Refineries suffer losses. Naftan and Mozyr Oil Refinery in danger of stopping operations

23 April 2019

The needs of millions of people are at stake. This is how market experts assess today the situation with the supply of poor-quality Russian raw materials through Druzhba oil pipeline. The fact was discovered by Belarusian refineries. Then concern was expressed by European consumers. Today, the deterioration in the quality of oil was recorded by the Polish side.

The main complaint from all Russian partners is the high concentration of organic chlorides in the supplied raw materials. This means inevitable damage to the pipeline and plant equipment.

Belarusian oil refineries, which are the first in the way of Russian oil, are already suffering huge losses. Mozyr Oil Refinery reduced daily operations from 27 to 18 thousand tons, and Naftan reduced the production twice-fold. In order to maintain stability in the domestic market, Belarus has to suspend the export of light petroleum products. And this is losses from the reduction of deliveries under contracts already paid by European partners and the loss of image. According to preliminary estimates, the actual damage to Belarus could exceed several hundred million dollars. Now Belneftekhim is negotiating measures to normalize the situation, as well as subsequent compensation of the losses incurred by the Belarusian side.

It is worth noting that the Russian partners have already pleaded guilty for the supply of poor-quality raw materials and violation of contractual obligations, but the mechanism for eliminating damage and compensating for losses has not yet been found. 

A poisonous wave of raw in Druzhba pipeline was discovered on Thursday, April 18, during standard quality control. Samples showed multiple excess of organic chlorine compounds in the light oil fractions. This means that the pipeline received not the crude oil that was stipulated by the contract, but a surrogate that is dangerous for people, the environment and even modern technical equipment.

Organic chlorides should not be contained in natural crude oil. Usually they appear as a result of treatment operations at production sites, in pipelines or tanks. During refining, this leads to the formation of light gases, and the yield of liquid products decreases. Chlorides cause corrosion. 

For Novopolotsk, the decrease in processing volumes is almost a disaster. And this is not an exaggeration. Judge for yourself: the industrial center of Vitebsk Region and the center of the petrochemical industry of the country produces over 70 petrochemical products. More than 70% are exported, mainly to the EU countries. This is the economy of the region, the replenishment of the state treasury of Belarus and the income of each worker. 

The plant noted that the presence of chlorine compounds critically increases the corrosion of the entire system, clogs the technological equipment and is capable of completely deactivating the catalyst systems.

Andrei Rybakov, Chairman of  Belneftekhim Concern: "The danger is caused by  high corrosive properties that can damage heat exchange equipment and expensive catalyst systems. Given the uniqueness of this equipment, its repair will take more than six months. And if we talk about money, it is at least tens of millions of dollars."

On the same day, on April 18, the specialists of Gomeltransneft Druzhba, in the presence of a representative of Transneft, made an additional sampling at several sites. According to the results of the examination, all oil samples did not meet the requirements of GOST. Simply, they were poisoned by chlorine compounds.

The halt of such industrial giants as the oil refinery in Mozyr is a huge damage for the country. 

Belarus, putting a barrier for low-quality raw materials, reduces processing. As a result, exports are also reduced in order to send quality reserves to the domestic market. The obligations are fulfilled by 100 percent, so there will be no shortage of gasoline in the country. 

Sergey Grib, Deputy General Director of the Belarusian Oil Company: "The shutdown affected light oil products - this is diesel gasoline. These are the markets of Ukraine, the Baltic States and Poland. Dark oil products in the direction of ports are currently being supplied, because these products are not consumed in the domestic market of the Republic of Belarus."

An agreement was reached on the transportation of oil to Naftan via the uninfected northern branch of Druzhba pipeline.

As a responsible market participant, Belneftekhim created an operational headquarters for monitoring the progress of special operation to rescue Belarusian oil refining, the interests of domestic and foreign consumers and partners. To reduce losses, the supply of functional additives to protect the equipment from corrosion was significantly increased. In fact, two Belarusian refineries turned into a giant filter. 

Vitaly Pavlov, General Director of Mozyr Oil Refinery OJSC: "The plant has organized an enhanced control over the state of the process equipment, the maintenance of the technological mode in order to take prompt measures. The supply of reagents that reduce corrosion is increased."

Transneft leadership finally recognized a sharp deterioration in the quality of the raw materials supplied to Belarus. However, the partners refused to talk about the specific reasons of the appearance of chloric surrogate. According to unverified information from Russian market participants, chlorine compounds could get into the pipe due to gross violations of the technology of pumping crude oil into the system. The source of pollution was found at Samara-Unecha site. If a competent investigation proves the suspicion, the reputation of the Russian oil industry in European and world markets will be critically damaged.

By the way, according to independent experts, the European partners have already felt the supply of poor-quality oil. On Monday, raw materials with high chloride content reached the factories in Germany. This is the northern branch of Druzhba pipeline.

Today, according to the calculations of oil traders, the poisoned raw materials have reached the refinery in Hungary, the reaction of partners is expected in the coming hours. An additional test is also carried out by Slovakia and Ukraine.

Maintaining the quality for the domestic market is expensive for Belarusian factories. The laboratories of the two plants switched to around-the-clock operation.

The main issues are the measures of responsibility to the Russian partners for the failure of obligations and subsequent compensation of the total amount of losses incurred by the Belarusian side. The carrier Gomeltransneft Druzhba,  the processor Belneftekhim and two refineries in Mozyr and Novopolotsk, are ready to make justified claims. 

In addition, the issue of returning low-quality raw materials to Russia will have to be resolved. More than 700 thousand tons of oil has been accumulated, which does not meet the quality standards.

The cumulative damage has not been announced yet, but according to expert estimates, it may amount to hundreds of millions of dollars.