is the largest emergency in the history of the Russian oil industry, which also affected Kazakhstan
The shutdown of Russia’s most important oil pipeline due to chlorides entering it is an unprecedented event in the history of Russian energy exports to Europe.
The USSR built “Druzhba” in the 1960s to provide fuel for the socialist countries. Today, Poland and Germany are supplied along the northern branch, Hungary, Slovakia and the Czech Republic along the southern branch.
The key transit country for “Druzhba” is Belarus: near the city of Mazyr, oil from Russia is distributed to the northern and southern branches. On April 19, 2019, the Belarusian state concern Belneftekhim announced that in recent days, the quality of the Russian Urals export mix has deteriorated sharply. The content of organochlorine in it is ten times higher than the norm: 150-300 ppm instead of the maximum allowable 10 ppm. Poland and then Belarus stop “Druzhba” on April 24, a day later, Ukraine stops transit along the southern branch. Goods from Russia are contaminated with dichloroethane. This substance is used to increase the return of depleted deposits, but then they must certainly be separated from the extracted oil. Experts admit that about a monthly pumping volume has been spoiled - up to 5 million tons or 37 million barrels.
President of Belarus Alexander Lukashenko begins to demand compensation from Russia. The country is losing transit potential due to a shortage of high-quality raw materials, its two refineries are working half-heartedly and stop exporting petroleum products, in addition, the Mozyr oil refinery claims to have broken some of the equipment.
In Russia, dirty raw materials are not only in the “Druzhba” pipeline. From it, it enters the Baltic Pipeline System-2 and through it reaches the export oil terminal of the port of Ust-Luga. There, oil with organochlorine is poured into tankers and sent to the EU countries, but European buyers refuse to take it. There are reports that China ready to accept oil.
Traditionally, Druzhba’s largest customers are two refineries in East Germany. The Total concern has been hiding for a long time that dirty oil has got into its plant in Loyne, and only on May 17 admits that it suspended the work of a number of installations “for technical inspection”. And on May 29, it turns out that the company, due to interrupted supply of Druzhba, is forced to work half its capacity.
The second East German client of “Druzhba” is the PCK refinery in Schwedt. Its co-owners, the Russian state-owned company “Rosneft” and the BritishDutch concern Shell, are silent about the losses of the plant, which turned out to be within 7 weeks without deliveries via “Druzhba”. But the head of “Rosneft”, Igor Sechin, wrote a letter to the Russian government at the end of May, demanding that both the exporter and the consignee put pressure on “Transneft” for compensation.
On June 9, net oil via the northern branch of “Druzhba” arrives from Belarus to Poland, then reaches Germany. Prior to this, transit through Ukraine to Slovakia (May 23), the Czech Republic (May 27) and Hungary (May 29) is being restored.
At the end of June, it became known that the Russian operator “Transneft” would pay compensation to Kazakhstani pipeline operator “KazTransOil” for oil contaminated in the Baltic port of Ust-Luga. At the same time, the amount of compensation may be about $76 million (according to Bloomberg sources). According to traders, the volume of contaminated Kazakhstani export oil is 700 thousand tons of about 5 million tons of substandard raw materials that fell into the “Transneft” pipeline system.
“KazTransOil” is the first pollution-affected party with which “Transneft” agreed on compensation. In transit through the pipes of “Transneft”, oil of Azerbaijan and Turkmenistan is also exported. As of the end of June, agreements with them were not known, and the amount of compensation to Belarus and other European countries where dirty oil had been delivered or to which supplies of raw materials had ceased due to suspension of pumping was not determined.
On July 24, a meeting of the Board of Directors of “Transneft” was held, at which the issue of resolving the consequences of the incident with “Druzhba” was considered. The Board of Directors has set a limit on payments to shippers under contracts for the provision of oil transportation services at $15 per barrel of substandard oil. At the same time, shippers must document their property losses.