Page 10 - AsianOil Week 01

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Hengli launched its 400,000 bpd facility in Liaoning Province’s port of Dalian. Image: Xinhua
in the private sector, the official Xinhua news- wire reported on December 22. Of the several reforms mentioned, Xinhua said: “Eligible pri- vate firms may engage in crude oil import and the export of refined oil products.”
It did not say what requirements compa- nies would need to meet to become eligible or when the introductions would come into effect, but it comes at a time when private companies have begun to rival their state peers in terms of technological sophistication.
Hengli Petrochemical and Zhejiang Petro- leum & Chemical (ZPC), for example, have each launched mega-refineries and are widely considered the most likely candidates to receive export quotas once the government begins awarding them in 2020. ZPC and Hengli launched 400,000 bpd facilities in Zhe- jiang Province’s Zhoushan City and on Liaon- ing Province’s port of Dalian respectively.
Prior to the award of the government’s oil product export quotas, S&P Global Platts quoted an unnamed source with knowledge of the mat- ter as saying the two independents were likely to be awarded quotas at some point this year.
“The two complexes have all kinds of advantage for exporting, including logistics, capacity and [trading] talents,” Platts quoted an unnamed executive from an independent refiner in Shandong as saying last week. The source added that Beijing was more inclined to open the export market up to mega-refineries than the “small-scale and land-locked” inde- pendents in Shandong.
As independent refiners ascend the technologi- cal curve, they have been lobbying the government to reopen access to international markets.
What next
Hengli Petrochemical is one company that has already set its sights on winning the right to export
jet fuel. Company sources told Reuters in May 2019 that while the refiner had hopes of winning export quotas, it understood that there were barriers to overcome. An unnamed spokesman said the company had applied for 3mn tonnes in jet fuel export quotas for 2019. Clearly the company has not received these yet.
However, the company has been pursuing government certificates stating that its fuel is air- worthy, which is the first step in the road to being able to market the fuel both at home and abroad. In October 2019, the Civil Aviation Administra- tion of China (CAAC) issued the necessary cer- tificate declaring that Hengli’s No.3 Jet Fuel had passed its airworthiness test. With that hurdle cleared the company is one step closer to achiev- ing its goal of entering the export market.
The Asian fuel market will be watching the Chinese government’s next moves closely, given that private refiners’ aggressive mar- keting on the domestic front has already seen state refiners up their oil product exports. Platts’ sources, however, remained uncon- cerned by the prospect of new Chinese players being able to sell their fuel overseas.
“The government will likely continue to restrict the total oil product exports volume for 2020, keeping it at a level similar to 2019,” one source said. Instead, state refiners could well have to relinquish some of their quotas to make way for the country’s more technologi- cally advanced independent refiners.
The central government appears content to liberalise both the crude import and fuel export markets as long as private players embrace economies of scale. While companies such as ZPC and Hengli have followed Bei- jing’s directions, Shandong Province’s smaller refiners may struggle to compete in a market where only the most competitive can curry the government’s favour.™
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w w w. N E W S B A S E . c o m Week 01 08•January•2020