Russia Identifies Source of Oil Contamination as Crisis Wanes

(Bloomberg) -- Russia identified the source of chemical contamination that shut down a major oil pipeline to Europe, blaming a private storage terminal in the center of the country for the problem.

"We can say for sure that the organic chlorides were fed into the pipeline through a control point run by privately-held Samaratransneft Terminal," Russia’s state-run crude pipeline operator Transneft PJSC said in a statement on Friday. The terminal accepts oil from a number of smaller independent producers and is obliged to check quality of the crude, it said.

Russian authorities have initiated a criminal case and the first results of the investigation show the contamination was not accidental, the pipeline operator said without elaborating.

Transneft’s statement comes as Russia, Belarus, Ukraine and Poland agreed on a potential technical solution that could allow producers to resume shipments through the Druzhba line, at least via the southern branch of the pipe through Ukraine, Hungary, Slovakia and the Czech Republic from early May.

The fix is still under review, but if successful it would reduce the risk of Russian crude shortages in eastern Europe, just as global markets take a hit from restricted supplies out of Iran, Venezuela and Canada.

The Druzhba pipeline built in the Soviet era starts in central Russia and divides into two sections in Belarus. While the northern section goes to Poland and links up to the German pipeline system, the southern section supplies refineries in Ukraine, Slovakia, Hungary and the Czech Republic.

Refineries in some of the Eastern European countries stopped imports of Russian oil through the Druzhba pipeline this week after identifying high levels of organic chlorides in the batches.

Organic chlorides are not naturally occurring and "must be removed before bringing crude parcels to market" as they can cause severe corrosion of refinery equipment, said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd.

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