October 18, 2019 / 5:24 AM / 25 days ago

PetroChina unit wins permit to supply bunker at China's Zhoushan port

ZHOUSHAN, China (Reuters) - A PetroChina unit has won a license to supply marine bunker fuel in Zhoushan on China’s east coast, as the city’s free trade zone looks to challenge Singapore as a regional shipping fuel hub, according to a company executive and local government official.

PetroChina Fuel Oil Co. Ltd, a subsidiary of state oil and gas giant PetroChina 857.HK, will join half a dozen other domestic independent and state-run firms supplying marine fuel from bonded storage, with the permit coming just months before new global rules on cleaner bunker fuel come into force.

Zhoushan, in Zhejiang province, is relying on its proximity to major Chinese ports and support from Beijing to give it an edge over its larger Southeast Asian rival in the multi-billion dollar marine fuel industry.

“We’ll either import the very low sulfur fuel or produce it ourselves,” a senior PetroChina Fuel Oil official told Reuters, declining to be identified as he was not authorized to speak to media.

A local official in Zhoushan with direct knowledge of the matter confirmed the company has received a permit.

PetroChina Fuel Oil has mainly focused on marketing Venezuelan crude lifted by its parent company under term supply contracts, but this business has shrunk dramatically in recent months due to U.S. sanctions on the South American oil exporter.

The firm operates four small refineries in China that process primarily Venezuela’s Merey crude, a heavy type of oil that typically yields bitumen used in road construction.

It would need to revamp its facilities in order to make the 0.5% sulfur fuel oil required under International Maritime Organization rules that come into effect from January 2020, said a bunker fuel executive based in Zhoushan with a different firm.

Zhoushan, approved by Beijing in early 2017 as a pilot zone for a regional commodities trading hub, is China’s largest supplier of bonded marine fuel by port.

Zhoushan’s bonded bunker fuel sales are expected to reach 4 million tonnes this year and to exceed 5 million tonnes in 2020, Feng Fei, vice governor of Zhejiang province told an industry gathering in Zhoushan on Friday.

That is still less than a tenth of Singapore’s annual shipping fuel sales, although a bunker executive with China’s top refiner Sinopec has previously forecast that marine fuel turnover at Zhoushan could reach 30 million tonnes by 2030.

Reporting by Muyu Xu, Shivani Singh and Beijing newsroom; editing by Richard Pullin

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