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China may liberalise fuel export sector this year
The central government may be on the verge of allowing a select few private refineries to begin exporting fuel
COMMENTARY
WHAT:
The government has released a new guideline suggesting private players will be allowed to export fuel.
WHY:
The advent of privately owned mega-refineries seems to have triggered the policy shift.
WHAT NEXT:
Hengli and ZPC are expected to win the first export quotas for the private sector.
AFTER several years of confining China’s inde- pendent refiners to selling on the domestic fuel market, 2020 appears to be the year the central government is ready to loosen its grip on the export market.
Not only did last year see the launch and ramp-up of the country’s first privately owned and operated mega-refineries, which are pro- ducing fuel of a comparative quality to the more advanced facilities of their state rivals, but the government also announced that it was prepared to let a select group of private oper- ators export fuel.
Quota award
China issued its first batch of fuel export quotas for 2020 at the start of this month and, accord- ing to media reports, the government increased allowances by more than 50% year on year.
The Chinese Ministry of Commerce (MOF- COM) issued 27.99mn tonnes of export quo- tas for 2020, up 53% on the 18.36mn tonnes awarded in 2019’s first tranche, according to an official document.
China awards its fuel export quotas in waves throughout the year and has steadily expanded them in recent years to accommo- date a rise in downstream capacity, a slow- down in fuel demand growth and a heightened competition on the local fuel market.
Of 2020’s first round of quotas, 24.55mn tonnes fell with the general trade category, while another 3.44mn tonnes was under toll- ing arrangements. The first category allows refiners and traders to export from the domes- tic market irrespective of whether the fuel was processed from domestic or imported feed- stock, while also receiving a tax refund once the export has been finalised. Exports under tolling arrangements have their taxes waived.
Only state-run companies – PetroChina, Sinopec, China National Offshore Oil Corp. (CNOOC), Sinochem and China National Aviation Fuel (CNAF) – received quotas. Pri- vately operated refineries have not received export quotas since 2016. While the govern- ment has encouraged its private downstream sector to consolidate and build new capacity to replace older, less efficient and more polluting plant, it has limited the independents to sell- ing into the domestic fuel market.
But while the private sector may have failed to secure the government’s approval in this latest round of export allowances, the signs are that Beijing intends to ease restrictions later this year.
New opportunities
The Central Committee of the Communist Party of China and the State Council issued a guideline late last year that aims to spur growth
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