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In the light of the current import policies, the import of 1-ton straight-run fuel oil will possibly mean a theoretical loss of CNY 906 for them, compared with a profit of CNY 364 in late December 2008, elaborated an oil editor with C1 Energy, a leading energy consulting company in China.
After the refined oil pricing reform kicked off on January 1, 2009, the import excise on fuel oil has been raised to CNY 0.8 per liter. The new taxation regulations will pull down the comprehensive sales of regional refineries in the coastal eastern province of Shandong by CNY 895 to approximately CNY 1,975 a ton, predicted the consulting company.
Shandong Changyi Petrochemical Co., Ltd., one of the depressed refineries, disclosed that they did not cast their eye to import oil for the moment, and instead, they bought a shipment of offshore oil.
Offshore oil costs less than imported fuel oil, explained a source from the regional refinery. The added-valued tax rate on offshore oil is only 5 percent, white that on ordinary crude oil is up to 17 percent. Moreover, offshore oil is now priced at roughly CNY 2,000 a ton, over 60 percent less than the CNY 3,300-3,500 price of imported straight-run fuel oil.
Changyi Petrochemical has started to purchase more offshore oil after it singed an agreement with state-owned China Petrochemical Corp. (Sinopec Group) in 2008 to refine oil for the latter. But it is not easy to obtain a continuous offshore oil supply.
Notably, China National Offshore Oil Corp. (CNOOC), the country's biggest offshore oil producer, launched strategic cooperation with Shandong last January with the hope of edging into the province's regional refining market.
In early 2008, the oil giant started preliminary preparations for the acquisition of Shandong Lihuayi Group, the biggest regional refiner nationwide with a yearly refining capacity of 5.5 million tons.
On September 3, 2008, a CNOOC refining unit singed an agreement with the State-owned Assets Supervision and Administration Commission of Weifang, an oil-rich city in Shandong, to obtain a 51 percent stake in Shandong Haihua Group Co., Ltd., parent of Shandong Haihua Co., Ltd (SZSE: 000822), for free.
Shandong Haihua Group has a 3-million-ton refining plant now. Within the upcoming two or three years, its annual refining capacity will be driven up to 8 million tons jointly by the Shandong-based company and its partner CNOOC with CNY 7 billion investment.
(USD 1 = CNY 6.84)
Source: dycj.ynet.com (January 13, 2009)
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