Italy’s ENI and France’s Total have said they will not pay Russian companies that delivered them with oil that was contaminated with organic chloride through the Druzhba pipeline.
As Russia is in the process of removing contaminated oil from the Druzhba export pipeline, the real cost of damage to European refiners, time to remove tainted oil and restore exports as well as the effect on Russia’s status as an energy supplier, remains unclear.
According to Reuters, the crisis has escalated since Belarus told oil refiners and pipeline operators in Europe nearly four weeks ago that the crude heading down the 5,500 km Druzhba pipeline was heavily contaminated with organic chloride, which is used to clean oil wells and accelerate the flow of crude.
Russia had to stop exports via the Druzhba pipeline to Poland and Germany at the northern branch of the line and to Ukraine, Hungary, Slovakia, and the Czech Republic in the south.
Russia is using rail, storage tanks and ships to remove contaminated oil from an export pipeline and has so far extracted around 2 million tonnes of the tainted oil – or over a third of volumes hit.
A total of around 5 million tonnes could have been contaminated by organic chloride and up to six months are needed to fully restore the flows.
Russia, Belarus, and Ukraine still have the lion’s share of contaminated crude in their pipeline systems – or up to 2 million tonnes, with another roughly 1 million stuck in Poland and Germany.
Until tainted oil is removed from the pipeline inside Russia and Belarus normal flows or clean oil to export markets cannot resume.
Asked if the oil contamination would affect Russia’s reputation. It seems like something that was completely unexpected and unprecedented and something that just never happened before.
It feels that nobody was ready for this. Russian companies were not ready and obviously the Europeans were not ready for this but hopefully it won’t repeat itself in the future.
Western buyers of Russian oil were taken by surprise and left in the dark by a lack of communication from Russian pipeline monopoly Transneft about how long the crisis would take to resolve.
The damage relating to it is it going to significantly affect other supplies as well because that means it will have to be replaced by somebody else, therefore you’re going to find a constriction in supply.
And now if you are now going to be also seeing further concerns over political issues with Russia, it’s going to further add aggravation at a time of great sensitivity to the diplomatic issues between them.
Russian President Vladimir Putin has publicly scolded the boss of pipeline operator Transneft over the contamination scandal.
New Europe / ABC Flash Point Oil News 2019.