* China bans imports of dirty oil - sources
* Most dirty oil struggling to find buyers
* Demurrage costs per vessel exceed $1 million
* Russia pledges to compensate buyers
By Olga Yagova, Dmitry Zhdannikov and Florence Tan
MOSCOW/LONDON, June 25 (Reuters) - In the opinion of Russianofficials, the oil contamination crisis that disrupted flowsfrom the world's second-largest exporter of crude this spring islong over.
But a closer look at a dozen tankers containing dirtyRussian oil suggests that for the buyers, the debacle has a longway to run and will cost them hundreds of millions of dollars.
Two months since buyers discovered Russia was shipping oilcontaminated with organic chloride, which is designed to boostoutput but can destroy refining equipment, less than half of thetainted crude loaded on tankers has found end-users.
More than 1 million tonnes worth around $500 million remainshomeless, zigzagging between Europe and Asia. In China, buyershave refused to take dirty Russian oil, forcing trader Vitol tosend a cargo back to Europe.
The Chinese development has not previously been reported.
That means buyers are struggling to place oil even atdiscounts of $10-15 per barrel - or $10-15 million per regularSuezmax tanker - to the current, regular price of $65 a barrel.
"I’m not willing to risk our equipment just for cheapcrude," said an oil trader with a North Asian refinery.
Buyers have also paid millions of dollars in demurragecharges as tankers are stuck with the dirty oil, preventingship-owners from sending them on new voyages.
Russia has promised to compensate buyers after they fileclaims post-sale.
"The problem is that this oil is often impossible to sell.So how can I file a claim?," a Russian oil buyer said.
"Sometimes you have a feeling that Russia has moved on fromthe issue. There was a meeting with buyers at the beginning ofJune. Since then, we've had no communication whatsoever,"another major buyer said.
The Russian Energy Ministry and Transneft did not respond toa request for comment.
CHINA SAYS "NO"
News of the dirty oil broke in late April when buyers fromthe Baltic port of Ust-Luga and along the Druzhba pipeline toGermany, Poland, Hungary, Slovakia, Ukraine, Belarus and theCzech Republic discovered organic chloride content 10-20 timesabove normal levels.
After several weeks of debate, Russian pipeline monopolyTransneft pledged to pay compensation to Russian producers suchas Rosneft, Surgutneftegas, as well asKazakhstan, for contaminated oil.
Those producers shall in turn compensate Western buyersincluding oil traders Vitol, Glencore, Trafigura and oil majorsTotal, Shell, BP, Eni and PKN Orlen, among others.
Hopes were high that China and India would take a big chunkof dirty oil - as at least 800,000 tonnes began to sail fromEurope to Asia - but those have not materialised.
Five trading sources said Chinese customs authorities hadtold buyers not to take crude with organic chloride contentabove the Russian standard of 10 parts per million. Some cargoeshad as much as 100-200 ppm. The authorities declined to comment.
Suezmax Chios I, fixed by Vitol, has been floating aroundthe Suez for a month, initially set to be sold to an independentChinese refiner, but is now heading back to Europe with no finalbuyer, according to traders and ship-tracking data.
Another Vitol Suezmax, the Sonangol Rangel carrying 140,000tonnes of contaminated Urals, was bought by Chinese independentrefiner Bora Group initially for its mainland Dalian plant, butis now heading to storage near Malacca.
A very large crude carrier (VLCC) with 270,000 tonnes,Glencore's Amyntas, also went to Singapore instead of China.
So far, only Sinopec has been allowed to import dirty crude- in the 2-million-barrel VLCC New Comfort - intoNingbo-Zhoushan, eastern China, because it bought the oil inearly April before the contamination news broke, trading sourcessaid. The vessel is due to arrive in China on July 12.
Sinopec, Vitol and Glencore declined to comment.
STEEP DEMURRAGE BILLS
In Europe, a limited number of buyers dared to refine theoil including Spain's Repsol, Swedish Preem and Finnish NesteOil, according to traders and Refinitiv Eikon flows data. Theyare estimated to have taken 600,000 tonnes.
Dirty oil needs to be diluted before being refined,sometimes one tainted barrel with 20 barrels of clean oil.
"We took a cargo to one of our refineries. It's still beingrefined and is likely to be for several more months," a traderwith an oil major told Reuters.
Meanwhile, at least four cargoes of 100,000 tonnes each areanchored at various European ports and have yet to find a home.
Demurrage costs for the tankers have exceeded $1 million pervessel, four trade sources said.
In one such example, the FSL Shanghai ship chartered by BPhas zigzagged between the European ports of Ventspils andRotterdam since loading in Ust-Luga on May 2.
As of Monday, it still had no buyer and had paid $1.3million in demurrage charges to date with every new day costingan extra $25,000, trading and shipping sources said.
BP did not respond to a request for comment.
Total's Mendeleev Prospect vessel has been anchored near thePolish port of Gdansk since April 27, while Glencore's Searubyand Searanger vessels are anchored near Turkey's Aliaga and theUK shore.(Reporting by Olga Yagova in Moscow, Dmitry Zhdannikov inLondon and Florence Tan in Singapore; Additional reporting byAizhu Chen and Beijing newsroom; Editing by Dale Hudson)
