July 18, 2019 / 5:13 PM / 5 months ago

Total sells tainted Russian oil to PKN Orlen's Lithuania refinery: sources

VILNIUS/MOSCOW (Reuters) - France’s Total (TOTF.PA) has sold a cargo of contaminated Russian Urals oil to Poland’s PKN Orlen (PKN.WA) for its refinery in Lithuania, three sources familiar with the shipment said.

FILE PHOTO: The logo of French oil giant Total is pictured at a petrol station in Latresne near Bordeaux, France, November 19, 2018. REUTERS/Regis Duvignau

PKN Orlen said it had agreed a deal in April to buy a cargo of Russian oil before any contamination was found. It said the crude was being diluted with clean oil so it could be processed in its Lithuanian refinery. The firm did not name the seller.

Russia’s oil industry was plunged into crisis in April when buyers discovered it was shipping oil contaminated with organic chloride, a chemical used in oil recovery but which can damage refining equipment.

Since then, several tankers loaded with the tainted crude have struggled to sell their cargoes.

The tanker Mendeleev Prospect was loaded from Russia’s Ust-Luga port on April 24, at a time when organic chloride levels in oil stored at the port was much higher than normal.

The three sources told Reuters the tainted crude in the Mendeleev Prospect, which was chartered by Total, was sold to PKN Orlen.

Refinitiv Eikon trade flows data show it discharged 72,700 tonnes of crude at Klaipeda port in Lithuania on June 29.

Two of the sources said the tanker’s remaining 30,000 tonnes were offloaded to storage in Poland’s Gdansk port and would then be sent to Klaipeda.

The two sources said the contaminated oil was stored in Klaipeda and transported by rail in stages to PKN Orlen’s refinery in the Lithuanian city of Mazeikiai.

“It’s only possible to refine this oil if you mix it with large amounts of clean Urals, so it will be a long process,” a trader in Russian oil market told Reuters.

Industry sources say one barrel of the tainted oil may need to be diluted by 20 barrels of clean oil.

Mendeleev Prospect had been stuck in Gdansk since late April as no buyers could be found, traders said.

Two shipping sources said the delay in offloading could cost the company $1 million or more in additional demurrage fees.

Total said it did not comment on trading activities.

Officials at Klaipedos Nafta oil terminal, Lithuanian Railways and the Mazeikiai refinery did not respond to requests for comment.

Klaipedos Nafta had said last week it had imported a cargo of crude oil in June for “an oil refinery in the region”, which was loaded into rail tankers. But it did not name the refinery or give other details about the deal.

PKN Orlen operates the only refinery in the Baltic states. An industry source said the tainted shipment was transported to that refinery.

In Europe, a limited number of buyers have taken contaminated oil to refine, including Spain’s Repsol, Sweden’s Preem and Finland’s Neste Oil, according to traders and Refinitiv Eikon flows data.

Reporting by Andrius Sytas in Vilnius and Olga Yagova in Moscow; Additional reporting by Agnieszka Barteczko in Warsaw; Editing by Edmund Blair

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