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[BEIJING] China's top state planner will stop accepting new applications from oil refiners to use imported crude oil from May 5, it said on Thursday, amid growing concerns about domestic refining overcapacity that has led to record exports of fuel.
China has allowed 22 independent refiners to import crude oil since 2015 with quotas totalling 81.93 million tonnes, or 1.64 million barrels per day, making up 12 per cent of the country's total crude oil imports, according to China Petroleum and Chemical Industry Federation (CPCIF).
Harry Liu, oil analyst with consultancy IHS Markit, said the planner may have set a target of allowing in a total of 2 million bpd quotas to independents, a level expected to be met with those that have already applied before the May 5 deadline. "The policy, which is quite expected, also sends the signal that the government is not going to encourage independent firms to add new crude processing capacities," said Mr Liu.
The National Development and Reform Commission (NDRC) did not say in the statement whether it was referring to state-owned or independent refiners, unsettling an already jittery industry after a series of trade policy changes from Beijing in recent months.
The limits, however, do not apply to large state refiners like PetroChina or Sinopec as they typically do not need quotas to import crude oil. "NDRC is pretty cautious in giving more import quotas because they are concerned about the fuel glut in the domestic market," said a manager at an independent refiner in the city of Zibo in Shandong province. The majority of the independent refiners operate in Shandong on China's east coast.
He reckons he will not be affected by the deadline as he has filed for an import permit, but it could trigger a flurry of applications over the coming week.
In a report published on Wednesday on the industry federation's website, CPCIF warned of worsening overcapacity in the refining industry which has led to net fuel exports expanding at 40-50 per cent per annum over the past few years.
The surplus capacity is expected to rise to 110 million tonnes, or 2.2 million bpd, by 2020 under a base scenario, and net fuel exports to top 50 million tonnes, or 15 per cent of the total fuel produced, resulting in China overtaking South Korea and India as Asia's largest fuel exporter, said the association.