November 9, 2018 / 11:44 AM / in 8 months

China's Zhoushan plans rare crude import permits in pilot market opening

SHANGHAI, Nov 9 (Reuters) - China’s eastern coastal city of Zhoushan is set to grant its first crude oil import license to a local commodity trader in coming months, using Beijing’s policy sweeteners to attract oil and gas investment, a local government official told Reuters.

Zhoushan has been picked by Beijing as a pilot zone to build a northeast Asian marine fuel centre as well as a physical trading hub for oil and gas that rivals Singapore.

Chen Jianshe, deputy director of Zhanzhou Commerce Bureau, said the provincial government-controlled WZ Group was poised to become a licensed crude importer by the year-end, the first of three firms seen getting such permission in the next year or so.

Zhoushan is the only regional government authorised to grant crude import licenses, Chen told Reuters on the sidelines of the China International Import Expo in Shanghai.

China, the world’s largest crude oil buyer, has since 2015 partially opened its state-oil-dominated crude import market by allowing nearly 40 independent refineries to process foreign oil for the first time.

With the license, WZ Group will be allowed to sell imported crude to these independent plants, but not to resell to traders, Chen said.

“We plan to issue a total of three crude oil licenses within the next year,” said Chen.

The three licenses will be attached to an unspecified amount of crude oil import quotas, which have yet to be finalised and mandated by China’s Ministry of Commerce, Chen said.

The pilot opening in Zhoushan, an archipelago off the manufacturing hub of Zhejiang province, has drawn interest from local commodity traders as well as global merchants such as BP , Vitol and Mercuria keen to break into the yuan-denominated domestic crude business, officials have said.

The Zhoushan commerce official said the experimental licenses were not expected to go to wholly owned foreign companies, but such entities were welcome to get a foothold via joint ventures with local firms.

BP, for instance, has been in discussions with WZ Group to form a joint venture, Chen said. BP declined to comment.

Additional reporting by Meng Meng in Beijing; Editing by Dale Hudson

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