Russia signs first agreement compensating for tainted oil

Russia has signed a compensation agreement with Hungary on for tainted oil shipped to Europe via a major oil pipeline earlier this year. Russia has said that it would sign deals with other countries soon.

The Druzhba pipeline pumps 1m bpd to western and eastern Europe. In mid-April it was found to be contaminated with organic chlorides.

Russian oil pipeline monopoly Transneft has promised to compensate energy companies for contamination-related losses and then companies, in turn, should reach agreements with the buyers of their oil who received tainted crude.

The move is of relevance to the shipping industries because a number of shipowners were impacted when it was discovered that the oil they were carrying was tainted.

In a separate statement, Transneft said that the deal was signed with Lukoil, Russia’s biggest private oil producer, over its oil shipments to Hungarian energy company MOL. Lukoil said separately that the settlement covered tainted oil supplies to Hungary and Slovakia. Neither Transneft nor Lukoil said how big the compensation was. Transneft had capped the upper level of compensation at $15 per barrel.

Tokarev said on Wednesday that his company planned to clinch a deal with Kazakhstan on Thursday, has agreed on a deal with Ukraine and was in talks with Belarus.

Rosneft, Russia’s top oil producer, has expressed disagreement with Transneft since the tainted oil crisis. Rosneft reportedly sold a 100,000 tonne cargo of contaminated oil to energy trader Vitol at a discount of more than $25 per barrel to dated Brent, leaving it with a $10 a barrel gap to the maximum offered by Transneft.