Nikolai Tokarev concluded a truce with Igor Sechin

Both companies agreed not to spit or shit in the Druzhba oil pipeline.

Transneft was able to resolve a set of mutual claims with Rosneft related to the contamination of the Druzhba oil pipeline. The parties agreed that Rosneft will be able to receive compensation from Transneft for losses of its foreign clients until the end of May 2025, if they are proven, but its maximum amount will not exceed $15 per barrel. Formally, the deadline for filing claims expired in May 2022. Rosneft will drop its claim against Transneft for 11 billion rubles, and Transneft will drop its claims against the oil company.

We have become aware of the details of the settlement of disagreements between Transneft and Rosneft regarding the incident with organochlorine contamination of the Druzhba oil pipeline, which occurred in 2019. Then contaminated oil damaged equipment at the Mozyr refinery in Belarus, and Transneft and European buyers in Poland, Germany, Hungary and the Czech Republic stockpiled the off-spec oil for many months, gradually mixing it with clean oil so that it could be processed.

Transneft has undertaken to compensate for the damage, but within the limits of $15 per barrel of contaminated oil. The issue was resolved relatively quickly with other large Russian oil companies, but Rosneft for a long time could not agree with its foreign clients on the amount of compensation. By May 2022, claims for more than $170 million had been settled, of which $75 million related to losses of Rosneft, including claims from Total, Trafigura and the Mozyr Oil Refinery. For a number of Rosneft clients, the issue regarding the amount of compensation and confirmation of losses remained unresolved, while the three-year statute of limitations expired in May 2022.

Then Rosneft filed a lawsuit, demanding that Transneft return $120.9 million, €47.6 thousand, 5.5 thousand pounds sterling, 73.9 million Polish zlotys and 3.4 billion rubles. (a total of more than 11 billion rubles) losses from claims of foreign buyers and lost profits due to the stoppage of pumping due to contamination of Druzhba. In December 2022, the court rejected Rosneft’s claims, but it appealed the decision. In August 2022, Transneft filed a claim against Rosneft for 2 billion rubles. for non-payment of oil storage and accrued penalties.

According to sources, as part of the agreements, Rosneft will waive legal claims against Transneft.

At the same time, Transneft undertakes to extend the period in which it will be ready to compensate Rosneft for losses for contaminated oil – until the end of May 2025. Payments will be made if there are sufficient documentary grounds or a court decision and, as in other cases, will not exceed $15 per barrel. However, if foreign buyers of Rosneft oil demand compensation from it for more than $15 per barrel and prove in court the validity of their claims, then Rosneft’s losses can be compensated by a separate government decision in excess of the limit approved by Transneft. Transneft and Rosneft did not comment on this.

Transneft also undertakes to drop the claim for 2 billion rubles. for storing oil, after Rosneft covers part of the amount – about 400 million rubles. Please note that the consideration of disputes filed in 2022 has been repeatedly postponed and is now scheduled for October 3 and 2, respectively.

Our interlocutors seriously started talking about the fact that Rosneft and Transneft could come to a compromise back in March, when it became known about a meeting between the heads of the companies, Igor Sechin and Nikolai Tokarev. On August 17, Transneft official representative Igor Demin confirmed that “agreements and agreements have been reached on a number of controversial issues,” but did not disclose details.

In addition, at the end of 2022, Transneft filed two more claims against Rosneft and its controlled Bashneft with demands of 400 million rubles each. As the pipeline company stated then, the claims were related to the failure to fulfill contractual obligations regarding the volume of delivery and transportation of petroleum products in 2020 and 2021. Transneft has already abandoned one of these claims, and it is expected that the same will happen in the second case.

Under Russian law, a period of three years was established for shippers’ claims against Transneft, notes Stanislav Dabizha, senior lawyer at the Kazakov and Partners law office. The expiration of the statute of limitations under Russian law is an independent basis for refusal of a claim, but does not prevent the filing of claims. In relation to the participants in this dispute, it cannot be said that one of them is a “weak party,” the lawyer believes, therefore the concluded agreement should be considered equivalent, concluded in compliance with the balance of interests of the parties.