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Russian oil quality at Ust-Luga port improves after contamination, still volatile

Moscow - The quality of Russian oil from the Baltic Sea port of Ust-Luga has improved significantly in the past day but fluctuates sharply, three Russian oil buyers familiar with operations said on Tuesday.

Moscow - The quality of Russian oil from the Baltic Sea port of Ust-Luga has improved significantly in the past day but fluctuates sharply, three Russian oil buyers familiar with operations said on Tuesday. The Russian government has promised to fix the problem by May 7 after buyers discovered large volumes of Russian crude had been contaminated with organic chloride, a chemical compound used to boost oil extraction. “It is improving although it is still not up to normal standards,” one buyer said. (For a map of the oil pipeline, click here). The contamination has forced Russia to shut the Druzhba oil pipeline to Central Europe and Germany. As of Tuesday, the line had been closed for almost two weeks and it was unclear when normal operations would resume. A long outage could force refineries in Eastern Europe and Germany to cut operations and prompt Moscow to reduce oil production. It could also trigger claims by Western oil buyers against Russian producers and pipeline monopoly Transneft for lost profits as they struggle to sell contaminated oil.

The problem with oil quality in the Druzhba (Friendship) pipeline emerged in late April when Belarus, through which the link is routed, complained about high levels of organic chloride. Druzhba pumps around 1 million barrels of oil per day, or about 1 percent of global demand. Tests by Belarus on oil from Druzhba showed organic chloride levels of 150-330 parts per million (ppm) between April 19 and 22, according to documents seen by Reuters, well above the maximum 10 ppm allowed by Transneft. A trading source said the quality had improved to 60-75 ppm recently. Pipeline operator Ukrtransnafta said on Monday that clean Russian oil had started flowing from Belarus towards Ukraine and it was ready to resume oil exports to the European Union.

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