PetroChina’s oil product export quotas in the second batch allocations may fall to 2.8 million mt, a company source told S&P Global Platts on Aug. 2, raising fears that the state-run firm may struggle to cut inventories, while keeping run rates at relatively lower levels.
The state-owned oil giant has been running out its quotas of 9.81 million mt allocated in the first batch, resulting in a sharp drop in July and August outflows. With the expected second round of allocation, PetroChina may get a total 12.61 million mt quotas for 2021, compared with a total 21.28 million mt for 2020.
PetroChina in July only exported minimal oil product barrels by trucks from its Yunnan Petrochemical in southwest China, while Wepec is its only refinery which plans to export 40,000 mt of jet fuel in August.
The 2.8 million mt expected allocation suggests that PetroChina’s monthly exports would average at 560,000 mt in August-December, compared with an average outflow of about 1.6 million mt in the first half of this year, Platts’ calculations showed.
The limited quotas are expected to prevent PetroChina from offsetting its inventory pressure via exports.
Most PetroChina refineries are located in Northeast and Northwest China, which are relatively less developed compared with consumption centers in Southern and Eastern China.
This has prompted PetroChina to account for 70% of China’s gasoline outflows.
“Refineries have been storing oil products for Sales Company as it has been difficult for the company to find outlets for extra barrels,” a PetroChina refining source said.
Therefore, at least two of its exporting refineries – Wepec and Dalian Petrochemical – plan to cut August crude runs.
Wepec plans to process 720,000 mt of crude oil in August, or 85% of its nameplate capacity, down from 88% in July, and 96% in June.
Meanwhile, the flagship refinery Dalian Petrochemical plans to cut its crude throughput by one percentage points further to 75% of its nameplate capacity, or 1.3 million mt.
PetroChina cut its average utilization rate in July by one percentage points to 73% from June, Platts reported earlier.
Quota estimation
Meanwhile, state-owned Sinopec is likely to get a total 3.2 million mt of export quotas in the second batch on top of 12.07 million of allocation in the first batch for 2021, according to a Sinopec refiner.
The state-owned Sinochem was heard to have applied for 1.7 million mt of export quotas for allocation in the second batch, which would bring its total quotas for 2021 to 4.3 million mt, according to a source with knowledge of the matter.
“The new allocation will be mainly used for jet fuel exports to offset its high sulfur kerosene inventory pressure as the surplus barrels are no longer exempt from consumption tax in the domestic market,” the source added.
State-run Norinco is likely to be awarded 150,000 mt of quota in addition to the 150,000 mt of allocation in the first batch, a second source with knowledge of the matter said on Aug. 2.
“The second batch will be released soon,” the second source added.
Beijing controls China’s oil product exports by quotas and set to cut allocation for the rest of the year as an effort to limit emissions to meet the country’s carbon zero target.
Currently, there are seven quota holders in the country. They are state-owned PetroChina, Sinopec, Sinochem, CNOOC, Norinco and China National Aviation Fuel, as well as private Zhejiang Petroleum & Chemical.
There has been market talks that Beijing is likely to allocate about 7.5-9.5 million mt of quotas for exporting gasoline, gasoil and jet fuel during the second round of allocation.
If the allocation hits 9.5 million mt, the total allocation would work out to 39 million mt for 2021, about 14.7% lower from the actual export level of 45.75 million mt in 2020, Platts’ calculation showed.
China exported 26.29 million mt of gasoline, gasoil and jet fuel in the first half of 2021, down 2.6% year on year, data from General Administration of Customs showed.
Source: Platts