The opening of import of refined oil products needs to cross multiple borders

Failure to obtain “stabilized oil sources” has always been an important bottleneck for the development of privately-owned oil companies. The Ministry of Commerce issued the “Implementation Opinions of the Ministry of Commerce on Encouraging and Guiding Private Capital into the Circulation of Commerce and Trade” (hereinafter referred to as the “Implementation Opinions”), expecting private enterprises. After the merger and acquisition became a large company, and support for private oil companies to take a variety of forms to obtain a stable source of oil, so that many privately-owned refined oil wholesalers saw the hope of achieving independent import of refined oil.

Seemingly mysterious oil product import rights, some private enterprises once received approvals. However, approval does not mean that large quantities of refined oil can be imported because the quota given by the state is not high, so most private oil companies still need to rely on “two "Bulk oil" is the traditional import channel for central enterprises.

China's refined oil imports

In 2011, the Foreign Trade Department of the Ministry of Commerce approved 40 companies to import refined oil (fuel oil).

A private oil company selling gasoline and diesel liquefied gas in a certain southwestern province is one of them. The company was originally a subsidiary of PetroChina Sichuan and was later designated as a local state-owned company. After 2002, the company was restructured into a joint-stock private enterprise.

"The application time for the entire oil product import right is not long. From preparation to submission, it takes about six months or more. After the application was submitted, it only took one month to get the import right." said Mr. Shen, a person in charge of the company.

The internal management of a number of refined oil wholesale companies told reporters that in addition to the need to submit the specific reasons for the application of the Ministry of Commerce, overseas procurement of refined oil products and domestic production and sales, private enterprises need to obtain the right to import oil products. Customs proves that the company has not smuggled or violated regulations for the past three years, and that it has obtained the taxation department's tax certification documents.

In addition to this, private enterprises must submit to the competent commerce department documents issued by banks to prove the company’s high-level reputation (Grade A), and materials issued by the foreign exchange management department that are free from foreign exchange and arbitrage records.

And Mr. Ye, a responsible person in a Shanghai-based company engaged in the trade of refined oil products, said that in order to obtain the right to import refined oil, there are still some hard indicators. “According to the regulations, companies must have at least 10,000 tons of oil products shipping terminals or product oil pipelines, special railway lines, etc., as well as an oil depot of 50,000 tons and above. Whether it is a dock or pipeline, The oil depot, whose ownership and right of use must be concentrated in the hands of the enterprises, is not easy to reach. Therefore, even if there are many wholesalers of refined oil in the country, it is not too much to qualify for the application."

At present, there are 71 state-owned enterprises with wholesale oil product qualifications and 130 private enterprises.

However, according to the national regulations, we can only apply for imported fuel oil within 50,000 tons at a time, which is still much less than the company’s demand for hundreds of thousands of tons of fuel oil. Mr. Shen also had other concerns. "80% of the company's fuel oil is still imported through PetroChina's trading companies. The other 20% is from other small refineries and a small amount of imports. In this way, companies still have risks. ”

There are two concerns: First, because the import of fuel oil is controlled by others, it is difficult for buyers to lower prices when purchasing fuel oil. Assuming that the price of fuel oil (the raw material used for gasoline and diesel processing) has soared, and the sales price of downstream gasoline and diesel cannot communicate the cost of this part of the price increase, there is still a possibility that the company will suffer losses; and second, the import of fuel oil will be affected. Limited, its gasoline and diesel quality and corporate earnings will also be affected.

If international crude oil prices fall rapidly and China speeds up the price adjustment of refined oil products, it is not necessarily a good thing for private enterprises to import large quantities of refined oil products. In any case, if China can liberalize the import qualifications and quotas for domestic gasoline, diesel, and other refined oil, there are still many benefits for China to obtain more and cheaper refined oil resources.

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