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Beijing likely to continue gasoline, gasoil and jet fuel exports cut: sources – S&P Global

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Beijing is likely to continue to cut gasoline, gasoil and jet fuel exports and eliminate them altogether by 2025 to ensure that the country meets its carbon emission peak target, said several sources with knowledge about the matter in the week to Oct. 6.
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“It is quite unlikely to have another batch of oil product export quota allocation for the rest of the year amid the recent energy supply crisis,” a Beijing-based source told S&P Global Platts Oct. 6.
“Oil supplies should be fine on the back of sufficient crude stocks, but increasing oil product exports can lead to bad social impacts when the country is suffering from power rationing during winter, a kind of energy shortage,” the source added.
Rising energy prices, low coal and gas stocks, along with mandates to control energy consumption have triggered electricity rationing in China’s developed provinces, Platts reported earlier.

This means only 5.87 million mt or 1.47 million mt/month of oil product export quotas are available for September-December, compared with 31.13 million mt or 3.89 million mt/month in January-August.
Beijing has allocated a total of 37 million mt of oil product export quotas for 2021. In 2020, the allocation volume was 59 million mt, with 45.75 million mt of actual exports.
“We have stopped exporting and don’t plan to resume the outflow due to tight quotas,” a source with an exporting Sinopec refinery in southern China said.
“Oil companies may have to find ways to get around if they want to sustain the outflow, such as send out uncontrolled semi-finished products instead of the fine finished oil products, or report as other products when exporting,” a Beijing-based analyst said.
Beijing controls China’s gasoline, gasoil and jet fuel exports by quota allocations to six oil companies — Sinopec, PetroChina, CNOOC, Sinochem, China Aviation Fuel, Norinco and private Zhejiang Petroleum & Chemical.

Eliminate exports by 2025

Sources indicated since early September that the government intends to eliminate oil product exports by 2025 to cap emissions and crude imports.
“It is possible to cut exports to zero by 2025 when China’s oil demand for transportation peaks. Less product surplus then as more old and small refining capacity will be phased out, while the new refining capacity will be built for petrochemical production instead of oil products,” a Guangzhou-based analyst said.
China is constructing about 1.44 million b/d of integrated refining capacities for petrochemical production, which are expected to be online 2022 onward. These are on top of about 800,000 b/d of capacity that is likely to complete construction and start trial run in 2021.
Meanwhile, the country has speeded up the phasing out of capacities this year amid multiple mandates, and investigations for operational, taxation and environmental compliances. Almost all of the investigated capacities were built for producing oil products.
The Shandong province, home of the country’s small independent refineries, is expected to cut refining capacity to 1.8 million b/d in 2025 from 2.6 million b/d in 2018 despite a 400,000 b/d integrated petrochemical-oriental refinery being under construction.
China’s transportation fuel demand is likely to peak at 380 million mt in 2025 from below 350 million mt as the country accelerates energy transition to meet its carbon neutrality target by 2060, according to an estimate by Bank of China International Global Commodities.
Transportation fuels including gasoline, gasoil, jet fuel and bunker fuel, saw demand of below 350 million mt in 2020, according to BOCI.
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