China’s Ministry of Commerce (MOFCOM), responsible for quota releases has allocated 13 million metric tonnes (mt) of first batch of oil product export quotas to seven oil companies for 2022, down 55.9 per cent from the same batch for 2021, according to sources cited by S&P Global Platts.

The oil product quotas are for gasoline, gasoil and jet fuel exports. The decline in oil product export in 2022 is a fall of more than half from 29.5 million mt in the same round of last year.

“Beijing is set to cut the country’s oil product exports in the coming years, with talks about the volume would fall to zero in 2025 as part of China’s effort to control carbon emission”.
S&P Global

China’s top refiner, Sinopec, had the highest percent drop, as its quota fell 64.3 per cent to merely 4.31 million mt from 12.07 million mt in the same round of last year.

Even Sinochem’s cut, which was the least among the state-owned oil giants, was pegged at 31.9 per cent year on year.

Routes for Export Quotas

Export quotas are allocated under two routes: general trade and processing trade. Under the general trade route, all the exported barrels must be shipped by vessels and sold overseas.

The exported barrels under the processing trade route are for bunkering in China’s bonded zones, such as jet fuel for bonded bunkering in China’s airports for flights plying international routes.

Most of the latest quotas were granted to state-run firms including China National Petroleum Corp (CNPC), China Petrochemical Corp, or Sinopec, China National Offshore Oil Company, Sinochem Group and China National Aviation Fuel, said the sources, who asked not to be named as they are not authorized to speak to the press.

Seven oil companies were allocated a total 10.79 million mt of quotas under the general trade route, falling 58.8 per cent from the 26.79 million mt in the same round for 2021.

The Ministry of Commerce (MOFCOM) issued 2.21 million mt of quotas under the processing trade route to China National Petroleum Commission (CNPC). Quotas for Sinopec and Sinochem for 2022 were down 33.6 per cent from 3.33 million mt for the same companies in the same round for 2021.

Fuel oil quotas up 30 per cent

Separately, MOFCOM in the same batch has issued 6.5 million mt of fuel oil quotas to CNPC, Sinopec, CNOOC, Sinochem and ZPC, which provides them the opportunity to send tax-free domestically produced barrels for bonded bunkering at Chinese ports, S&P’s sources added.

In contrast to oil product export quotas, the volume jumped 30 per cent from the 5 million mt allocated in the same round of 2021.

Most of the low-sulphur fuel oil (LSFO) quota increase went to Sinopec, causing the company to hold 60 per cent more of volume to 3.84 million mt comparing to the same round of last year.

However, not all of the oil firms are willing to have more fuel oil quotas as both Sinochem and Zhejiang Petroleum & Chemical (ZPC) applied for less volume.

Allocation to the companies dropped 90.6 per cent and 74.4 per cent, respectively, year on year. As revealed by sources close to the companies, they preferred to produce more petrochemical products, or even oil products, rather than bunker fuel oil.

In addition, MOFCOM awarded 20,000 mt quota to Sinopec to export propylene tetramer in 2022.