October 30, 2019 / 8:23 PM / 12 days ago

Russia signs first tainted oil settlement deal in Hungary

BUDAPEST (Reuters) - Russia and Hungary on Wednesday signed a first settlement over compensation for tainted oil shipped to Europe via a major oil pipeline earlier this year, with Moscow promising to clinch deals with other countries soon.

FILE PHOTO: Lukoil company logo is pictured on a helmet at the Filanovskogo platform in Caspian Sea, Russia October 16, 2018. Picture taken October 16, 2018. REUTERS/Maxim Shemetov

The Russian Druzhba pipeline, which pumps 1 million barrels of oil per day to western and eastern Europe, was found in mid-April to be contaminated with organic chlorides.

Belarus, Ukraine, Czech Republic, Slovakia, Hungary, Poland and Germany were affected, as were supplies from Kazakhstan whose means for export via the Russian Baltic Sea port of Ust-Luga was contaminated too.

Russia’s state oil pipeline monopoly Transneft (TRNF_p.MM) 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.

“All payments towards Hungary were made,” Nikolai Tokarev, head of Transneft, told reporters on Wednesday.

He was part of a delegation to Budapest led by President Vladimir Putin.

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.

Talks with Rosneft, Russia’s top oil producer which also has refineries in Germany, were the most difficult. Rosneft and Transneft have publicly attacked each other since the tainted oil crisis.

“We are in talks with Rosneft and hope for progress,” Tokarev said.

Rosneft has sold a 100,000 tonne cargo of contaminated oil to energy trader Vitol with a discount of more than $25 per barrel to dated Brent, traders told Reuters earlier this month, far more than Transneft has offered as a maximum.

Reporting by Vladimir Soldatkin; Writing by Andrey Ostroukh and Katya Golubkova; Editing by Jonathan Oatis and Grant McCool

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