For almost four weeks, the tanker Mendeleev Prospect has been anchored idly off the Polish port of Gdansk unable to discharge a $50 million cargo of crude oil.
After any normal voyage the tanker would quickly deliver its 700,000 barrels of Russian crude into a refinery for processing into gasoline, diesel and other petroleum products. But the Mendeleev Prospect is in limbo, the victim of Russia's unprecedented contaminated crude crisis that's been spreading chaos though the European oil market for a month.
"There are problems," Kremlin spokesman Dmitry Peskov said on Friday. "There are efforts being made to minimize the consequences for Russia's partners and counterparties, as well as for all related Russian systems."
Back in April, unusually high levels of the chemicals known as organic chlorides were discovered in Russian crude flowing through the giant Druzhba pipeline, built in the 1960s to carry crude from the U.S.S.R. to allied countries in Eastern Europe. The chlorides can severely damage oil refineries and on April 24 Russia's state pipeline operator, Transneft PJSC, halted shipments. Moscow pledged to resolve the issue right away; four weeks later, the flow of Russian oil into Europe is little more than a trickle.
The length and scope of the crisis has given it a political dimension. On Thursday, Polish Prime Minister Mateusz Morawiecki decided to get personally involved in finding a solution, but said talks were "very difficult, very tough."
Druzhba usually supplies as much as 1.5 million barrels a day of Russia's benchmark Urals blend to central Europe — more than the total production of OPEC member Libya. The crude goes directly to refineries through two separate pipeline spurs and via tankers from the Ust-Luga export terminal in the Baltic.
Despite repeated pledges from Russian authorities to resume shipments in days, the crisis is proving bigger, longer and costlier than almost anyone expected and a solution could still be weeks away.
In Germany, one of the continent's biggest refineries — the Leuna plant owned by French oil giant Total SA — was shut down. Poland has been forced to tap the emergency petroleum reserves. And as far west as Rotterdam, Europe's petroleum hub, some refineries have been forced to run at lower rates.
The technical challenge of handling millions of barrels of tainted crude has been compounded by fights over who will pay the cost of the crisis. An emergency summit in Warsaw on Thursday made some progress, but didn't nail down a solution.
"So far the resumption of flows along Druzhba has been progressing very slowly," Vienna-based consultant JBC Energy GmbH told clients. "Negotiations and payment arrangements here could well take some time, delaying the full resumption of flows."
Oily Mystery
Then there's the mystery of what's happening to Russia's crude oil while Druzhba is shut. According to official data, output has barely dropped over the last four weeks, falling from 11.23 million barrels a day in April to 11.15 million barrels a day so far in May. But the country is shipping roughly 1 million barrels a day less than normal, about a tenth of its output.
That's led oil traders to puzzle on how Russia's been able to maintain production, asking whether it has the millions of barrels of empty storage needed to hoard the crude that hasn't flowed through Druzhba for four weeks.
Spokesmen for Transneft and Rosneft PJSC declined to comment.
As the weeks pass, the price tag soars. Speaking privately, more than a dozen oil traders and refining executives in London, Geneva and Moscow said the cost may reach $1 billion. The estimates are based on the volume of oil contaminated and the $10-to-$20-a-barrel discounts refiners are asking to take the tainted barrels. The traders and executives spoke on condition of anonymity to avoid upsetting their commercial relationship with Russia.
