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Druzhba Pipeline Accident: Key Implications

Druzhba Pipeline Accident: Key Implications

The Druzhba oil pipeline accident became the main “hit” in the Russian oil industry in 2019.

A year has passed, but no satisfactory answer about what did in fact happen has been given to date. Meanwhile, it was Russia’s reputation as a reliable oil supplier that was put in jeopardy.

Oil with organic chlorides got to Belarus, Hungary, Poland, Germany, Ukraine, other countries. The accident led to a tremendous international scandal. That – at a moment when increase in competition on the global oil market became obvious.

And the internal showdown over the affair continued for a year and indeed, it is not over yet. The bureaucratic conflicts may be considered to have begun with the personal meeting of Vladimir Putin and the Transneft chief executive, Nikolay Tokarev, in late April 2019. One might also say that the symbolic end to them was brought by their new meeting in exactly one year, in May 2020. But this end will be highly conditional.

The case will have a lingering aftermath, evidence whereof is given, for instance, by current disputes over prices for oil transport.

It is therefore a delusion to think that the accident has been forgotten and that it has sort of “dissolved”. Officially, though, not even those to blame have been clearly identified.

The NESF's new report examines this unique accident in detail and discusses the key implications of the affair. You will find in it the following subjects:

  • A chronicle of one war

    • How the accident caused a tremendous corporate war between Rosneft and Transneft
    • The strategies and tactics of the opponents, their actual objectives and key instruments
  • The dispute over prices as a new stage of the conflict

  • What action regulators took

    • The accident as a test for the oil and gas sector management system
    • Key victims in the elite
    • The positions of the government agencies concerned
  • Reform of the system of oil quality assurance and oil transport control

    • Key proposals and bureaucratic battles
    • The interim result of the disputes
  • Settlement with foreign buyers

    • Talks with Belarus, Poland, Ukraine, Kazakhstan, Hungary, and the other countries involved
    • Reasons why the dispute was protracted
    • The mistakes of the Russian side at the initial stage
    • Analysis of the arrangements made
  • The positions of Russian integrated oil companies and their negotiations with Transnef

  • The main domestic and foreign implications of the accident

Contents of the report:

Introduction 3
Beginning of the scandal. A chronology of the Druzhba. Accident and the first consequences 5
Official investigation into the causes of the accident 11
War between Rosneft and Transneft 15
Settlement of compensation disputes with other countries 24
Belarus 27
Poland 31
Other countries 35
Settlement with other Russian integrated oil companies 37
Discussion of reform of the system of oil quality assurance and oil transport control 41
New round of the fight between Rosneft and Transneft: a dispute on prices 48
Conclusion 54
Date of release: August 24, 2020

If you are interested to obtain please contact » Elena Kim

Other issues:
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Analytical series “The Fuel and Energy Complex of Russia”:

Druzhba Pipeline Accident: Key Implications
New OPEC+ Deal and Future of Oil Business in Russia
Gazprom on the background of external and internal challenges
Regulation of Oil and Gas Sector in 2019 and Prospects for 2020
Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia
The tax system in the oil and gas sector continues to undergo radical changes. The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT. The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment. The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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