[SINGAPORE] China National Offshore Oil Corp (CNOOC) exported its first ever diesel and gasoline cargoes in April and will ship more in May after winning government approval for overseas sales of the transport fuels, industry sources said on Tuesday.
The new fuel source is expected to drag on Asia's diesel margins as other new refining capacity and upgrades have sharply increased regional supplies. The shipments, though, could also relieve tightness in Asian gasoline markets, where demand has been firm, traders said.
CNOOC, parent of China's top offshore oil producer CNOOC Ltd, is primarily an exploration and production company, and has just one wholly-owned refinery. Its total capacity, including other joint ventures, is about 800,000 barrels-per-day (bpd) or around 5.7 per cent of the country's total capacity.
Until last year, the state oil company sold refined products exclusively in the domestic market. But with CNOOC expanding its Huizhou refining complex, near Hong Kong, and domestic demand failing to keep pace with supply, it started to export jet fuel last year after winning export quotas for the first time.
CNOOC followed that up this year, selling 30,000 tonnes of 50 parts-per-million (ppm) sulphur diesel and 15,000 tonnes of 92-octane gasoline with 10 ppm sulphur for loading in April, one of the sources close to the matter said.
The buyers of both cargoes could not be confirmed but the cargoes are likely heading to Singapore or Malaysia, the source said, adding that CNOOC also sold similar volumes for both oil products for loading in May.
CNOOC exported its first jet fuel cargo in September 2014 after winning government approval for overseas sales for refined products last March. These cargoes have been mainly shipped to Hong Kong.
The refiner stopped exports of jet fuel after reaching the limits of last year's quota but resumed shipments after getting an increased quota for oil products for 2015, traders said.
The refinery received a quota of 150,000 tonnes to export jet fuel, gasoline, diesel and naphtha in the first half of this year, compared with 100,000 tonnes for the second half of last year.
China controls oil product exports through quotas to a few state-run refiners, mainly Sinopec Corp, PetroChina and WEPEC refinery, after assessing domestic needs.
CNOOC is spending US$8 billion to expand its Huizhou refining and petrochemical complex, adding a 200,000 bpd refinery to the 240,000 bpd plant already there, traders said. The new plant could be ready by 2018.