Save for later Print Download Share LinkedIn Twitter China has slashed crude oil import quotas for its privately owned refineries, and the cuts have fallen particularly hard on smaller "teapot" refineries that Beijing is currently investigating for various types of alleged misconduct. This year's second round of crude import quotas was cut to a total of 35.24 million tons, equivalent to 1.4 million barrels of oil per day for the six months from July through December. That is 35% lower than last year’s second round. Beijing's investigation of the teapots covers potential breaches of the rules that apply to import quotas, possible tax evasion, and the alleged failure of some operators to make required upgrades to their plants (IOD Jun.3'21). The sharp reduction in allocated volumes for the second round of import quotas is likely to translate into a reduction in China's crude imports over the new few months. However, demand could rebound later in the year if there is a third round of quota allocations, as has been the case in past years. Most Teapots Get Lower Quotas This year's second round of crude quotas is very different from the second round in 2020, when the Ministry of Commerce (Mofcom) granted additional volumes to most private players as China sought to spur economic recovery (IOD Apr.22'20). Most private players have received lower allocations during this year's second round, but the teapots -- typically plants with capacities of 100,000 b/d or less -- have borne the brunt of the cuts. Four teapots, which were granted quotas in last year's second round, did not get an allocation at all this time, according to a list seen by Energy Intelligence. The four include Shandong Wonfull Petrochemical and Shandong Qingyuan Petrochemical, which hold annual import quotas of around 80,000 b/d. A Chinese oil analyst told Energy Intelligence that allocations had been made on the basis of refineries' past import volumes and the results of government investigations. He added that the probe had uncovered wrongdoing but that details had not been made public. The Chinese refining sector -- and in particular the largely unregulated teapots -- has come under scrutiny this year as the central government seeks to boost its tax revenue and halt the rising trend in the country's carbon emissions by 2030. High First-Round Allocations
