China Increases Oversight On Crude Import Of Oil Majors

Chinese authorities have urged some of the biggest state-owned oil firms to provide information about their use of imported crude as part of a wider attempt to close tax loopholes and reduce the fuel glut, Reuters reported on Thursday, citing an “urgent notice” to the state companies it had reviewed.

According to the notice, Sinopec, China National Offshore Oil Corporation (CNOOC), Sinochem Group, ChemChina, and China North Industries Group had to provide to the National Development and Reform Commission (NDRC) historical information about how they have been using the crude oil they have been importing, and whether they have resold crude to other companies in the country.

Unlike independent refiners, which are issued semi-annual quotas for crude imports, the state refiners’ imports are not capped by quotas.

Yet, in recent months, China has been increasing the oversight on the refining industry in order to crack down on the illicit fuel trade, close loopholes that some companies have been using to avoid paying fuel consumption taxes, and curb the fuel oversupply, part of which is the result of tax avoidance or tax evasion.

Earlier this month, the Chinese authorities said they would impose a consumption tax on imported light cycle oil (LCO), mixed aromatics, and diluted bitumen as of June 12.

China is thus seeking to close a tax loophole that refiners have so far used to import cheap blending fuels for making gasoline and other fuels. The taxes are part of the efforts to ease the domestic fuel glut and reduce pollution by heavily taxing the imports of several kinds of blending fuels, which are being used by refiners to produce lower-quality fuels.

Last month, China stepped up pressure on independent refiners to uproot illegal tax practices and check if outdated facilities have been closed as required, Bloomberg reported, quoting sources with knowledge of the plans.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

• U.S. Shale Is Finally Giving Shareholders A Payday
  
• The $87 Billion Chinese Car Maker That Hasn’t Sold A Single Car
  
• Oil Prices Fall As Iran Claims Sanctions Will Be Lifted