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The Regional Comprehensive Economic Partnership that 15 Asian nations signed last month will place South Korea and Japan in a more favorable position as oil product suppliers to China, Bloomberg has reported, noting the pact will lead to a gradual reduction in import tariffs between signatories.
Thanks to their proximity to the world’s largest importer of oil, Japan and South Korea are likely to gain market share at the expense of Singapore and Malaysia, which are further from China.
China imported some $12 billion worth of oil products, including light-cycle oil, bitumen, base oil, and aromatics, as well as feedstock for petrochemicals production during the first ten months of this year.
“It certainly means that more of these products will flow to China from Asian countries, with Korea and Japan the beneficiaries,” the director of the China Energy Programme at the Oxford Institute for Energy Studies told Bloomberg. “But the extent also depends on potential tax loopholes that could exacerbate speculative buying and the issue of blending,” Michal Meidan added.
China is about to become the country that possesses the most refining capacity in the world due to closures of refineries in the current number-one refiner, the United States. The country has 1.4 million bpd in new refining capacity under construction. This amount, distributed among four refinery projects, will add to more than 1 million bpd in new capacity already added since last year.
“China is going to put another million barrels a day or more on the table in the next few years,” Steve Sawyer, director of refining at energy industry consultancy Facts Global Energy, told Bloomberg in November.
As this happens, the country will gradually reduce import tariffs for oil and derivatives from Japan and South Korea—which are currently between 0.8% and 8%—to zero over the next two decades.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.