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“The displacement began”

Date of publication: 30 May 2019

Sergey Andronov, Vice President of Transneft, spoke to Kommersant about the location of the oil contaminated with organochlorine, the time necessary to resume operation of the Druzhba oil pipeline and the options for compensating for buyers’ losses.

— According to current estimates, how much contaminated oil was supplied to foreign countries?

— The total volume of substandard oil supplied via the Druzhba oil pipeline system and through the port of Ust-Luga amounted to about 3 million tonnes.

— Where and how will the contaminated oil - planned for return to Russia - be stored?

— Oil with a high content of organochlorine compounds (OC) will be placed in tanks available at Transneft subsidiaries’ tank farms, based on plans for oil supply, in accordance with contractual obligations to shippers and taking transportation safety into account.

— How much will it cost to store oil in the countries where it will remain?

— The cost of storage services in trunk pipeline systems of neighboring countries will be determined after the volume of oil with a high OC content will be specified and the time will be estimated. This depends, among other things, on the time it will take to restore normal operation of oil trunk pipelines after the start of supply of acceptable quality oil to the territory of these countries.

— How much oil will get back?

— The total volume of oil to be removed from the territory of Belarus to Russia amounts to a total of 1.328 million tonnes. It includes the oil in the oil trunk pipelines system of the Belarusian companies Gomeltransneft Druzhba (868 thousand tonnes) and Polotsktranspetrol Druzhba (460 thousand tonnes). The displacement began on 24 May. In accordance with the approved roadmap, standard quality oil should enter the territory of Poland through the Adamova Zastava custody transfer point (CTP) on 10 June. Displacement from the territory of Poland is not envisaged by the plan.

— What will happen to the oil in Poland?

— Oil with excess of OC delivered through Belarus to the territory of Poland in accordance with routing orders and accepted by Polish operators in pursuance of acceptance certificates is currently in the country’s pipeline system. In our opinion, bringing this oil’s quality up to the standard level is possible by localising it in empty tank farms and then blending it with non-contaminated oil flows coming both from the sea (the port of Gdansk) and via the Druzhba pipeline system. The total volume of oil supplied to Poland and Germany through the Adamova Zastava CTP amounts to approximately 690.5 thousand tonnes.

— Are traders and consumers ready to purchase it? At what discount?

— This issue is not within the competence of the Company, as the oil transported through the oil trunk pipeline system is not owned by Transneft. Together with the Ministry of Energy we have discussed the issue of possible compensation to shippers in connection with the situation. Our proposal was announced at a meeting with Dmitry Kozak, Deputy Prime Minister. Almost all Russian shippers agreed to this option. I think we will start implementing this plan in the near future.

—Whom do you expect to forward compensation claims? How shall it be calculated?

— This issue should be considered in view of acceptance or non-acceptance of our proposal for compensation by shippers. In case of refusal, there is only one way to resolve the issue — through the court.

— Do you plan any changes in the control system for crude oil accepted by your system following these events? What about the ownership model of custody transfer points?

— On the instructions of the Government, Transneft has prepared relevant proposals and sent them to the Ministry of Energy, including the ones regarding strengthening control over accepting oil at third-party CTPs. Moving away from intermittent LACT operating mode while simultaneously transferring it to daily operation is also among the proposals. We are already implementing this one.

— How much will it affect the cost of transportation?

— Of course, the transition from controlling OC content in oil accepted into Transneft’s system every ten days to daily one has already led to a tenfold increase in the number of necessary tests and to a respective increase in their cost, which varies depending on the methods used, the price of reagents, etc. As for the cost of transportation, this issue should be discussed with the Ministry of Energy, the Federal Antimonopoly Service and shippers.

— How soon will the system be cleaned of crude with a high OC content ?

— According to our forecasts, it will take six to eight months. Standard quality oil arrived at Belarusian refineries on 4 May, on May 10 it reached the port of Ust-Luga. On 23 and 29 May it was transported through Ukraine to Slovakia, the Czech Republic and Hungary respectively.

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