Caixin
Jul 10, 2020 05:13 PM
BUSINESS & TECH

China Grants First Export License to Private Oil Company

What’s new: Zhejiang Petroleum & Chemical Co. Ltd. became the first private oil company in China to obtain the go-head from the Ministry of Commerce to sell petroleum products abroad, according to a Tuesday urgent notice reviewed by Caixin.

The size of the export quotas granted to the company has not yet been made public. Xu Peng, a petroleum analyst at consulting firm JCL, predicted that the number may be revealed after August.

Zhejiang Petroleum currently has an annual capacity of 20 million tons and can produce 8.36 million tons of refined petroleum products suitable for export.

What’s the background: The move came as China is approaching its crude oil storage capacity limit, as data from energy information provider Oilchem China showed the country had used up 69% of its storage space as of July 1. That is only one percentage point away from the 70% threshold viewed by experts as its limit.

China’s cabinet granted export permission in April to companies operating within the Zhejiang Pilot Free Trade Zone, where Zhejiang Petroleum is based. The effort is seen as an attempt to ease oversupply in its bloated refinery sector.

The country's oil refining industry is largely a closed shop dominated by state-owned giants. Local private refineries were granted export rights on a temporary basis in 2016, but the policy was scrapped the following year, returning exclusive export rights to just five state-owned oil conglomerates — China National Petroleum Corp., China Petrochemical Corp., China National Offshore Oil Corp., Sinochem Corp. and China National Aviation Fuel Group Ltd.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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