaminated oil at the Adamowo entry point (Polish-Belarussian border) was stopped," the ministry added.

The ministry said that Poland, as a member of the EU and the International Energy Agency, is obliged to maintain 90 days' worth of crude oil and product in storage in case of supply interruption. "Thanks to the release of crude oil in storage, the continuity of refining and the supply of the Polish market with fuels will be ensured until the reasons for the failure and the clean-up of the transmission system in Poland are clarified.

On Wednesday, the Polish energy ministry announced a decision to suspend supplies of the Russian oil through the Druzhba pipeline via the Adamovo hub on the border with Belarus due to deterioration of the fuel’s quality and the risk of damaging the oil transfer system and refining facilities. The ministry said that the country had sufficient oil reserves to ensure the continuity of oil processing and fuel supplies to the Polish market. In case of a long suspension of oil supplies to Polish refineries, the fuel will be imported via an alternative route, through Gdansk, the ministry added.

On April 19, the Belarusian side reported a sharp deterioration of the quality of the Russian oil running through the Gomeltransneft Druzhba main oil pipeline. The contaminant source had been revealed at the Samara-Unecha section of the Druzhba pipeline. Russia’s Energy Ministry referred to technical issues as a reason of deterioration of the oil quality, saying that the problem would be solved quickly.

On Tuesday, the operator of the Polish section of the Druzhba pipeline PERN confirmed receiving information from Gomeltransneft about excessive content of chlororganic compounds in crude oil delivered to Belarus. Later the company noticed that in the oil supplied to Poland, its spokesperson said.