China's first batch of oil product export quotas for 2022 plunge 56% on year

China's Ministry of Commerce, or MOFCOM, has allocated 13 million mt of oil product export quota in the first round to seven oil companies for 2022, down 55.9% from the same round for 2021, sources with knowledge of the matter said.

The quotas are for gasoline, gasoil and jet fuel exports, according to the sources.

The more than a half reduction from 29.5 million mt in the same round of last year set the falling range of China's oil product outflow in 2022.

Beijing is set to cut the country's oil product exports in the coming years, with talks about the volume would fall to zero in 2025 as part of China's effort to control carbon emission.

Sinopec, China's top refiner, is hit the most as its quota falling 64.3% to merely 4.31 million mt from 12.07 million mt in the same round of last year.

Even Sinochem's cut, which was the least among the state-owned oil giants, is at 31.9% year on year.

Export quotas are allocated under two routes: general trade and processing trade. Under the general trade route, all the exported barrels must be shipped by vessels and sold overseas. The exported barrels under the processing trade route are for bunkering in China's bonded zones, such as jet fuel for bonded bunkering in China's airports for flights plying international routes.

Seven oil companies were allocated a total 10.79 million mt of quotas under the general trade route, falling 58.8% from the 26.79 million mt in the same round for 2021.

MOFCOM issued 2.21 million mt of quotas under the processing trade route to CNPC, Sinopec and Sinochem for 2021, down 33.6% from 3.33 million mt for the same companies in the same round for 2021.

Fuel oil quotas up 30%

Separately, MOFCOM in the same batch has issued 6.5 million mt of fuel oil quotas to CNPC, Sinopec, CNOOC, Sinochem and ZPC, which allow them to send tax-free domestically produced barrels for bonded bunkering at Chinese ports, the sources added.

Contrast to oil product export quotas, the volume jumped 30% from the 5 million mt allocated in the same round of 2021.

Most of the LSFO quota increase goes to Sinopec, leading the company to hold 60% more of volume to 3.84 million mt comparing to the same round of last year.

However, not all of the oil firms are willing to have more fuel oil quotas as both Sinochem and Zhejiang Petroleum & Chemical (ZPC) applied for less volume. Allocation to the companies dropped 90.6% and 74.4%, respectively, year on year.

Sources closed to the companies said they prefer to produce more petrochemical products, or even oil products, rather than bunker fuel oil.

In addition, MOFCOM awarded 20,000 mt quota to Sinopec to export propylene tetramer in 2022.

China's first batch of gasoline, gasoil, jet fuel export quotas (million mt)

China's first round of LSFO export quotas (million mt)

Notes:

* Includes 2,500 mt of natural gas quotas

^ Includes 2,000 mt of natural gas quotas

~Just for jet fuel export

Source: Market sources