Russia's oil output falls to 3-year low due to contamination crisis

MOSCOW (Reuters) - Russia’s average daily oil output has dropped to a three year-low after contaminated crude clogged its main export route.

FILE PHOTO - A pump jack is seen at the Ashalchinskoye oil field owned by Russia's oil producer Tatneft near Almetyevsk, in the Republic of Tatarstan, Russia, July 27, 2017. Picture taken July 27, 2017. REUTERS/Sergei Karpukhin

Average oil output was 10.87 million barrels per day (bpd) on June 1-3, down from an average of 11.11 million bpd in May, two sources familiar with official data said on Tuesday.

The figure for the first three days of June is the lowest since mid-2016, according to Reuters calculations.

The decline follows the discovery in mid-April of contaminated Urals crude in the Druzhba pipeline to Europe.

Exports via the pipeline’s southern route have resumed, but the northern route that supplies Poland and Germany remains shut. A full clean-up of pipeline systems will take months, according to official estimates.

Russia’s oil pipeline monopoly Transneft has promised to supply clean Urals crude to the Polish border on June 9.

The country’s energy ministry declined to comment on the latest production data.

Russian producers Rosneft and Surgutneftegaz, major suppliers via the route, have been especially hit by the export constraints.

May also saw seasonal maintenance at Russian oil refineries, adding to the pressure on exporting infrastructure.

“The timing was really bad. May exports were set at the maximum capacity allowed, so producers had to use storage heavily, but still some had to cut production,” one industry source said.

Rosneft managed to load a rare additional ESPO Blend crude cargo in May to ease some of the pressure. In June, Lukoil and Surgutneftegaz received a cargo each.

Rosneft has also increased pipeline supplies to China by more than planned - by 149,000 tonnes in April and by 243,000 tonnes in May, according to energy ministry data.

Rosneft expects a quick clean-up of tainted oil, TASS news agency cited chief executive Igor Sechin as saying on Tuesday. He also said the crisis had had a negative impact on Russian oil supplies to the West, according to emailed extracts of his speech.

In response, Transneft said its pipeline network had received an extra 2.2 million tonnes of oil in the first five months of this year compared with the same period in 2018, and that Rosneft should “operate by the figures, not emotions”.

Rosneft responded with a statement urging Transneft “to solve the problem, instead of starting a discussion on the issue in public”.

Sechin and Transneft’s chief Nikolai Tokarev both have long-standing ties with Russian President Vladimir Putin, while Rosneft and Transneft have a long history of feuding.

The Urals crude oil loading plan from Russia’s ports for June is down only 3 percent from May as producers look to export volumes from storage, three industry sources said..

Reporting by Olesya Astakhova, Gleb Gorodyankin, Olga Yagova; Writing by Maria Kiselyova; Editing by Louise Heavens, Mark Potter and Jan Harvey