Chinese Oil Refiners in Limbo as Beijing Delays Releasing Quotas
Chinese Oil Refiners in Limbo as Beijing Delays Releasing Quotas
(Bloomberg) -- It’s an anxious end to the year for many Chinese oil refiners as they wait for Beijing to announce crude import and fuel export quotas.
The import allowances are for independent refiners, accounting for around a quarter of the country’s processing capacity, while the export limits cover the entire sector including state-owned companies. Both types of quota had already been released at this point last year.
The delay is the latest headwind for China’s refining sector, the world’s largest crude importer and processor, which is already facing an economic slowdown and the threat posed by the omicron virus variant. The private refiners, or teapots, have also been hit with taxation and pollution probes.
The complexity of the tax investigations, rising competition between private and state-owned firms and the uncertainty caused by omicron and China’s zero-Covid policy were likely reasons for the delay in issuing quota, according to several oil traders. Beijing is also thought to be considering limiting both the import and export allowances to cut carbon emissions.
The lack of import quota is causing frustration, according to officials at three teapots who asked not to be identified as the matters are private. The refiners have run out of crude and are unable to start planning processing, financing and hedging for next year, they said.
If the import quotas are delayed until January, it could mean the teapots will face demurrage fees for cargoes they booked for arrival early next year.
The delay has seen some teapots resort to an old trick: import fuel oil, which can be used as a feedstock to produce other oil products, instead of crude. The number of Chinese private refiners and traders applying for fuel oil import quota for 2022 has almost doubled from a year earlier, the Ministry of Commerce said in a statement last week.
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With assistance from Bloomberg