Sinopec exports first diesel cargo under general trade terms in 13 years

BEIJING: Top Asian refiner Sinopec Crop exported its first refined fuel cargo under so-called general trade terms in 13 years, the company said on Friday, as China's state-owned refiners adapt to tighter government export quotas.

Sinopec exported a diesel cargo on April 1 from its Qingdao plant in east China for delivery to Singapore under the rules, it said.

Chinese refiners mainly export refined oil products under processing trade terms and the government has set an annual quota on how much each refiner can ship.

The government slashed the second round of export quotas under processing trade rules for 2017 by 73 percent versus the first batch.

Under the processing scheme, refiners are exempted from taxes on both the crude oil imported and the oil products exported, while under the general trade category plants get tax refunds after exports are completed, said four traders familiar with the rules.

Both require quotas, but general trade offers much greater flexibility as refiners have the full authority to decide when and how much refined fuel to export.

"For large refiners like Sinopec and PetroChina, the flexibility to market refined barrels in domestic or overseas market as they see fit means good profitability," said a former state oil trading executive.

It was not immediately clear how many quotas Beijing is considering or may have issued to state refiners under the general trade rules. The shipments like Sinopec's cargo could be a supplement to the prevailing exports under processing trade, said two Beijing-based oil traders.

Under the processing, or so-called "tolling" schemes, refiners have a fixed volume and time slots to export, both under tight scrutiny of Chinese customs, the Beijing-based oil traders said.

Beijing has suspended the grant of export quotas under processing trade rules to independent refiners for this year, ending a year-old policy allowing some independents to sell diesel, gasoline and naphtha abroad and dealing a blow to the group.

General trade exports are totally off-limits to these independents, executives at these smaller firms have said.