China’s Ministry of Commerce is expected to award the independent refining sector with oil products export quotas next year as Beijing steps up efforts to support private companies to play a bigger role in the economy, industry sources and market participants said Monday.
The government recently held a meeting with multiple state-owned refiners in Beijing to inform them about possible changes to oil products export participants in 2020, two sources with close knowledge of the matter told S&P Global Platts last week.
“We expect the government to release the first batch of oil product export quota allocations for 2020 [later] this week, one of the sources said. “It is not clear if any new players will be in the [first batch] list.”
However, a few independent refiners would certainly make the list in the later stage in 2020, the sources said.
In China only state-run oil companies have long-held permission to export oil products, but Beijing’s determination to distribute export quotas to some independent refiners could mean that private companies could have direct access to the international market going forward.
Traditionally, independent refiners with excess oil products could only offload the surplus supply overseas by selling the barrels to state-owned export quota holders, who would resell the cargoes in the international market.
However,once Beijing awards some 2020 export quotas to the private sector, independent refiners could sell oil products overseas on their own and compete directly with state-owned exporters, industry and market sources said.
Earlier this month, the state council said in a guideline that the authorities would support qualified private enterprises to participate in crude oil and refined product trades, essentially laying the ground for independent refiners to compete with state-run firms in the international oil market.
The cabinet said it would “support qualified enterprise to participate in crude oil imports and oil product exports,” and direct all relevant authorities to set up detailed methods for market entry access, a road map and timetable.
The guideline, which focused on improving the business environment for private enterprises in general, highlighted Beijing’s willingness to help the sector lead the reform of goods and services quality and ensure employment and economic growth, a Beijing-based policy observer said.
HENGLI, ZPC TOP CANDIDATES
China’s mega greenfield refining and petrochemical firms Hengli Petrochemical (Dalian) and Zhejiang Petroleum & Chemical are the top two candidates in the independent sector expected to be granted export quotas sometime during 2020, the two sources and industry officials said.
“The two complexes have all kinds of advantage for exporting, including logistics, capacity and [trading] talents,” a Shandong-based independent refiner said. Beijing would be more inclined to award export quotas to mega private players, rather than small-scale and land-locked private refineries in Shandong, he added.
Hengli and ZPC, each with 400,000 b/d refining capacity, are located in the coastal area of northeastern China’s Liaoning province and the eastern Zhejiang province, respectively. Both refineries are equipped with their own ports and pipelines connecting the plants.
The two private refining companies also employ multiple trading experts with international market experience from state-owned refiners.
In 2016, the government temporary awarded oil product export quotas to 12 qualified refineries, in addition to the four traditional state-owned exporters — CNPC, Sinopec, CNOOC and Sinochem.
Since then, however, the government has not granted export quotas to companies other than the four state-run giants and state-owned China National Aviation Fuel.
Independent refineries account for about 31% of China’s total refining capacity in 2019, up five percentage points from 2018, data from Sinopec’s Economics & Development Research Institute showed.
2020 EXPORTS FLAT
The government’s expected support for independent refiners, however, doesn’t necessarily mean Beijing will allow an increase in overall oil products export volume, the two sources with knowledge of the recent government meeting said.
“The government will likely continue to restrict the total oil product exports volume for 2020, keeping it at a level similar to 2019,” the second of the two sources said.
The National Development and Reform Commission, the country’s top planner, has been strict in controlling China’s oil product exports to avoid any drastic increase in crude inflows and product outflows while addressing the country’ fossil fuel pollution issues.
Tight quota allocations and new export players suggest the traditional exporting state-owned oil companies would have to sacrifice some of their export permit volumes for independent refiners in 2020.
Sinopec’s EDRI projected China’s oil product exports to reach 59 million mt in 2020, compared with 55 million mt in 2019.
Beijing in 2019 allocated a total 55.994 million mt of quotas for oil products — gasoline, gasoil and jet fuel — as well as 6,000 mt of quotas for LNG.
In January-November, China exported 50.1 million mt of oil products, accounting for 89.5% of the total quota allocation for 2019.
Source:Platts
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
Please Contact Us at：
admin@xindemarine.com
.gif)
