Page 10 - AsianOil Week 25
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S&P Global Platts quoted sources at Sinopec and PetroChina as saying that both majors had used almost all of their export quotas by the end of April. China’s entire downstream has come to rely on state awarded fuel export quotas to relieve some of the pressure on the domestic market.
China only grants these allowances to state- run companies, having frozen out the private sector since 2016. Beijing has, however, steadily increased crude oil import quotas for private re ners a er rst granting them access to the international oil market in 2015.
is has seen a surge in crude imports from teapot re ners as they ditched Russian straight- run fuel oil (SFRO) as their preferred feedstock. With the teapots ramping up their re nery runs, competition on the local wholesale and retail fuel market has intensi ed. is has forced state re ners to sell their higher-quality fuels to for- eign markets, with Sinopec shipping fuel for the rst time to Australia, Europe and Africa this past year.
e interruption to the state-majors’ exports in May saw the central government move quickly to issue a new batch of allowances total- ing 23.79m tonnes in the middle of the month. It was around 30% higher than the 18.36m tonnes of quotas the government awarded in the rst round in December 2018.
While increasing exports from state re ners will help relieve some of the pressure, the gov- ernment’s push for bigger and more e cient pri- vate re neries means that this is just a short-term solution.
What next
Years of central government policy aimed at shuttering outdated, ine cient and polluting small-scale crude distillation units (CDUs) has
seen the number of privately operated re neries tumble rapidly in recent years. Private players have been squeezed by new tax rules, emissions standards requirements and minimum capacity requirements.
is has not hobbled the sector, however, but has weeded out the weakest operators. ose that remain have grown in scale and nancial clout and are taking the ght to the state majors that have long dominated the sector.
Privately owned Hengli Petrochemical and Zhejiang Petrochemical both have 400,000-b/d integrated re nery and petrochemical projects on the East Coast. Hengli’s plant near the north- eastern port city of Dalian reportedly reached full capacity in May while Zhejiang’s facility in Zhoushan began trial operations.
ese are amongst the country’s largest inte- grated complexes and their construction is the direct result of years of government e orts to force smaller companies to expand, merge or shutter their facilities. Where they used to num- ber in the hundreds, private players are now counted by the dozen.
“China’s refining industry has become a grand stage for state-owned, private and for- eign enterprises to compete fairly and achieve win-win co-operation,” Xinhua quoted China Petroleum and Chemical Industry Federation chairman Li Shousheng as saying on June 19.
Li’s comment on the re ning industry’s fair- ness may be a touch overblown, considering the private sector’s inability to export surplus fuel inventories. But the new breed of independent re ners does enjoy a far more level playing eld than previously. And as larger and more sophis- ticated private capacity comes on stream it may not be long before older and ine cient state-op- erated capacity is shuttered.
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w w w . N E W S B A S E . c o m Week 25 26•June•2019
