China grants second batch of fuel export quotas

10 May 2018, Week 18, Issue 692

The Chinese Ministry of Commerce (MOFCOM) has reportedly issued this year’s second batch of oil product export quotas.

The ministry granted permits for the export of 19.33 million tonnes of fuel, Reuters reported on May 7, citing three sources with direct knowledge of the matter. All of the quotas went to state-run companies.

Beijing awarded the largest quota to Sinopec, according to the sources, with the company now permitted to export 8.23 million tonnes. MOFCOM also authorised China National Petroleum Corp. (CNPC) to export 6.67 million tonnes, Sinochem 2.3 million tonnes and China National Offshore Oil Corp. (CNOOC) 2.03 million tonnes.

The smallest quota went to China National Aviation Fuel (CNAF), which will be able to export 100,000 tonnes of jet fuel. Meanwhile, the sources added, MOFCOM will soon award more permits – specifically, permits for small amounts of refined petroleum products within the framework of a tolling scheme. They did not say exactly how much fuel might be involved.

All of the new quotas were issued under the category of general trade, Reuters’ sources said. As such, the holders of the permits will be able to obtain tax refunds after completing their export shipments or, alternatively, to secure a tax waiver covering future fuel exports. The government introduced this policy in 2016.

Since the start of 2018, Beijing has granted export quotas for 39.33 million tonnes of refined fuels. This is equivalent to 96% of China’s actual petroleum product exports in 2017 and 91.5% of the total volume of quotas issued in the same year. Most of this year’s quotas have fallen into the category of general trade, but some relate to tolling schemes.

Domestic competition

Reuters had predicted last month that China’s government would issue all remaining fuel export permits for the current year in one single round rather than dividing the awards up into several tranches.

Citing two trading sources, the news agency said the total volume of quotas for 2018 was likely to come to around 43 million tonnes. This would be roughly equivalent to the volumes specified in last year’s permits, it added.

Under these conditions, Chinese refiners are set to face heavier competition on the domestic markets in the near future. While China’s demand for fuel is still rising, the country has mounting fuel surpluses and state-run firms are understood to be preparing to bring around 160,000 bpd of new refining capacity on stream before the end of this year. As such, fuel sellers will have to work harder to attract customers.

Export plans

In the meantime, state-run refinery operators are moving forward with efforts to draw up plans for their fuel export programmes.

Sinopec, for example, said on May 7 that its Guangzhou refinery was on track to deliver 800,000 tonnes of petroleum products to foreign consumers this year. In its corporate newspaper, Sinopec said these exports were likely to generate about 2.6 billion yuan (US$408.6 million) in sales revenues.

It also noted that the quotas would allow for exports within the general trade category. As such, the company will therefore be eligible to seek rebates. If it does, it stands to receive around 1.3 billion yuan (US$204.3 million), according to the newspaper.

PetroChina, CNPC’s main subsidiary, reported the same day that its Yunnan refinery had launched its first export shipment of diesel. In its corporate newspaper, the company said the plant had loaded a cargo of 60 tonnes of diesel onto a truck on April 29. That truck took the fuel from the city of Anning in southern Yunnan Province to Ruili, a crossing point on the China-Myanmar border, the newspaper said.

PetroChina did not identify the buyer, but a trading source with direct knowledge of the matter told Reuters that the company had delivered the fuel to a Myanmar customer. This is in line with the firm’s efforts to seek new customers in Southeast Asia.

Edited by

Andrew Kemp

Editor

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