Transneft Warns Urals Oil Quality Reaching Critical Levels

The sulfur content of Russia Urals oil exports to Europe will reach a critical level this year and continue to rise in 2018 as more low-sulfur crude is shipped to China, the vice president of national pipeline monopoly Transneft said, as quoted by S&P Platts.

Sergei Andronov said the company had no technological capacity to continue reducing the sulfur level of Urals crude for European buyers as low-sulfur Urals exports to China continue to grow.

Part of the reason for this shift in export destinations, according to S&P Platts is the increase in availability of rival crude oil grades in the Mediterranean, including Kazakhstan’s CPC sweeter grade, Azeri crude, and crude from Kurdistan. This has made Russia look east for its sweeter grades.

Another reason is that Russian refineries are equipped to process sour crude, but not too sour: the sulfur content has been kept at around 1.63 percent and it should not exceed 1.8 percent. As production grew over the last few years, higher-sulfur crude oil has been added to export-bound shipments since 2014 and to date the sulfur content of Urals exports is around 1.61 percent.

At the same time, however, Urals shipped to China via the East Siberia-Pacific Ocean pipeline, has a sulfur content of around 0.5 percent. This puts it in the sweet crude category, which is much easier for refineries to process. Sour crude is all crude with a sulfur content of above 0.5 percent.

Last week, Andronov said that since 2014, the amount of high-sulfur crude transported via Transneft’s network had grown by 36.65 million barrels (5 million tons), compromising the overall quality of the grade. Also, he said, the amount of high-sulfur oil processed by Russian refineries fell by 33 million barrels (4.5 million tons) in the same period. Finally, Andronov said, Transneft increased the amount of low-sulfur Urals shipped to China by 88 million barrels (12 million tons).

By Irina Slav for OIlprice.com

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