Oil Majors Refuse To Pay For Dirty Russian Crude

Western oil majors Total and Eni have suspended payments to Russian companies that sold contaminated crude through the Druzhba pipeline, in a new controversy over what commercial sources described Reuters as "the biggest interruption of Russian oil supply."

Last month, Russia stopped supplies through the Druzhba pipeline to several European countries due to a pollution problem, which the Russians said was deliberate.

The oil was contaminated with organic chlorine, a substance used in oil production to increase production, but dangerous in high quantities for refining equipment. The amounts of the chemical were found at levels much higher than the maximum amount allowed.

According to the Ministry of Energy of Russia, it is expected that normal deliveries through the pipeline will be resumed in the second half of May.

Russian pipeline operator Transneft will compensate its customers for the losses they suffered due to contaminated crude oil, Russian Deputy Prime Minister Dmitry Kozak said last week, noting that refiners must first prove their damage and loss to claim compensation.

Supplies through the Druzhba pipeline are made in accordance with Russian law, according to which buyers pay first, and if they are not satisfied with the quality of the oil, they can claim damages and compensations.

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According to commercial sources from Reuters, Western companies, including Eni and Total, informed their Russian suppliers, including Rosneft, that they will not pay the contaminated oil payments due on May 15. Western buyers are ready to pay When the damage becomes clear and when supplies of clean oil restart, according to Reuters sources.

Contamination of the Russian oil supply has disrupted the refinery operations of some companies. Total, for example, stopped some of the units at its 230,000 bpd Leuna refinery in Germany last week to carry out technical verifications. On Thursday, Total declared force majeure on shipments of refined petroleum products from the Leuna refinery.

Meanwhile, the Vitol and Unipec commodity trading houses are said to try to sell part of the contaminated Russian crude rejected by European refiners to Asian buyers. Chinese independent refiners are the main target buyers, but no one is sure how much oil should cost, how much it would cost to dilute it with clean oil to reduce chlorine levels, and if it can be refined, trade sources say Reuters.

By Tsvetana Paraskova for Oilprice.com

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