China cuts independent refinery oil import quotas for first time since 2015

Singapore — China has issued a new batch of oil import quotas for independent refiners for 2021 that show total annual allowances were lower than last year, a first reduction of import permits since these firms were allowed into the market in 2015.

The latest batch of quotas for independent refiners was 14.89 million tonnes, according to the documents. That brings the total allowances for 2021 to 177.14 million tonnes, down from 184.55 million tonnes in 2020, said three trade sources and Chinese commodities consultancy JLC.

The reduction in import quotas follows heightened government scrutiny of the refining sector this year over the trading of crude import quotas and tax evasion, as Beijing sought to curb inefficient fuel processing and cut emissions.

“Traditional local refineries are expected to see even lower quotas next year after several years of robust growth, while mega refinery-petrochemical integrated firms will see further sizeable increases in quotas,” according to a JLC note on Friday.

Among the 16 companies granted quotas, Hengli Petrochemical, one of the country’s largest privately controlled mega-refiners, was given the largest at 3 million tonnes.

State-run ChemChina received a quota for 2.57 million tonnes, according to the sources.

Shenghong Petrochemical, which is set to start up a 320,000 barrel-per-day (bpd) refinery next month in eastern China, received a quota of 2 million tonnes, the third-largest allocation.

However, Zhejiang Petrochemical Co (ZPC), operator of China’s largest refinery with a capacity of 800,000 bpd, was not on the list.

ZPC had been widely expected to receive the same volume as Hengli.

“We’re in the midst of communicating with the government (over quota matters),” said a ZPC representative, without offering further details.

Beijing’s cooling measures, alongside soaring global prices that triggered drawdowns of inventories, have led to lower crude imports into the world’s top buyer, with purchases in the first three quarters of 2021 down 6.8% over a year earlier.