The pain for Shandong-based independent refiners is set to mount as they face the toughest crackdown by Beijing since the sector was liberalized and given access to imported crude in 2015.
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The sector has been the main contributor to incremental crude demand growth in recent years and currently accounts for 24% of the country's overall crude imports. But now they are facing the strongest headwinds as both central and local governments tighten supervision of their operations, which has lowered their access to imported crudes as well as raised their tax and environmental obligations.
This could potentially hurt their competitiveness, resulting in a consolidation spree that would see the phasing out of old and relatively small units.
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