London — Russia's key Urals crude exports to Europe via the 1 million b/d Druzhba pipeline system have been effectively shut down as a result of contaminants in the crude flowing from Russia which has damaged refineries and infrastructure.
High levels of organic chlorides in the crude have been blamed for the incident and Russia has said it is investigating the source of the contamination.
Rarely present in wellhead crude, organic chlorides can spike when additives or cleaning solutions are added. The presence of chlorides can form hydrochloric acid, particularly when heated, which severely corrodes equipment throughout the refining process.
Representatives of Russia, Belarus, Ukraine, and Poland will meet in Minsk on Friday to try to resolve the issue. Russia said it has developed a plan to minimize the concentration of these chlorides and hopes to resume supplies of "clean" oil by Monday.
**On Thursday, Ukraine suspended transit of oil through the Mozyr-Brody section of the Druzhba pipeline due to poor quality Urals crude.
**On Wednesday, Poland suspended Urals crude flows via the northern section of the Druzhba pipeline into Poland, effectively shutting the northern section of the Druzhba pipeline to Germany.
**The northern section of the 1 million b/d Druzhba pipeline system from Russia to Europe carries oil via Belarus to Poland at Plock and onwards to Schwedt and the Leuna refineries in Germany.
**Urals crude exports via the Druzhba pipeline system have averaged 1 million b/d since the start of the year, according to Russian energy ministry data, some 70% of which flows through the northern route to Belarus, Poland, and Germany.
**Germany receives more than a third of its imports from Russia via the affected pipeline.
**Contaminated crude is expected to reach Hungary and Slovakia in the next few days.
**Russia has removed contaminated crude from the trunk pipeline in Russia and hopes to resume clean Urals crude exports via Druzhba on Monday, local media reported citing the deputy PM.
**On April 18 Belarus reported contaminated crude in the system.
**Belarus suspended exports of light oil products to ensure sufficient supplies to the domestic market.
**The Russian energy ministry said Friday that loading continues at Baltic Port of Ust-Luga. Transneft says one tanker at the port is delayed so that additional quality checks can be carried out. Trading sources have indicated that contaminated crude may impact cargoes loading at Ust-Luga May 20-30 or earlier.
**Urals crude deliveries via two other major routes -- Primorsk on the Baltic Sea and Novorossiisk on The Black Sea -- seem intact.
**Oil market watchers cited the temporary halt of Russian crude exports to Poland and Germany as helping to support Brent crude prices Thursday which traded above $75/b at their peak.
**Brent crude prices soften in late Thursday, however, and were trading 2% lower around $73/b in early European trade.
**Urals crude price remained strong in Europe, with differentials in Northwest Europe bouncing back into positive territory versus Dated Brent on a CIF Rotterdam basis Thursday, despite May's loading program being the longest since 2013.
**Carrying Russian crude some 4,000 km, Druzhba is one of the world's biggest oil pipeline systems.
**Russian officials say contamination has caused significant damage to Russian refineries.
**Crude with excess chlorides is believed to have entered the Transneft system at the Samara-Unecha section of its Russian pipeline network.
**The Mozyr refinery in Belarus reported damage to heat exchanger tubes at the plant as a result of the contaminated crude and has reduced runs by 40%.
**Belarus' second refinery Naftan has reduced throughput by 50% to protect equipment and eventually got supplies via the Surgut-Polotsk branch.
**Polish refiners PKN Orlen and Grupa Lotos said Thursday operations of their refineries had not yet been affected so far by the crude supply halt.
**In Germany, the Shell/BP-operated Schwedt and Total-operated Leuna refineries are supplied by the Druzhba pipeline.
**Germany's oil industry group MWV said Friday there were no immediate supply or processing shortages as a result of the Druzhba shutdown.
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