Rosneft sells contaminated oil to Vitol at more than $25/bbl discount: trade

MOSCOW (Reuters) – Rosneft Trading SA, a subsidiary of Russian oil producer Rosneft, has sold a 100,000-tonne cargo of contaminated oil to energy trader Vitol [VITOLV.UL] with a discount of more than $25 per barrel to dated Brent, traders said on Tuesday.

The hefty discount is far more than Russian pipeline monopoly Transneft’s (TRNF_p.MM) offer of $15 per barrel to compensate for the excessive organic chloride content in oil.

A high level of organic chloride was found in late April in Russia’s Druzhba (Friendship) pipeline, which connects Siberian oilfields with Belarus, Ukraine, Poland, Germany, Czech Republic and Hungary. It was also detected in the Baltic Sea port of Ust-Luga.

The crisis hit Russian oil output for months and has drawn multi-million compensation claims from buyers.

President Vladimir Putin said the incident had undermined Russia’s image as a reliable supplier of energy products.

Up to 5 million tonnes of crude may have been contaminated by organic chloride, which is used in oil extraction. Traders such as Glencore and BP, have been struggling to sell the tainted oil.

Traders said the cargo of Russia’s flagship Urals blend contained around 150 parts-per-million (ppm) of organic chloride content and was loaded on the Searanger tanker.

Russia’s acceptable level of contamination is just 6 ppm.

According to Reuters data, the Urals cargo was first loaded in the Baltic Sea port of Ust-Luga on April 30, while Glencore was the offtaker of the cargo.

Trading sources say that Glencore had planned to deliver the cargo to Rosneft Trading SA for further supplies to Rosneft’s European refineries.

However, Rosneft declined to receive the oil, while Glencore failed to find a buyer.

Subsequently, Rosneft Trading SA was forced to tender the cargo, which was snatched by Vitol, traders said.

Rosneft and Vitol did not respond to request for immediate comment.