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China Teapot Refineries Lobby For Fuel Export Ban Removal

Refinery

Independent Chinese refineries, known as teapots, are lobbying with the government for the lifting of a fuel export ban that has cut a major source of income. The export quotas were suspended at the end of last year without an official warning or explanation.

Teapots last year got their first fuel export quotas, which led to improved crude oil demand in China, positively affecting international prices. In fact, the teapots were considered by many to be among the factors that put a stop to the oil price slide that brought prices below $30 a barrel in February 2016.

The leaders of the lobbying drive are two members of parliament and heads of two major teapots: Wang Youde of Hengyuan Petrochemical Co. and Li Xiangping, the chief of the largest teapot, Shandong Dongming Petrochemical Group.

Li told Reuters that the ban increased the pressure from domestic competition for independent refiners and weighed on profits. With the ban, international markets are once again solely in the hands of the four big state-owned oil companies, depriving the smaller players, some of them private, from a vital source of income and the prospects of international expansion.

Separately, Reuters reported that a Shanghai-based industrial conglomerate, CEFC China Energy, has reached out to several teapot operators with the intention to buy a refinery in the mainland. The move may not come at the best time given the export quota ban, but it seems CEFC still believes the acquisition of local independent refiners can serve its goal of establishing a global presence.

Last year, the company’s chairman Ye Jianmin said CEFC will aim to become a second Sinopec by acquiring both local teapots and assets abroad but that was while the teapots still had their export quotas. Among the teapots that CEFC has been talking to now are Li’s Shandong Dongming Petrochemical Group and three other refiners.

By Irina Slav for Oilprice.com

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