Beijing to allocate 4.42 mil mt crude import quotas to four private refineries: sources

Beijing is likely to allocate 4.42 million mt of crude import quotas to four independent refineries, which would temporarily ease the shortage of quota availability, market sources told S&P Global Platts on Aug. 12.

The four refineries that would receive quota allocations are Zhejiang Petroleum & Chemical in Zhejiang province, Hualong Petrochemical, Lianhe Petrochemical and Hualian Petrochemical in Shandong province, market sources said.

"We have not received the official allocation document yet, but the expected allocation will help us carry out our procurement plan," a Shandong-based source with one of the quota winners said, adding that they expected to get the official notice soon.

With the new allocation, quotas that the four refineries hold will hit their quota ceilings set by the country's top planner, National Development & Reform Commission.

It will bring the total quota allocated by Beijing for 2021 to 156.86 million mt for 42 qualified refineries, accounting for 90% of their total quota ceilings, leaving 22 refineries yet to meet their quota cap.

In China, refineries built and operated by state-owned companies — CNOOC, PetroChina, Sinochem and Sinopec — do not need quotas to import crude. All other refineries, including independents and those owned and operated by state-owned companies such as ChemChina and Norinco, require quotas.

Independent refineries have slowed down their crude procurement due to tight quota availability.

In July, crude imports for the key independent refineries fell to 12.37 million mt, a 16-month low, indicating that only 35.6 million mt of quota was available for rest of the year with the new allocation, Platts data showed.

ZPC's quotas

Among the four refiners set to receive new allocations, ZPC is the most in need of additional quotas.

It runs three crude distillation units, each with a production capacity of 10 million mt/year, with the quota ceiling at 20 million mt as the government did not award specific quotas for its third CDU to crack imported crudes, despite ZPC starting up the unit of its phase 2 project in November 2020.

As a result, it had to shut down the third CDU in late July while applying for quota for its 20 million mt/year phase 2 project.

With the new 3 million mt allocation, ZPC holds 20 million mt quotas which meets its quota ceiling for its phase 1 project with two CDUs.

In the first seven months, ZPC has imported 15.1 million mt of crudes.

Similarly, the greenfield Shenghong Petrochemical (16 million mt/year) is also applying for crude quotas and targets a start up in October, according to a company source.

Fuhai Group is likely to win 250,000 mt and 420,000 mt of quotas for its Hualian Petrochemical and Lianhe Petrochemical, respectively, in this round's allocation, market sources said.

Hualong would get 750,000 mt in the new batch.

China's crude oil import quota allocations ('000 mt)

* includes quota allocations for other qualified refineries.

Source: Market sources