Page 4 - FSUOGM Week 30 2019

FSUOGM COMMENTARY FSUOGM
Druzhba denouement
Russia’s state pipeline operator Transneft is still facing dif culties in Europe, despite its offer to compensate buyers
RUSSIA
WHAT:
Transneft has said it wants to cap damage claims at $15 per barrel.
WHY:
Tainted Russian crude is still up for sale, and some of Transneft’s biggest customers are sceptical of the reimbursement plan.
WHAT NEXT:
The company will have to negotiate with dissatis ed customers and may end up revising its formula for compensation.t
RUSSIA’S state oil pipeline operator Transne has had a di cult few months, owing to the dis- covery of organic chloride contamination in oil owing through the Druzhba network in April.
e worst of the crisis seems to have passed, though. Transneft has taken steps to prevent further contamination, and the quality of Rus- sian crude exports has improved. As of the end of June, the company had resumed regular shipments through Druzhba, which is the main overland route for pipeline deliveries of Russian crude to Europe.
Since then, it has also drawn up a plan for compensating buyers of the contaminated oil. On July 24, it revealed that it was ready to pay damages to a ected parties and had set the cap for reimbursement at $15 per barrel. It also stated that it would require claimants to prove that they had incurred damage as a result of the organic chloride contamination.
Transne probably hopes that its o er will put the problem to rest. But there are signs that the pipeline operator will have to do more to mollify its customers.
Still oating around
On the one hand, Transne will have to deal with the fact that customers are still trying to dispose of oil they may not be able to use because the contaminants can damage re nery equipment.
As mentioned above, the Russian company has gone to some trouble to take the contami- nated crude out of circulation and make sure that Druzhba, its main overland corridor for oil exports to Europe, is once again functioning as a reliable delivery route. Nevertheless, some of the a ected barrels are still oating around the market.
Within the last week, reports have emerged about two major companies’ e orts to unload tainted Russian crude. e rst came from Reu- ters, which said that a vessel chartered by France’s Total had picked up a cargo of chloride-laced oil in the Russian port of Ust-Luga in April and then unloaded it in the Lithuanian port of Klaipeda in June. Total used the tanker, the Dmitry Men- deleyev, to deliver these volumes to the Polish company PKN Orlen, the news agency said.
Neither Total nor PKN Orlen has commented
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w w w . N E W S B A S E . c o m Week 30 31•July•2019