[SINGAPORE] China National Offshore Oil Corp (CNOOC) could start exporting diesel and gasoline cargoes in February or March after getting an expanded quota for shipments this year, industry sources said on Thursday.
The exports are likely to drag on margins for both oil products in Asia at a time when new refining capacity and upgrades have sharply increased supply in the region.
CNOOC could export a cargo each of gasoline and diesel from its 240,000 barrel-per-day (bpd) Huizhou refinery in the southern province of Guangdong in February or March, although that depends on smooth production at its refinery, one of the sources said.
CNOOC will export diesel with either 500 parts-per-million (ppm) or 10 ppm sulphur, depending on the economics of producing and selling the grade, the source added.
Volumes of the cargoes will be in 10,000-tonne parcel sizes due to the limited draught of the wharf and will probably be shipped to neighbouring countries such as the Philippines, Vietnam and Myanmar or to Hong Kong, the source said.
CNOOC, parent of China's top offshore oil producer, CNOOC Ltd, exported its first jet fuel cargo in September, last year after it won government approval for overseas sales in March. These cargoes have been mainly shipped to Hong Kong.
The refiner stopped exports of jet fuel for a while after it reached the limits of its quota but it is expected to resume shipments this year after getting an increased quota for oil products, the source 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, the source said.
China controls oil product exports through quotas to a few state-run refiners, mainly Sinopec Corp, PetroChina and WEPEC refinery, after assessing domestic needs.
But with CNOOC expanding its refining capacity and domestic demand failing to keep pace with supply, the refiner will also need to export surplus oil products.
CNOOC is spending US$8 billion to expand its refining and petrochemical complex in Huizhou, near Hong Kong. It is adding a 200,000 barrel-per-day (bpd) refinery to the existing 240,000 bpd plant there. The plant could be ready by 2018, traders said.