Oil Contamination Issues Hit Russian Port of Ust-Luga

Crude oil exports from the Russian Baltic Sea port of Ust-Luga have been hampered over the past several weeks due to contamination in Russia's Druzhba pipeline network, which carries about one million barrels per day westward into European markets. 

On April 19, Belarusian refiner Belneftekhim detected elevated levels of organic chlorides - manmade solvents like dichloroethane - in shipments coming from the Druzhba line. Organic chlorides can quickly corrode refinery process equipment, and refiners will generally accept levels of only about 10 parts per million or less. Belneftekhim reported off-spec concentrations "dozens of times above the limit value," according to Russian state media. 

Organic chlorides are not naturally occurring substances, and are typically introduced during oil extraction or transportation. Russian authorities assert that the contamination occurred when a group of companies transferred oil "using organochlorine compounds in volumes [exceeding] the norm" at a metering unit in the Samara region. Four people have been detained in connection with the contamination incident and criminal proceedings have begun. 

As of the end of April, an estimated six million tons of contaminated Urals crude was in transit in the pipeline network in Russia, Ukraine, Poland and Belarus. Ust-Luga, a small oil port located about 70 miles west of St. Petersburg, received a portion of the contaminated shipments, and it is only this week returning to loading uncontaminated cargoes. However, independent media outlets have reported that off-spec loadings at Ust-Luga continued early this week. The port's oil is still trading at a steep discount, according to Reuters.

Cargo owners and refiners have two options for disposing of the contaminated oil: It can be diluted with clean crude and metered gradually into the refining process, giving an acceptable level of contamination; or it can be burned by power plants to generate electricity. It is expected that most will be diluted and refined.

The Russian government is assessing the economic damage from the incident and expects to know the full extent within three to four weeks, according to deputy prime minister Dmitry Kozak.