July 9, 2015 / 9:37 AM / 5 years ago

China to let independent refiners import more crude

* China may give 600,000 bpd in crude quotas to independents

* Independent refiners to push up China’s crude demand

By Florence Tan and Chen Aizhu

SINGAPORE/BEIJING, July 9 (Reuters) - China is opening its crude oil imports to buyers outside of the state-owned sector, and independent refiners could get approvals for up to 600,000 barrels per day (bpd) in shipments this year.

The volumes that could go to the independents are 50 percent higher than what was expected when the policy was announced in February as more of the private refineries qualify for quotas, trading sources with independent and state refiners said.

This could lead to the world’s second largest oil consumer buying more crude in a market where values have been cut in half since mid-June last year by oversupply.

“The granting of more crude import quotas to the independents is likely to provide further support to crude imports and exert more pressure on fuel oil imports towards year-end, with the impact expected to be more pronounced in 2016,” said Wendy Yong, an analyst with energy consultancy FGE.

FGE expects China’s crude imports to rise by 10 percent in the second half of 2015 versus the first six months, with shipments to be up by 7 percent both this year and next.

China’s crude imports hit a record 6.17 million bpd in 2014, a gain of nearly 10 percent. In the first five months of this year, the imports then rose more than 4 percent compared with a year ago to reach 6.5 million bpd.

China’s largest independent refiner Shandong Dongming Petrochemical won approval this week to import 150,000 bpd of crude, and Beijing has given an initial nod to Panjin Beifang Asphalt Fuel Co Ltd to import 140,000 bpd.

Other applicants include Sinochem Corp-controlled Hongrun Petrochemical Co Ltd, CNOOC-invested Haike Chemical in Shandong province, the independent Lihuayi Group and several inland-based private refineries, the sources said.

In 2013, in a first opening up of the crude import market, state-run ChemChina received a quota for 200,000 bpd.

China regulates its oil imports via a quota system, with state refiners Sinopec Corp and PetroChina accounting for nearly 90 percent of the shipments. New quota winners will still need licensed traders such as Unipec and Chinaoil - trading arms of Sinopec and PetroChina - and Sinochem Corp to act as import agents.

Sinopec and PetroChina officials were not immediately available for comment.

Still, despite the rising number of importers, analysts said China’s economy, growing at its lowest rate in a generation, could hold back the overall import growth.

“The major headwinds facing the teapot refining sector - including tighter domestic credit conditions, a ban on products exports and the continued slowdown in Chinese fuels demand growth - will limit the upside,” said Emma Richards of BMI Research. (Editing by Henning Gloystein and Tom Hogue)

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