China has raised its 2018 crude oil import quota for “non-state trade,” generally meaning independent refiners, by 55% over 2017, raising the clout of the independents in the global market after a setback this year. The move took market participants by surprise after Beijing cut the quotas to independents for 2017. The annual quota setting, announced earlier than usual, is a sign the government is relaxing its policies towards the independent refiners after the cuts and after banning them from exporting fuel this year.
An employee rides a bike on a road near refinery plants of Chambroad Petrochemicals, in Boxing, Shandong province. China’s Ministry of Commerce said yesterday companies can start applying for quotas for 2018 totalling 142.42mn tonnes, or about 2.85mn bpd of crude oil, up from 91.73mn tonnes for 2017.
The Ministry of Commerce said yesterday companies can start applying for quotas for 2018 totalling 142.42mn tonnes, or about 2.85mn barrels per day (bpd), up from 91.73mn tonnes for 2017.
The ministry did not provide a detailed breakdown of quota recipients, but they should include mostly independent refiners, which in 2017 made up around two-thirds of the total. The announcement follows a recent state media report that China’s increasingly influential independent refineries have sought changes to oil quota polices to help them plan procurement and production in advance.Quotas for some of these independents, also known as “teapots”, were cut by nearly 17% in 2017 versus 2016 because they under-used the earlier permits.
“Teapots like us may get a bit more quota next year after Commerce Ministry cut back our volumes in 2017,” said a procurement manager with Shouguang Luqing Petrochemical Co, a teapot based in the eastern Chinese province of Shandong, home to a number of the independent plants. “It’s an improvement to set the annual volumes earlier. But the volumes are much larger than expected,” said Harry Liu of consultancy IHS Markit.
Higher quotas should boost imports of ESPO crude which loads from Russia’s Far East and crude from Angola, favorite supply sources for the independents that have also been drawing barrels from the Americas and the Middle East. “Margins for fuel is really strong in (the fourth quarter) as crude prices pick up. We have already run out of quota this year. So if we get higher quota, we will import more crude in 2018, especially ESPO,” said the Shouguang manager, who declined to be named because of company policy.
The new quotas are equal to about one-third of China’s imports during the first nine months of the year. One of the new recipients is likely to include a greenfield refinery backed by Zhejiang Rongsheng Group, a privately owned petrochemical company, said a source familiar with the matter. Zhejiang Rongsheng may start trial operation of a 400,000 bpd plant in east China towards the end of 2018 and that would be joined by Hengli Petrochemical Group’s planned 400,000 bpd refinery in northeastern city of Dalian in the third quarter, three sources familiar with the plants said. The Commerce Ministry said the quotas will be issued in batches, with the first lot based on companies’ actual purchases during the January to October period this year. Companies without any import record will be banned from new quotas for 2018 and those which under-use quotas are required to return the unfinished permits.
Sources and Photo-credits: Gulf Times, Reuters