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Russian pipeline company faces claims of up to $1bn for polluted oil

06 February 2020

Industry sources have told Reuters news agency that the Russian oil pipeline operator Transneft is facing claims of up to $1 billion relating to the contamination of around five million tonnes of oil in April 2019.

Transneft storage facility - Image: Shuttestock
Transneft storage facility - Image: Shuttestock

The incident last year was discovered after the Belarusian State Concern for Oil and Chemistry, Belneftekhim, reported a sharp deterioration in the quality of Russian oil running through the Druzhba pipeline, which supplies oil to Belarusian refineries and provides its transit to Europe via Belarus, Poland and Ukraine.

The oil is said to have been contaminated with high levels of organic chlorides, substances used in oil production to boost output but which are highly corrosive to refining equipment, at a private terminal at Samara in southern central Russia.

According to Reuters, state-owned Transneft, which operates the Druzhba pipeline, had put aside 23 billion roubles ($371 million) for compensation after saying it would pay no more than $15 per barrel. However, Reuters' sources suggest that on average, claims from buyers stand at around $30-$40 per barrel, almost $1 billion in total. 

In June 2019, buyers such as BP, Shell, Total, Eni, and PKN Orlen agreed to put their claims to Russian suppliers, while Transneft said it would pay for the majority of the contamination-related costs. Russian exporters such as Rosneft would then forward claims of compensation onto Transneft. 

In November 2019, Rosneft confirmed that it had still been receiving claims for compensation from customers. Transneft has already agreed to pay $15 for every contaminated barrel of oil to Kazakhstan and has also made an agreement with Hungary’s MOL.

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