Rosneft says Transneft failed to offer solution to crisis over tainted oil

[September 03, 2019]  MOSCOW (Reuters) - Kremlin-run oil giant Rosneft said on Tuesday that Transneft, which manages Russia's oil pipelines, had failed to deliver a solution to a tainted-oil crisis that slashed the country's crude exports, more than four months since it erupted.

The Russian Druzhba pipeline, which pumps 1 million barrels of oil per day to western and eastern Europe, was found in mid-April to be contaminated with organic chlorides.

Russia cleaned up the pipeline and restored supply a couple of months later. Transneft <TRNF_p.MM>, the state oil pipeline monopoly, has promised to compensate energy companies for contamination-related losses.

Rosneft, whose oil production and profits took a hit from oil intake restrictions imposed by Transneft during the crisis, said in rare comments on Tuesday that the pipeline firm had yet to resolve the problem.

"The future of the tainted oil remains unclear, claims by companies and their business partners are unresolved, and the issue of guaranteeing oil quality during transportation has also yet to be resolved," Rosneft said in a statement.

"The risks to Russia's image as a reliable supplier ... are growing."

Rosneft, headed by powerful chief executive Igor Sechin, said a number of oil-importing countries, including Poland, and some Mediterranean ports had started to consider other options for importing oil.

"Transneft is mixing oil from different producers on its own. Given that there is no 'oil quality controller' in the pipeline system, companies in fact are getting a blend that may not correspond to the oil quality supplied initially," it said.

The Rosneft logo on a safety helmet in Vung Tau, Vietnam, April 27, 2018. REUTERS/Maxim Shemetov/File Photo

Rosneft said that in August, Transneft gave notification that it planned to supply oil containing organic chlorides of up to 6 parts per million (ppm) to refineries in central Russia and the Baltic Sea port of Primorsk.

Russia allows contamination of up to 6 ppm, but many European refineries cannot process oil with organic chloride content higher than 1 ppm.

"This means export supplies via Primorsk will have prohibitive (ppm) levels for European refineries," Rosneft said.

So far, Transneft has agreed to pay $15 per barrel in compensation, or roughly a quarter of the cost of the oil, to Kazakh producers whose barrels were contaminated en route to Western markets.

President Vladimir Putin said in April the oil contamination had damaged Russia's image as a reliable supplier.

(Reporting by Katya Golubkova; Editing by Dale Hudson)

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