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Russia expects 'clean' Urals crude exports via Druzhba to resume Mon: report

Moscow — Russia has pledged to resolve a rare quality glitch with its Urals crude within days after contaminated supplies of the key export grade damaged plants and triggered a major suspension of crude flows to Europe.

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Russia hopes to resume "clean" supplies of Urals crude via the Druzhba pipeline to Belarus by Monday, local media cited Russian deputy Prime Minister responsible for the energy, Dmitry Kozak saying Thursday.

The comments came less than 24 hours after Poland suspended Urals crude flows via the northern Druzhba pipeline into Poland over escalating concerns that the contaminated Russia crude would damage refineries in the region.

The move, which effectively shuts the northern section Druzhba pipeline to Germany, follows reports last weekend that Urals crude supplied to the Belarus Mozyr refinery had damaged heat exchanger tubes at the plant. Belarus' second refinery Naftan has reduced throughput by 40% to protect equipment, local media reported.

Contaminated Urals crude has now been removed from the trunk pipeline in Russia and "clean, quality crude will start entering Belarus Monday," Kozak was reported as saying.

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.

Oil market watchers cited the temporary halt of Russian crude export to Poland as helping to support Brent oil prices which traded above $75/b in London Thursday.

Central Europe's oil infrastructure

ORGANIC CHLORIDES

Key Polish refiners, PKN Orlen and Grupa Lotos, said Thursday the operations of their refineries have not been affected so far by the halt in crude supplies from Russia.

Total declined to comment on the status of its 220,000 b/d Leuna refinery near Leipzig in Germany and the 210,000 b/d Shell/BP-operated Schwedt refinery was unavailable to comment.

Poland's state-owned oil pipeline operator PERN received information from its Belarussian counterpart Gomeltransneft last Friday about a surge in the amount of organic chlorides in crude supplied to Belarus from Russia, Poland's energy ministry said late Wednesday.

"Standards were also not met in crude oil transported to Poland," the ministry said, adding that contaminated oil was stopped entering Poland to protect the domestic transmission system and refineries.

The level of chlorides in crude supplies to Poland's Druzhba entry point at Adamowo was up to 30 times higher than specifications set at 10 ppm, according to Gomeltransneft and PERN.

Organic chlorides are rarely present in crude oil but can be found when additives or cleaning solutions are added to oil. The presence of chlorides can form hydrochloric acid, particularly when heated, which severely corrodes equipment throughout the refining process.

PIPELINE CLEANING

Crude transit via Ukraine to refineries of the Czech Republic, Slovakia and Hungary continued, Gomeltransneft said in a statement Wednesday, adding, however, that the contaminated crude could reach entry points of Hungary and Slovakia in about four or five days.

Kozak was quoted as saying Thursday that Russia has determined the entry point where the contaminated oil reached the trunk pipeline system and is trying to investigate the exact source of the problem.

"[The incident has caused] "significant damage to Russian refineries, our partners and Transneft itself," Kozak said, adding that an investigation is underway to determine who is responsible for the contamination.

Russia plans to hold consultations with Belarus, Poland, and Ukraine over the incident on Friday, he said, adding that they may consider the pumping contaminated crude from the Druzhba pipeline in Belarus and Poland.

PKN Orlen, meanwhile, said it hoped the situation would improve shortly.

"We have received signals from the market that the quality of crude oil in the pipeline outside of Poland might be improving, so we expect the quality to improve in the days to come," PKN's deputy CEO for development, Zbigniew Leszczynski, told a company first-quarter results conference call Thursday.

So far, feedstock supplies to the company's refineries are secured due to high crude inventories, he said.

Poland's ministry believes available stocks will allow refiners to maintain operations until the problem is resolved, with alternative sources able to ensure stable operations for the refining sector.

Russia's oil ministry declined immediate comment Thursday and Transneft was not available for comment.

-- Nadia Rodova, nadia.rodova@spglobal.com

-- Robert Perkins, robert.perkins@spglobal.com

-- Elza Turner, elza.turner@spglobal.com

-- Adam Easton, newsdesk@spglobal.com

-- Edited by Paul Hickin, newsdesk@spglobal.com