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China to grant crude import licenses to four independent refiners

Singapore — China is set to award crude oil import licenses to four independent refineries in eastern China, the Ministry of Commerce said in a statement Tuesday.

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The license will enable those refineries to import crude directly, rather than asking other refineries to import on their behalf.

Those four refineries are Haike Ruilin Petrochemical, Chengda New Energy, Lianhe Petrochemical in eastern Shandong province, as well as Xinhai Petrochemical in neighboring Jiangsu province.

The latest approval will be the first for independent refineries this year, since the last 12 companies were approved in May 2018.

The approvals will come after a public review, which could last until June 17.

Taking the latest approval for those four refineries into account, a total of 31 refineries will be granted the crude import licenses by the ministry since August 2015, allowing them to directly import crude.

So far, China has granted crude import quotas to 42 independent refineries, with a total volume of around 152.64 million mt/year, including the two new greenfield refineries Hengli Petrochemical (Dalian) Refining and Zhejiang Petroleum & Chemical Co. Ltd.

Once a refinery has both a crude import quota and license, it is allowed to directly import crude without going through a third party. The import license also allows the license holder to import crude for other refineries that hold quotas to process imported crude.

China's independent refiners are mainly concentrated in Shandong province, though a few are located in the north and south of the country. They account for approximately 30% of China's total refining capacity of around 15 million b/d, according to Platts' estimates.

Beijing started allowing independent refiners to process imported crude in early 2015. Prior to that, these refiners relied on fuel oil and domestic crude for feedstock.

These refineries, locally called teapots, have not been built by state-owned oil entities Sinopec, PetroChina, CNOOC, and Sinochem. CNOOC and Sinochem however, later acquired stakes in some of these refineries to meet their own strategic needs.

Before 2015, the independent refineries had an average capacity of 40,000-50,000 b/d. But they have since revamped their plants in order to win crude import quotas and currently have an average capacity of 70,000 b/d.

--Staff, newsdesk@spglobal.com

--Edited by Nurul Darni, nurul.indriani.darni@spglobal.com