Rosneft agrees new oil contract with PKN Orlen, supplies to drop

MOSCOW/WARSAW: Russia's Rosneft and Poland's PKN Orlen, owner of the Plock refinery, have agreed oil supply terms from March 2021 after a row over prices suspended supplies in February, two sources familiar with the talks told Reuters.

Under the new agreement Rosneft will supply around 300,000 tonnes of Urals oil via the Druzhba pipeline per month, which is about 200,000 tonnes a month less than under previous contract, the sources said.

The decrease in supplies was agreed due to the rise in the price of supplied oil, the sources said.

Lower seaborne transport costs for Russia's flagship Urals crude in 2020 had made exports via the pipeline less profitable compared to shipping oil by sea.

"Rosneft insisted on a higher oil price in the new contract to make supplies equally profitable to seaborne exports, so PKN decided to decrease purchased oil volumes," - one of the sources said, but gave no details on the new price.

The new contract will be signed for two years with deliveries planned to start in March, the sources said. They added the companies still had to agree on several legal details, but expected the document to be signed before the end of February.

A PKN Orlen representative told Reuters that the companies were at the final stage of talks. Earlier PKN had said it was close to a deal with Rosneft.

Rosneft did not reply to a request from Reuters for comment.

The Russian oil exporter suspended oil supplies to Poland in February after failing to agree on new contract terms with PKN Orlen once the previous agreement expired on Jan. 31.

The move resulted in an increase in Rosneft's seaborne oil exports in February.

Rosneft also suspended supplies to Grupa Lotos in January after it failed to agree new contract terms with the refiner following the expiry of the old agreement on Dec. 31.