Rosneft’s daily production falls after restrictions from operator - GulfToday

Rosneft’s daily production falls after restrictions from operator

Rosneft

An employee at a Rosneft petrol station in Moscow. Reuters

Rosneft’s daily oil output fell 2.7% in the second quarter from the previous three months, the Russian oil company said, mainly because of restrictions introduced by pipeline operator Transneft after an oil contamination scandal.

The world’s biggest listed oil company by output said its oil production averaged 4.62 million barrels per day (bpd) in the quarter, up 0.3% from the same period last year, but down from the first three months of this year.

“During temporary restrictions on the oil intake into Transneft’s pipeline system, the company was forced to reduce crude oil production by 1.7 million tonnes,” Rosneft said.

Russia’s oil exports were thrown into crisis this year when oil transported to Europe via the Druzhba pipeline was contaminated by chlorides. Moscow managed to restore supplies in a couple of months.

Last month Transneft curbed oil intake from Yuganskneftegaz, the main upstream unit of Rosneft.

Rosneft later said it would claim compensation from Transneft for a drop in output resulting from the contamination in the Transneft network.

In its statement on Tuesday, Rosneft did not specify which units faced oil intake curbs.

It said oil production also fell on a quarterly basis as Rosneft reduced output - along with other Russian oil companies - under a deal between OPEC and other producers to curb supply.

Rosneft accounts for more than 40% of oil production in Russia, which has committed to cutting output by 228,000 bpd from the 11.41 million bpd pumped in October 2018, according to the so-called OPEC+ pact.

Rosneft, whose chief executive Igor Sechin is a close ally of President Vladimir Putin, said oil production for the first six months of the year was up 2% to 4.68 million bpd.

Over the past couple of years, the company has embarked on a massive drilling programme aimed at developing new fields and supporting or increasing production at mature production sites.

“Production growth was due to the continued active development of new large projects (Yurubcheno-Tokhomskoye, Srednebotuobinskoye, Kondinskoye fields) and production ramp-up at brownfields - Samaraneftegaz, RN-Nyaganneftegaz, Varyaganneftegaz,” Rosneft said.

Rosneft also said that India’s Nayara Energy, which it partly owns, had signed a $750 million long-term prepayment contract to export oil products to BP and Trafigura .

The contract was signed with the involvement of an international banking consortium, Rosneft said without naming the individual banks.

Nayara Energy, which runs India’s second-largest oil refinery Vadinar, imports oil from a number of countries from Africa, the former Soviet Union, Latin America and the Middle East, including from Venezuela and Iraq.

Meanwhile, BP and Glencore are struggling to sell around 600,000 tonnes of tainted Russian oil more than three months after the contamination was discovered, according to six trading sources.

Russia’s oil industry was plunged into a crisis in April after about 5 million tonnes of oil for export was found to be contaminated with organic chloride, a chemical used to help boost oil extraction but which can damage refining equipment.

Exports through the Druzhba pipeline that transports oil to Germany, Poland, Hungary, Slovakia, the Czech Republic, Ukraine and Belarus were halted. The Baltic port of Ust Luga loaded some 15 cargoes or 1.5 million tonnes of the contaminated oil for Western buyers.

At least 6 cargoes that sailed from Ust Luga remain unsold, according the trading sources. Glencore is stuck with 500,000 tonnes in one very large crude carrier (VLCC) Amyntas and two smaller tankers - Searanger and Searuby, according to the sources and Refinitiv Eikon vessel tracking system.

BP has tried to sell its cargo Fsl Shanghai at a tender earlier this month but failed, according to the same traders. BP and Glencore both bought the oil from Russian state oil major Rosneft.

BP and Glencore declined to comment. Rosneft did not respond to a Reuters request to comment.

They cannot claim compensation until they sell the oil.

“You can’t file a claim against Russia until you have actually sold your oil and counted your losses,” one of the trading sources said.

President Vladimir Putin said in April oil contamination had damaged Russia’s image as a reliable supplier. Transneft and Rosneft have been at loggerheads over efforts to resolve the situation.

The oil was transported by pipeline monopoly Transneft, which said it was ready to pay compensation to Russian shippers which in turn would pay compensations to overseas buyers.

Transneft and the Russian Energy ministry did not respond to Reuters requests to comment.

So far, Transneft has only agreed to pay $15 per barrel in compensation, or roughly a quarter of the cost of the oil, to Kazakh oil producers, whose barrels got contaminated while en route to Western markets.

Reuters

Related articles