Independent Refineries now Allowed to Export Refined Fuel

Independent Refineries now Allowed to Export Refined FuelFor the first time independent refineries are now allowed by the Chinese Government to export refined fuel starting next year. This will free around 20 percent of china’s refining capacity for sales abroad as the country aims in cutting the local glut and boost investment. The move will allow independent refineries known as teapots to enter the international market for the very first time thus raising concerns on the fresh flood of excess diesel and other fuels in Asia. As of the moment only State owned refineries and small State owned firms are allowed to sell refined fuel abroad.

During a meeting that was held last week and attended by provincial trade officials and refinery executives, the Ministry of Commerce told the refinery plants that they can now apply for the first quarter fuel export quotas. One refinery executive who attended the meeting said that the news is an encouraging development in which they are now allowed in the same playing field as the big firms to export fuel. Although the move will add further pressure to Asian oil product prices that are already sagging in the weight of excess barrels coming from Middle Eastern Plants. This year China also raised dominant State refiners export quotas for diesel, jet fuel and gasoline to thin the swelling domestic inventories as refinery output outpaced the demand in the cooling manufacturing heavy economy.

Although its not clear on how many teapot refinery will apply for permits and traders has estimated that it could mean an additional 3 to 5 million tons of products to be sold abroad next year adding to the 30 million tons assigned to the country’s State owned refineries. The combined exports of 700,000 barrels a day is equivalent to 7 percent of the total oil use in China. However the government will be closely monitoring the new system by checking if the shipments actually take place and will withdraw any permits that a company is not fully using. Teapots refinery also falls into this category and it also applied to State owned companies thus exempting them from consumption and value added taxes.

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