* Traders offer Urals with high organic chloride content
* Around 700,000 tonnes of contaminated crude heading to China
* Cargoes mainly offered to Chinese teapot refineries
* Hard to set prices without trade precedent (Adds buyer of Vitol's cargo, Unipec buys oil for Sinopec refineries)
By Florence Tan and Olga Yagova
SINGAPORE/MOSCOW, May 21 (Reuters) - Trading companies Vitol and Unipec are sending around 700,000 tonnes (5.1 million barrels) of contaminated Russian oil to Asia in an attempt to place the barrels rejected by buyers in Europe, according to trading sources and ship tracking data.
A key Russian pipeline to Europe, Druzhba, and a major port Ust-Luga have been contaminated with organic chloride, which can damage refining equipment. As a result, Russia was forced to reduce exports in the country's worst ever supply disruption.
Vitol has sold its cargo to Chinese independent refiner Bora Group while Unipec is moving the oil to refineries in China owned by its parent company China Petroleum and Chemical Corp (Sinopec), the sources said.
"We took the oil after evaluating that our refineries are able to process the crude," one of the sources told Reuters, adding that the price was also attractive given that Middle East crude grades are trading at multi-year highs on tight supply.
The vessels heading to China include the 130,000-tonne Suezmax tanker, Sonangol Rangel, that loaded oil from Denmark's Skaw ship-to-ship transfer area on May 15. The ship, chartered by Vitol, is expected to reach the port of Yingkou in northeastern China, on June 26, according to Refinitiv data.
The very large crude carrier (VLCC) New Comfort, provisionally chartered by China's Unipec, is currently loading in Skaw to sail to eastern China's port of Ningbo.
Unipec has also chartered the VLCC Amyntas to load contaminated Urals from smaller ships near the port of Southwold in Britain on May 22 for delivery to China, according to traders and Refinitiv data. Each VLCC is capable of carrying 270,000 tonnes of Urals crude.
Sinopec, Vitol and Bora declined to comment.
Traders who handle oil sales to Chinese teapots said they have been shown cargoes of Urals crude that contain organic chloride ranging from 30-50 parts per million (ppm) to 200 ppm with sellers asking for price quotes.
Buyers are treading cautiously because the contaminated Urals crude needs to be stored in tanks and diluted multiple times with clean oil to reduce the organic chloride content in order not to damage refining equipment.
"The final price is to be set. More quality tests are needed. Then it is possible to figure out the price, the way it can be refined and if it can be refined at all," a trader with a Chinese major told Reuters.
Organic chloride in crude oil can cause corrosion and destroy refining units.
"I was shown barrels with 200 ppm and I said: "No, thanks," a Singapore-based trader said.
"The logistics is very challenging and only big refiners can manage," he said, adding that a cargo with 200-ppm of organic chloride will need 20 cargoes of the same volume to be diluted to a normal level of 10 ppm.
For traders, estimating the value for the oil is the hardest part as there has been no trade precedent.
"Nobody knows where these barrels should trade. It's a discount to ICE Brent for cargoes landing in China for sure but how much of a discount, nobody knows," a second trader said.
European traders said contaminated cargoes have been offered at a discount of $10-20 per barrel but very few buyers showed interest. Clean Russian Urals crude from the Baltic is currently trading at $74 per barrel.
"We don't want to touch it. Refiners were previously hurt due to chloride issues, so they should be more cautious," a European buyer said.
Volumes that are currently heading to Asia represent around half of the 1.5 million tonnes, or 11 million barrels, of contaminated Urals that had been exported from the Baltic port of Ust Luga in recent weeks.
Because European buyers refused to buy the volumes, they ended up mostly with trading houses.
Another 9 million barrels are estimated to be stuck in the Druzhba pipelines between Belarus and Germany. (Reporting by Florence Tan and Olga Yagova; additional reporting by Dmitry Zhdannikov and Gleb Gorodyankin; editing by Susan Fenton and Christian Schmollinger)