CNOOC to Export 100,000 T Oil Products in H2

CNOOC to export diesel, gasoline, kerosene or naphtha in H2; volumes likely to be in 10,000 T parcel sizes.

China National Offshore Oil Corp (CNOOC) has received a quota from the government to export about 100,000 tonnes of oil products in the second half of the year, its first such permit, sources close to the matter said on Wednesday.

Overseas sales by CNOOC are expected to drag on margins for oil products in Asia at a time when new refining capacity and upgrades have sharply increased supply in the region.

"The market is already flooded with supply from new capacity in China and the Middle East, so CNOOC entering the picture is just bad news in terms of supply," said a Singapore-based middle distillates trader.

Under the quota, CNOOC, parent of China's top offshore oil producer CNOOC Ltd, will be able to export diesel, kerosene, gasoline and naphtha depending on the market situation, one of the sources said.

Volumes of the cargoes will be in 10,000-tonne parcel sizes due to limited draught of the wharf, the source added.

CNOOC could not be immediately reached for comment.

China controls oil product exports through quotas to a few state-run refiners, mainly Sinopec Corp, PetroChina (PCCYF) and WEPEC refinery, after sizing up domestic needs.

But with CNOOC expanding its refining capacity and domestic demand failing to keep pace with excess supply, the refiner will also need to export surplus oil products, traders said.

CNOOC is spending $8 billion to expand its refining and petrochemical complex in Huizhou, near Hong Kong. It is adding a 200,000 barrels-per-day (bpd) refinery to its existing 240,000 bpd plant there.

State giants Sinopec and PetroChina together already export over 1 million tonnes of naphtha, gasoline, diesel and jet fuel a month. China this year is set to post its first decline in diesel demand in more than a decade.

CNOOC OFFERS JET FUEL CARGOES

CNOOC has offered at least two cargoes of 10,000 tonnes each of jet fuel for export in September, trade sources said, though CNOOC officials declined to comment on this.

It is unclear if these cargoes have been sold yet.

Earlier this year, CNOOC also received government approval for a special permit to export refined fuels free of tax, as Beijing injects a small measure of competition into a market dominated by two other state giants.

The special trade permit, approved in early March by China's cabinet, or State Council, allows CNOOC to import crude oil and export a specified volume of refined fuel under a "processing deal", exempt from value-added tax and consumption tax.
 

By Jessica Jaganathan and Judy Hua