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Contamination Issue Lowers Crude Oil Production In Russia

After reports of oil contamination, Russia lowers production to honor the agreement made in December 2018.

With the supply glut in crude oil pulling oil prices down, the OPEC + countries agreed to cut oil production in each country. Alexander Novak, the Russian oil minister, agreed to cut output by 2 percent for six months in 2019. However, Russia failed to cut production as per the agreement.

But the contamination of oil through the Transneft pipeline has forced the country to cut down its production.

In April 2019, the oil supplied to European countries through the Transneft pipeline is said to be heavily contaminated with organic compounds. This is a substance that is used to accelerate oil flow and should be removed before transportation. But the compound was not removed.

About 36.7 million barrels of contaminated crude oil had been sent to Europe. Transneft had to shut down its operation. Though the company says that it was a fraudulent attempt that had contaminated the oil, Russian President Vladimir Putin blames Transneft for the error.

Transneft Company is a state-owned firm and is a monopoly in Russia’s pipeline crude transport. However, Europe has lost confidence in buying crude from Russia. Further, the company has not provided proper communication regarding the contamination. The contaminated oil has been sent through the Druzhba pipeline by Transneft.

Now, this issue forces Russia to cut down production by about 1 million barrels a day. Russia had earlier agreed with the other OPEC + countries to cut down to 11.191 million barrels per day. However, it still continues production to 11.23 million barrels per day. It is expected, that Russia may have to cut down production.

The European countries that were affected by the contaminated oil are Poland, Hungary, and the Czech Republic.

Transneft oil flow is expected to resume in another few weeks. Investigation continues to locate the reason for the contaminated oil flow.

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