A rare cargo of Canadian oil sands arrived in August for China’s private refineries based in the Shandong province, which would be a more economical feedstock than crude oil or bitumen blend to produce asphalt, says an article published on S&P global website.
No import quota
Unlike crude, natural bitumen and asphalt imports for independent refineries do not require import quota usage. They are consumption tax-free as well, while bitumen blend attracts Yuan 1,218/mt as a consumption tax before value added tax.
“Reporting oil sands as natural bitumen and asphalt helps to save both crude import quota and consumption tax,” a Singapore-based analyst said.
The Shandong-based independent refineries’ Iranian crude imports remained robust in August, with around 875,000 mt arriving in seven cargoes, S&P Global Platts data showed Sept. 6.
The volume jumped 51.9% from 576,000 mt in four cargoes in July.
Those imports were renamed as Oman, Omani Light, Upper Zakum, or Nemina blend, or Singma Blend, depending on the trading companies that bring in the barrels.
In addition, 880,000 mt of bitumen blend has been discharged into Shandong ports in August, surging 226% from the 14-month low of 270,000 mt in July, Platts data showed Sept. 6.
Despite the rebound, the inflow in August was far below the historical high of 2.64 million mt in May due to the introduction of hefty consumption tax June 12.
“The recent buying spree of crude feedstocks for November arrivals have stirred the demand for bitumen blend a little bit although demand for product asphalt remains weak,” said a trade source.
Most of those bitumen blend were imported by trading companies, which expected that independent refineries will come back to these feedstock once they run out of crude quotas. Moreover, most of the cargoes have no fixed buyers yet when they were brought into Shandong waters.
In addition to those discharged cargoes, there were around 1.28 million mt of bitumen blend in nine cargoes still waiting outside port limits to be discharged into September.
Due to the consumption tax, some of those Merey crude cargoes have been marked as Nemina crudes, Malaysian Blend, while others were marked as bitumen blend due to crude import quota shortage.
To save crude import quotas toward the year end, independent refineries also imported 494,000 mt of straight-run fuel oil in nine cargoes into Shandong as an alternative.
These cargoes were mostly from Russia, Malaysia and Singapore, with the volume rising 58.8% from 311,000 mt in July.
“Demand for fuel oil has remained strong in recent months, and we’ve got quite a lot of inquiries but supply has been tight,” said a trade source.
Different from bitumen blend, most fuel oil cargoes were imported by independent refineries themselves.
In addition, Zhejiang Petroleum & Chemical was said to also have started to import fuel oil for cracking due to quota shortage.
ZPC is likely to get an additional 4.5 million mt quotas for its Phase 2 project of 20 million mt/year in the last batch by October, which, however, seems still not sufficient for its operations. ZPC already shut a third 10 million mt/year crude distillation unit in end-July due to quota shortage.
These 36 refiners have been awarded a combined 135.73 million mt in crude quotas in the first three batches, accounting for 86.5% of total allocations to the independent refining sector so far in 2021, with the last batch of quotas to be allocated by October.
- Oil sands imported as natural bitumen, asphalt
- Iranian crude imports rise 52% on month
- Bitumen blend rebounds from 14-month low
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Source: S&P Global