MINSK/MOSCOW—Months of work will be needed to restore clean oil supplies via the Druzhba pipeline from Russia to Europe, Belarus said on April 30, after Western oil consumers suspended imports of Urals crude due to contamination.
Poland, Germany, Ukraine, Slovakia and other countries halted oil imports via Druzhba last week after finding contaminants that can damage refinery equipment.
A long outage could force refineries in Eastern Europe and Germany to cut operations and prompt Moscow to reduce oil production. It could also trigger claims by Western oil buyers against Russian producers and pipeline monopoly Transneft for lost profits as they struggle to sell contaminated oil.
The significance of any damage is not yet clear, nor is it known who will foot the bill. Belarus, which processes Russian crude into refined products for sale abroad, estimated its loss from a reduction in product exports at $100 million.
Pipelines in Russia, Belarus, Ukraine and Poland are estimated to contain 5 million tonnes of contaminated Russian oil, Belarus’s state news agency Belta cited an operator of the Belarusian section of the Druzhba pipeline as saying.
Russian President Vladimir Putin will meet the head of Transneft, Nikolai Tokarev, on April 30 to discuss the contamination, Kremlin spokesman Dmitry Peskov said.
On Tuesday, Russia and Belarus—where Druzhba splits into two routes, with the southern leg going to Ukraine, Slovakia, Hungary and the Czech Republic and the northern spur routed to Poland and Germany—held a second day of talks in Moscow.
On April 29, Moscow said it had started to supply clean oil to the border with Belarus, but Minsk denied the oil had reached the country.
On April 30, state energy company Belneftekhim said its Mozyr refinery was expected to receive clean oil on May 4 at the earliest. The Russian energy ministry put the date at May 2-3.
The ministry gave no explanation for the different timing. Belarus said that before clean oil reaches Mozyr, contaminated crude should be forced out of the pipeline.
Some 50,000 tonnes of contaminated oil should be forced out in Russia and 120,000 tonnes on the Belarusian side, Belneftekhim said in a statement. Belarus will store its contaminated oil at Mozyr.
“The measures taken would allow for the restoration of only one of Druzhba’s lines. Full restoration will take a couple of months of heavy work,” Belneftekhim said. It did not specify which parts of Druzhba would be immediately decontaminated.
Andrei Verigo, first deputy head of Gomeltransneft Druzhba, operator of Druzhba’s Belarusian section, said the pipeline would reach 60% to 65% of its average annual capacity on May 10-11, Belta reported.
It could take up to six months before the pipeline starts operating at full capacity, he added.
Druzhba can pump up to 1 million barrels per day (bbl/d), amounting to 1%of global crude demand. In total, Russia is exporting around 4 million bbl/d and other destinations in the south, northwest and east are unaffected, traders said.
The contamination comes as Russia plans to boost monthly Urals exports to five-year highs in May, a preliminary schedule showed, before the expiry of a deal on output cuts agreed with OPEC.
Traders said on April 30 there was no change so far to the plan. Transneft said that in May, state-run Russian Railways may transport 100,000 tonnes of oil by rail. It did not specify the oil quality.
Transneft is investigating the matter, Putin said on April 27, adding that this could lead to a wider inquiry, possibly including law-enforcement agencies.
The pipeline problem has cut off a major supply route for Polish refineries owned by PKN Orlen and Grupa Lotos, as well as plants in Germany owned by Total, Shell, Eni and Rosneft.
In an unpredictable market, newly minted E&Ps have abandoned the old models of building ready-to-drill assets and instead are forging ahead with new models, operating strategies and leaders.
Crude oil production in the U.S. climbed 100,000 bbl/d to a record 12.2 million bbl/d, after hovering around 12 million and 12.1 million bbl/d since mid-February, according to EIA data.
Under a deal with the government the 70-km (44-mile) pipe will have capacity for 950 million cubic feet of gas per day from fields operated by Noble and will be ready in first-quarter 2021.