Last Sunday, Forbes wrote about Russian oil producers being forced to cut production, not because of the OPEC+ deal but due to an unforeseen disruption:
After buyers in Europe discovered that $2.7 billion worth of oil they had purchased from a Russian producer was contaminated, Russia announced that it will be cutting production by about 1 million barrels per day for five days – about 10% of its total oil production.
I can’t recall anything like this happening in the twenty-something years I’ve been watching Russia’s oil sector, admittedly on and off. Reuters has more details:
Russian oil producers received a request from state-run pipeline monopoly Transneft to reduce oil output by 900,000 tonnes, or about 6.6 million barrels, until May 7…
That represents more than 1 million barrels per day (bpd) over the next five days or about 10 percent of output…
That would be a cut of more than 200,000 bpd for the whole of May, close to 2%. Russia’s OPEC+ commitment was to cut 228,000 bpd, by way of comparison. Besides, Reuters’s sources seem to suggest that a brief output cut wouldn’t be enough to make all the consequences go away.
But what really happened?
At least 5 million tonnes of oil, or about 36.7 million barrels, have been contaminated by organic chloride, a compound used to boost oil extraction but which must be removed before the oil is sent to clients as it can damage refining equipment.
“Organic chloride” is probably shorthand for chlorinated solvents such as chloromethanes and chloroethylenes (aka chloroethenes). They may be used occasionally in oil production as dewaxers, to dissolve heavy paraffins building up in wells and pipelines, but I doubt this is done on a large scale and on a daily basis – if it were so, organic chloride contamination would have long become a major headache for Transneft and offtakers.
The mind boggles at the sheer quantity of crude contaminated – more than three days’ output of oil from all of Russia’s fields. However, it probably didn’t take a huge amount of contaminant to wreak all this havoc. If crude becomes unsafe to refine with only 1 ppm of organic chlorides, then 5 tons would have been enough to spoil 5 million tons. The actual threshold is probably higher but refiners would rather be safe than sorry. Corrosion can lead to disaster.
Ten tons, say, of tetrachloromethane would probably cost no more than $20,000 to a Russian firm – hardly an insanely large sum even for a small crude producer. This doesn’t mean, by itself, that small producers are to blame for the contamination – as Transneft has been claiming all along – although they would make for convenient scapegoats.