Chinese government penalizes PetroChina Fuel Oil for illegal crude trade

 

The Chinese government has penalized PetroChina Fuel oil, a unit of state-owned oil giant China National Petroleum Corporation, following an investigation for illegal trading of crude oil, the state-backed Xinhua News Agency reported on late Jan. 19.

Register Now The move reflected that Beijing continues with tight supervision of the oil industry in 2022 to eliminate loopholes, which..

will eventually further narrow crude import access to the independent refineries.

According to the report, which was reposted by the National Development and Reform Commission on its official website, a probe by a joint investigation team led by the state council found that PetroChina Fuel Oil had sold 179.5 million mt of imported crude oil illegally to 115 independent refineries since 2006.

The first deal was a cargo of 400,000 mt of imported crude, which was reported as blended fuel oil and sold to Shandong Binhua Group, which is an independent refinery.

The Central Committee of the Communist Party of China and the cabinet decided to penalize PetroChina Fuel Oil on the issue by law and require the company to pay back the illegal profits.

PetroChina Fuel Oil was unavailable for comments.

The company has suspended supplying crude to independent refineries since mid-2021, when the investigation was underway, so that there was no immediate impact on the feedstock supplies to the sector, S&P Global Platts reported earlier.

PetroChina Fuel Oil currently trades fuel oil and asphalt, market sources said. In 2021, before the investigation, it mainly traded crudes from West Africa and Latin America, Platts data showed.

However, "it alerts other state-owned traders to be more cautious when selling feedstocks to independent refineries, which will further narrow the private sector's access to quota-free imported crude," a Beijing-based analyst said.

After PetroChina Fuel Oil was reported to have violated imported crude trade in mid-2021, the government started investigating other state-owned trading companies also, according to market sources and local media reports.

In China, refineries built and operated by state-owned companies -- CNOOC, CNPC, Sinochem and Sinopec -- do not need quotas to import crude. All other refineries, including independents and those owned and operated by state-owned companies such as ChemChina and Norinco, require quotas.

As Beijing tightens supervision of the refining sector, five independent refineries have been denied the first batch of crude import quota for 2022. The total allocation in the first batch fell 9.4% year on year to 107.4 million mt despite two integrated mega refineries adding to the total refining capacity.

PetroChina Fuel Oil had been mandated to look for outlets in China for CNPC's Venezuelan crude and fuel oil output, with supplies of about 16 million-20 million mt/year when the Latin American country was not under sanctions, market sources said.

In addition to reporting imported crude as blended fuel oil, PetroChina Fuel Oil also sold quota-free imported crude barrels to independent refineries and got refined products in return, in a form of tolling trade allowed by the government.

However, in recent years it had been selling 15 million-20 million mt/year of imported barrels to private refineries without receiving oil products in return, thus violating government policies, Platts earlier reported.

Market sources said such illegal tolling trade was also adopted by other state-owned firms, which are expected to already have or will stop such deals.

Από το spglobal.com