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Energy

Exclusive: Russia's tainted oil dispute drags on as buyers fight for payouts

MOSCOW (Reuters) - Four major buyers of Russian oil are contesting the amount of compensation pipeline monopoly Transneft TRNF_p.MM has offered over the supply of tainted barrels more than a year ago, three sources told Reuters, raising the prospect of legal action.

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Up to 5 million tonnes of Russian oil were contaminated with organic chlorides on their way to Europe via the Druzhba pipeline and a Baltic port in April 2019, forcing Moscow to suspend exports to countries as far away as Germany.

Oil companies and traders from countries including France, Hungary and Kazakhstan, have held talks with Transneft over compensation for the oil, which had to be stored in special facilities, burned or heavily diluted.

Several have agreed to Transneft's payout of up to $15 per barrel, but Russia's Rosneft ROSN.MM, via its unit Rosneft Deutschland, Italy's Eni ENI.MI and traders Trafigura and Glencore GLEN.L want more, three trade sources said on condition of anonymity.

“They want two-to-three times more than Transneft is offering. This spat may last for years,” one said.

In total, Rosneft, Eni, Trafigura and Glencore received a total of around 1 million tonnes of oil which, if not tainted, would have been worth nearly $500 million based on global prices at the time.

The tainted oil was almost worthless. The companies say their costs far exceeded Transneft’s compensation offer as they had to pay for storage in tankers and incurred penalties from shipbrokers and buyers, the sources said.

In the absence of a settlement, the companies’ only option would be to sue Transneft in the courts, the sources said.

Rosneft declined to comment on “existing contract liabilities between the parties”.

Glencore and Trafigura also declined to comment. Eni and Transneft did not immediately reply to Reuters requests for a comment.

All companies were initially reluctant to accept Transneft's compensation offer of $15 per barrel but Kazakh firms, Hungary's MOL MOLB.BU and France's Total TOTF.PA have since agreed to it.

Two other industry sources, who asked not to be named, said Royal Dutch Shell RDSa.L was also likely to accept $15 per barrel, but had yet to sign a final deal.

“It is hard to prove the exact loss,” one of the sources said. “So $15 is still better than nothing.”

Shell declined to comment.

Reporting by Olga Yagova and Gleb Gorodyankin; Editing by Katya Golubkova and Barbara Lewis

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