Moscow - The quality of Russian oil flowing to northern and central Europe has deteriorated significantly in recent days, traders and Russian officials said, roiling the continent’s refining industry.
Oil flows via the Baltic port of Ust Luga and via the Druzhba pipeline to Belarus, Poland, Germany, Hungary and the Czech Republic have been contaminated with high levels of organic chloride since April 19. The material is used to help boost oil output but must be separated from oil before shipment as it can destroy refining equipment.
According to traders with several European majors, levels of organic chlorine have fluctuated at 150-330 parts per million (ppm) instead of the 10-ppm maximum norm and the usual level of around 1-3 ppm. The Russian energy ministry confirmed there were quality issues and said pipeline monopoly Transneft was trying to fix the problem as soon as possible, giving no timeframe. A Russian energy source familiar with the situation said the problem could be fixed by the end of the week.
Crude contamination is rare in Russia. Traders said oil was last contaminated with high levels of organic chlorine around 10 years ago, but on a lower scale. This time the problem has become so big that refiners in Poland and Germany belonging to PKN Orlen, BP, Total and Shell are considering suspending purchases of Russian oil along the Druzhna pipeline, which constitutes much of their imports.
From the port of 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. Buyers have filed pre-claims to Russian oil sellers, indicating they may seek compensation, two traders familiar with the developments said.
“Russian oil sellers have in turn sought explanations from Transneft but so far have not heard any guidance,” one of the sources said. Transneft declined to comment. The energy ministry said it was working with Transneft to resolve the issue including by supplying oil to Belarus via alternative routes. It did not comment on the problems in Poland, Germany or Ust Luga.