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Transneft to Inspect All Pipes

Date of publication: 7 September 2021

The Company wants to initiate regular checking of security/safety systems at the oil custody transfer points.

Transneft that has unsuccessfully been trying to gain control over private oil custody transfer points since the contamination incident on the Druzhba pipeline in 2019 has changed its tactics. The Company is now pleading with the government to tighten up security/safety requirements at the transfer points and endow Transneft with respective powers. The latter include surprise inspections, installation of CCTV systems and direct access of the operators to data on the quality of crude fed to the system.

Kommersant looked through the appeal sent by Head of Transneft Nikolay Tokarev to Prime Minister Mikhail Mishustin in late July, asking him to instruct the Ministry of Energy to consider the Company's proposals to secure oil custody transfer points (CTPs). This is a draft government decree on safety requirements for fuel and energy facilities, currently being developed by the Ministry of Energy.

Transneft raised the issue of the need for such measures after an incident involving crude oil contamination with organic chlorides at the Druzhba pipeline in spring 2019. The controversy escalated in June 2021, when Samaraneftegaz, according to Transneft, delivered crude to the Mukhanovo CTP with excessive levels of organic chlorides. After the 2019 crisis, Transneft has unsuccessfully attempted to gain operational control of all CTPs, many of these owned by oil companies. Transneft is now asking for a broad mandate to check the safety of CTPs operations.

As follows from Mr. Tokarev's letter, the monopoly claims the right to conduct unscheduled inspections at CTPs with oil sampling, to organise video surveillance of personnel there and install warning systems, ensuring operator's control over the quality of crude fed to the system at preparation points, as well as providing Transneft with real-time data on accounting operations and oil quality parameters. The company also claims control over the data protection facilities within the CTPs' oil quantity and quality measurement system.

Igor Demin, Advisor to President of Transneft, confirmed the fact of sending the letter to Kommersant. He commented that when discussing the operational control of CTPs, it became clear that “the issue of security needs to be raised in broader terms”.

As Mr. Tokarev highlights in the letter, Transneft has sent its proposals to the Ministry of Energy eight times in the past two years, suggesting the tightening of safety requirements for line facilities and stricter control of crude oil intake, in addition to three more petitions sent to the government. President Vladimir Putin has twice instructed the government to come to grips with the situation. Mr. Tokarev argues in his letter to the Prime Minister that the oil industry's opposition to the introduction of operational control at private CTPs “can be regarded as a deliberate action to preserve the conditions for feeding substandard crude to the system”.

Transneft has been able to have its proposals approved, after their “partial correction”, by a number of companies including LUKOIL and Tatneft, Kommersant's sources clarify. Yet Surgutneftegaz holds a “special position” and Rosneft also opposes many of the pipeline Company's ideas.

Kommersant's sources inform that Mikhail Mishustin instructed Vice Prime Minister Alexander Novak to go through Transneft's proposals in detail, but the latter readdressed the issue to the Ministry of Energy. But it appears that the pipeline Company's proposals are by no means supported there in their entirety.

A month after contacting Prime Minister, Vice President of Transneft Maksim Grishanin sent a letter to Deputy Energy Minister Anastasia Bondarenko (its copy was sent to Kommersant) claiming that the Ministry's approach to threats to fuel and energy facilities, mindful only of their physical protection from terrorist attacks, is too narrow and that the measures planned in the draft decree are insufficient. A deliberate delivery of a mixture containing artificial chemical compounds in high concentrations to the system can halt oil transportation, posing a real threat to the entire transportation system, Mr. Grishanin argues. He asks the Ministry once more to give proper consideration to Transneft's proposals in the forthcoming document.

The Ministry of Energy and the oil companies refuse to comment on the situation. A Kommersant source close to the government doubts that the situation will be resolved anytime soon.

There remain many “teapots” (illegal mini-refineries) in Russia — small refineries with a low yield or conversion rate, producing a lot of fuel oil — in total these refine about 4-5 million tonnes of crude a year, says Alexander Gadetskiy, founder of Engineering & Consulting PFA. Some owners of private CTPs, he believes, are trying to drop fuel oil to Transneft's system and are therefore opposing the monopoly's proposals to tighten their control. In addition, a number of CTPs, according to him, lack accurate accounting of incoming oil volumes and quality control.

Raiffeisenbank's Sergey Garamita notes that Transneft has suffered direct financial losses because of the 2019 incident on the Druzhba pipeline, so the Company has an obvious motive to tighten control over the CTPs. Transneft has set aside about RUB 30 billion for compensations to the Druzhba pipeline oil consumers, half of this amount already paid out.

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