China's state-owned Sinochem completed its first two bonded bunkering deals in Zhoushan on May 2, a step toward boosting its bonded bunkering business, a source with knowledge of the matter said May 4.
The two deals were to refuel the international vessels Emma and Priscilla Venture, each with 1,000 mt with low sulfur bunker fuel oil, the source said.
The LSFO barrels were produced by Zhejiang Petroleum & Chemical in Zhoushan and use the private refiner's fuel oil export quota for tax rebate or tax exemption.
The company won a supplier license for bonded bunkering in June 2021, allowing it to take tax-free domestically produced LSFO from fuel oil export quota holders to supply vessels plying international routes.
Sinochem aims to supply 100,000 mt in 2022, with an 8,500 cu m storage tank rented for logistics in Zhoushan, according to the source.
Market sources in Zhoushan said Sinochem had bought 5,000 mt of the barrels from ZPC for its first few deals, while the state-run company's sole 15 million mt/year refinery will start to produce LSFO to the supplier in May.
Sinochem holds a 30,000 mt quota to export its domestically produced LSFO for tax-free, while ZPC has 100,000 mt.
Beijing is expected to issue the second batch of fuel oil export quotas soon even before the first batch of allocations amounting to 6.5 million mt runs out in May, with the total annual quota for 2022 set be higher than the 12 million mt allocated last year.
The government is keen to keep allocating fuel oil export quotas to the level which "oil firms can use," a Beijing-based source said.
Chinese refineries are set to boost LSFO production for bonded bunkering as access for other oil product exports is shrinking.
Source: Platts
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