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Full cleanup of Russian oil export crisis to take 'months' as Europe awaits clean flows

Highlights

Full clean-up could take 'several months'

Belarus estimates up to 5 million mt of oil affected

Transneft to blend dirty oil for export at Novorossiisk

Moscow — Efforts to restart flows of clean Russian oil exports to Europe are expected to start in the coming days but work to fully clear the millions of barrels of contaminated crude from the 4,000 km Druzhba pipeline system could take months to complete, it emerged Tuesday.

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Operators of Belarus, Ukrainian, Hungarian and Slovakian sections of troubled Druzhba network have agreed on technical measures to clean contaminated oil from part of the system and expect normal quality oil from Russia to start entering Belarus and Urkaine in the coming days, Ukrainian pipeline operator Ukrtransnafta said Tuesday.

Belarus refiner Belneftekhim said it expects clean crude from Russia to reach its Mozyr refinery on Saturday at the earliest, adding, however, that a full clean-up of the 1 million b/d Druzhba pipeline is likely to require "several months of hard work."

Deliveries of Russia's key export blend, Urals, to Europe via the Druzhba pipeline were halted last week In an unprecedented move after extremely high levels of corrosive organic chlorides were found in the crude. Belarus' Mozyr refinery first reported the problem on April 18.

Belarus is a key transit country for the Druzhba pipeline. The route splits into the northern branch (to deliver crude to Poland and Germany and the southern branch to Ukraine , Slovakia , the Czech Republic and Hungary near Mozyr.

Gomeltransneft Druzhba, the operator of Belarus' section of the pipeline, estimated the volume of contaminated crude in the pipeline network of Russia, Belarus, Ukraine and Poland at around 5 million mt, or some 36 million barrels.

At the same time, Ukrtransnafta said around 400,000 mt of contaminated crude needs to be removed into Belarus' storage tanks from the southern Druzhba branch.

Earlier estimates by market experts indicated that around 1 million mt-1.5 million mt of crude could be contaminated in the entire system.

Russian pipeline operator Transneft said it has agreed on a strategy along with the Russian energy ministry and pipeline operators from Belarus, Ukraine and Poland to combat the problem and it is already being implemented.

EMERGENCY OIL STOCKS

As the Russian crude supply debacle entered its second week, some refineries supplied by Druzbha line across Central Europe have been forced to curtail operations and Russian seaborne exports from the Baltic have also been affected. A total of ten European refineries with a combined 1.87 million b/d of capacity are supplied wholly or in part from the halted pipeline.

In Europe, Poland joined the Czech Republic in authorizing emergency crude stock releases in response to the shutdown of pipeline supplies from Russia due to a contamination issue, the International Energy Agency said Tuesday.

The Polish stock release is aimed at sustaining normal operations at the country's two main refineries, which are located on the Baltic coast at Gdansk and inland at Plock, and is "fully in accordance with how the IEA system is meant to work," the agency said.

The IEA also noted the Czech Republic had agreed to loan emergency stocks to Unipetrol, operator of the landlocked country's Litvinov and Kralupy refineries.

Separately, Germany's oil stocks administrator, EBV, told S&P Global Platts it had not received any requests for a stock release. Germany last released strategic oil stocks when Rhine water levels fell to record lows last autumn.

Under the IEA's emergency oil stocks program, each of its member countries is required to hold emergency oil stocks equivalent to at least 90 days of net oil imports. The stock are held as both crude and oil products by either the industry or by the government.

CLEAN UP OPERATIONS

Belnefthekhim estimated that the agreed measured so far "will allow the operation of only one line of the Druzhba pipeline [to Mozyr ] to be restored."

As part of the clean-up, Transneft plans to blend contaminated crude from the Druzhba pipeline with clean crude for further exports via the Black Sea port of Novorossiisk, CEO Nikolai Tokarev said during a meeting with President Vladimir Putin.

He said Transneft pledges to ensure the quality of its export blend meeting Urals' specifications.

Russian Railways has already started assisting with moving contaminated crude from Belarus, Tokarev said.

The first stage of work to clean the system includes removing around 50,000 mt of from the contaminated crude from the Russian section of Druzhba into storage tanks at the Unecha pumping station, according to Belneftekhim.

Simultaneously, over 120,000 mt of contaminated crude will be removed from the Belarusian section of the pipeline into Mozyr's storage tanks.

UST-LUGA

Meanwhile, the Russian energy ministry said that it expects clean crude to reach the port of Ust-Luga on May 7. Deliveries to the port have also been affected by contamination of crude with excess chlorides in the Russian trunk pipeline system.

Tokarev said that deliveries to Ust-Luga are ongoing.

"From Ust-Luga, all April shipments have been carried out, and the port's work schedule is fully implemented there," he told Putin.

-- Nadia Rodova and Rosemary Griffin, with Nick Coleman and Robert Perkins in London, newsdesk@spglobal.com

-- Edited by Robert Perkins, newsdesk@spglobal.com