Russia proceeds with compensations for tainted oil

Russia proceeds with compensations for tainted oil Photo: U.S. Coast Guard District 1

Hungary is to become the first beneficiary of compensation for polluted oil received from Russia in April. The deal was signed at the end of October, while settlements with other countries are expected to be concluded in the near future.

Russia and Hungary signed the first settlement over compensation for tainted oil last week, reports Reuters. Contaminated oil was shipped to Europe via the country’s major oil pipeline Druzhba earlier this year. In April, the pipeline turned out to be polluted with organic chlorides affecting oil supplies to Belarus, Ukraine, the Czech Republic, Slovakia, Hungary, Poland and Germany. Besides, the accident hit Kazakhstan, as the country’s oil was contaminated while flowing through Russia to be loaded on tankers at the Baltic Sea port of Ust-Luga.

Earlier, it was decided that Russia’s state oil pipeline company Transneft would compensate national energy companies for contamination-related losses, while the companies were supposed to reach agreements with their partners who had received contaminated oil.

According to Transneft’s statement, the agreement was signed with Russia’s biggest private oil producer Lukoil regarding its supplies to Hungarian MOL energy company. The settlement covered tainted oil supplies to Hungary and Slovakia, added Lukoil. However, none of the companies specified the amount of compensation.

Russian Druzhba pipeline pumps one million barrels of oil per day to Western and Eastern Europe. Photo: Vodnik

“All payments towards Hungary were made,” said head of Transneft Nikolay Tokarev on 30 October. According to Tokarev, his company planned to clinch a deal with Kazakhstan on 31 October. Besides, Transneft has already agreed on a deal with Ukraine and is in talks with Belarus.

The upper level of compensation was earlier capped by Transneft at $15 per barrel. At the same time, Russia’s top oil producer Rosneft has provided energy trader Vitol with a much bigger discount for a 100,000-tonne cargo of contaminated oil. According to unnamed traders, the discount exceeded $25 per barrel.

Negotiations with Rosneft were the most difficult for Transneft, says Reuters adding that the two companies have publicly attacked each other since the tainted oil crisis. “We are in talks with Rosneft and hope for progress,” Tokarev commented.

By Anna Litvina