Page 10 - AsianOil Week 42 2021

AsianOil EAST ASIA AsianOil

China’s teapot refineries

garner unwelcome attention

POLICY IN its efforts to rein in an oftentimes unre- Bora Enterprise and Panjin Haoye Chemical,
strained refining industry Beijing is being both of which are based in the coastal city of
accused of overseeing investigations into tax Panjin in the north-east of China.
irregularities at two of its independent refiners, Together, the firms have a processing capacity
while at the same time giving a tacit nod to oper- of around 400,000 barrels per day of crude and
ations continuing as normal to help avoid fuel are believed to have been under investigation by
shortages heading into the winter. the central government since the early summer.
Local media reports have said state-run Current processing rates, however, have been in
Sinopec is set to supply crude to two refiners the region of 300,000 bpd, according to recent
currently facing scrutiny in a government tax reports.
investigation. Both firms are suspected of tax evasion to the
Ensuring the crude reaches the refiners by way tune of several billion US dollars, although no
of its trading arm, Unipec, Sinopec now risks run- figure has yet been officially released.
ning counter to the governmental probe, although Sinopec has reportedly declined to make a
the relief it will bring to some independent refiners statement on the matter – a response identical to
is not lost on industry watchers. representatives from the companies and the local
For much of 2021, with the international Panjin government.
community looking on, Beijing has been looking As part of the deal, Unipec is expected to take
into allegations of tax evasion and the domestic refined products from both companies for at
and cross-border trading of oil quotas in a bid to, least the next three months.
in part, curb emissions across the country. Similar investigations in China have previ-
Chinese President Xi Jinping has previously ously led to swift convictions of senior execu-
promised that emissions would peak by 2030, tives across a range of other industries, but with
and that China would be a net-zero emissions an annual turnover of almost $24bn, Bora is one
contributor by 2060. of largest private refineries in China to have been
In July, it was announced that China had given a trading licence. This is making the alle-
slashed import quotas for independent refiners gations of tax evasion all the more damning for
for the first time in at least six years. the private sector.
As a result, just a week ago it was reported Known as teapot refineries, private com-
that crude oil imports by China were down more panies are now importing around 1.2mn bpd,
than 15% from the same time last year; a num- an estimated 15% of Chinese daily imports. At
ber also seen as highlighting efforts by individual present, there are thought to be less than 20 such
companies to use stored inventory to help coun- firms operating across China.
ter rising oil prices across the world. Beijing’s ongoing investigations are seen
Earlier in the summer this resulted in some by some observers as the central government
forecasts that this would lead to the lowest levels simply targeting emerging forces in the private
of oil imports by China this century. sector in a bid to bring senior management to
The independent refiners caught up in the heel and restrict the pace at which the industry’s
investigation are understood to be Liaoning liberalisation takes place.™

P10 www. NEWSBASE .com Week 42 21•October•2021