Published By : 24 Nov 2015 | Published By : QYRESEARCH
For the very first time, Beijing will be letting independent oil refineries, also referred to as teapots, to export refined fuel next year. Sources said that this will free up 20 percent of the refining capacity in China for sales overseas with the government looking to reduce the curb the local oversupply and encourage investments.
The move will also enable independent refiners such as Panjin Beifang Asphalt and Dongying Yatong Petrochemical to venture into the global market for the first time. This has raised concerns about Asia facing a fresh flood of surplus diesel and other fuels.
At present, only state owned refiners PetroChina, Sinopec, and other smaller oil companies have the permission to export fuel to other countries.
In a meeting that was held last week, the Ministry of Commerce told refinery plants that they can begin applying for fuel export quotas for the first quarter of next year. The meeting was attended by several teapot refinery executives and provincial trade officials.
One of the refinery executives present at the meeting said that it is being viewed as an encouraging development because they will now be entering a playing field that is common with some of the leading oil and fuel firms.
This move is likely to add to the pressure on prices of Asian oil products that are already suffering from the weight of surplus barrels emerging from plants in the Middle East.
This year, China has also increased the export quotas of leading state refiners for jet fuel, diesel, and gasoline in order to reduce the swelling of local inventories. This is due to the fact that the output from refineries surpassed the demand for the same in slowing economy that is inherently manufacturing-heavy.
As of now it has not been decided how many independent refineries will be applying for export permits. However, traders estimate that it could result in an additional 24 million to 40 million barrels being sold overseas in the coming year.