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Chinese Shandong province seeks to curb fuel production by ordering teapots not to trade crude oil quotas

August 05/2021

MOSCOW (MRC) -- China's Shandong province stepped up efforts to curb fuel production by ordering independent refineries to promise not to trade crude oil quotas, according to three industry sources and a document reviewed by Reuters.

The move follows a crackdown by Beijing in April which found several independent refiners had traded quotas, including selling quotas to plants not registered to process imported crude, defying efforts to ease a fuel surplus that has hurt state-owned refiners' profits.

That led the government to reduce a second batch of quotas issued in June and cut imports by the world's largest oil importer.

The independent refiners, known as teapots, handle roughly one fifth of China's crude imports.

The provincial government of Shandong province, China's independent oil refining hub, asked 30 refiners to each sign a letter of guarantee by the end of Wednesday pledging that they will neither resell their crude import quotas nor try to purchase such allocations.

The refiners were also asked to promise not to resell or relocate older processing units they earlier pledged to demolish in order to be qualified to process imported crude oil, according to the document and two of the sources.

"The government has stepped up checks on teapots in recent months, inspecting whether they have shut old units as promised, whether they are operating at the capacity previously agreed with the government," said an official with one Shandong-based refiner.

China, the world's top crude oil buyer, manages its crude oil imports via a quota system, issuing permits several times in a year.

As MRC informed previously, China Petrochemical Corp, or Sinopec, said in early July it started building a carbon capture, utilization and storage (CCUS) project in east China, the largest of its kind in the country, as part of the refiner's goal to be carbon-neutral by 2050.

We remind that Sinopec Engineering (Group) and ExxonMobil (Huizhou) Chemical (EMHCC) have recently entered into a BEPC (basic design, engineering, procurement and construction) contract for the proposed Huizhou Chemical Complex Project (Phase I). The main units of the project include a 1.6 million tonnes/year ethylene flexible feed steam cracker, downstream polymer and derivative units and utilities. The main product units include two performance polyethylene (PE) lines and two differentiated performance polypropylene (PP) lines.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 953,400 tonnes in the first five months of 2021, which virtually corresponded to the same figure a year earlier. High denisty polyethylene (HDPE) shipments decreased. At the same time, PP shipments to the Russian market were 607,8900 tonnes in January-May 2021, up by 33% year on year. Shipments of homopolymer PP and PP block copolymers increased, whereas deliveries of PP random copolymers decreased.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, propylene, ethylene, gas processing, petrochemistry, Exxon Mobil, Sinopec, China.
Category:General News
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