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Transneft to compensate buyers for dirty oil, but they must prove loss

May 20/2019

MOSCOW (MRC) -- Russias state pipeline monopoly Transneft will compensate all parties for losses incurred from contaminated oil, but they must prove the damage, a government official said, as the first European refinery declared force majeure, as per Hydrocarbonprocessing.

Russias oil export flows have been disrupted since April when high levels of organic chloride were found in crude pumped via the Druzhba pipeline to the Baltic port of Ust-Luga and other European countries.

The Druzhba pipeline splits in Belarus into a northern spur to Poland and Germany and a southern leg via Ukraine to Slovakia, Hungary and the Czech Republic. Only Hungary has resumed test flows to see if its refinery equipment can withstand the contaminated oil.

Druzhba can pump 1 million barrels of oil per day (bpd) or the equivalent of 1 percent of global oil demand.

Transneft has repeatedly said that oil firms which use chloride to boost oil output were to blame for contamination, but on Thursday, Russia said Transneft would foot the bill.

Of course - and sadly - Transneft, Russian Deputy Prime Minister Dmitry Kozak told reporters when asked who would pay after a meeting with his Belarusian counterpart Igor Lyashenko in Moscow. Transneft head Nikolai Tokarev also attended the meeting.

Ukraine and Belarus both said they will ask Transneft for compensation. Stoppage of oil flows not only affects refineries but also budget revenues from a loss of transit fees.

Kozak said on Thursday that Russia had not yet calculated the cost of the damage and it would take three to four weeks to do so. This is not a judicial dispute, we will find a compromise, Kozak said. Everyone who can prove real losses will, of course, be compensated."

He said Poland, Ukraine, Hungary and Slovakia were currently waiting and had not yet issued demands for compensation.

According to traders, while Druzhba remains shut, Russia is losing $80 million a day. For the buyers of an estimated 19 million barrels of contaminated crude which is stuck in the pipeline and loaded on tankers, its a $1.2 billion question.

Earlier it was written, Kazakh oil flowing via Russia to be loaded on tankers at the Baltic Sea port of Ust-Luga has been contaminated and Kazakhstan plans to seek compensation from Russian pipeline monopoly Transneft.
Author:Anna Larionova
Tags:petroleum products, petrochemistry, Transneft.
Category:General News
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