Zhoushan Circling the Wagons for Greener Pastures
On the morning of July 29, China (Zhejiang) Pilot Free Trade Zone Management Committee held a media briefing on the Implementation Opinions of Zhejiang Provincial Government on Supporting the Opening-up of the Oil and Gas Industry Chain in China (Zhejiang) Pilot Free Trade Zone. This was the further promotion of the Measures to Support the Opening and Development of the Oil and Gas Industry Chain in the China (Zhejiang) Pilot Free Trade Zone issued by the State Council on March 31.
Zhoushan is the main open sea gateway to the world on the eastern coast of China and the Yangtze River. Six of the seven international main routes of China pass through the Zhoushan sea area. Each year, more than 100,000 international sailing vessels pass through the Zhoushan sea area, which is an ideal area to develop bunker supply business.
On June 30, 2011, the State Council officially approved the establishment of Zhoushan Archipelago New Area in Zhejiang, as China’s 4th national new area. After years of development, Zhoushan has become an important port-centered industry base, port logistics base, marine tourism base and marine fishery base in China. On April 1, 2017, the State Council approved the establishment of the China (Zhejiang) Pilot Free Trade Zone, clearly proposing that “building a Northeast Asia Bunker Supply Center” and giving many reform and innovation privileges.
Zhoushan Port Building Itself into a Bunkering Hub in Northeast Asia
Zhoushan is the largest marine bunker supply station in China. According to the statistics of China (Zhejiang) Pilot Free Trade Zone, in 2019, the marine bunker direct supply volume at Zhoushan was 4,102,700mt.
In May, the supply of bonded bunker in Zhoushan was 361.0kt, down 1kt or 0.28% M-O-M. The total supply reached 1,700.6kt from January to May 2020. In May, the sales volume of the bonded bunker was 1,185.5kt, down 281.0kt or 19.16% M-O-M. The supply of bonded bunker in Singapore was 3,925.0kt, down 188.7 or 4.59% M-O-M. The total supply reached 20,755.4kt. In May, the public health event was still severe. The international shipping demand had yet to recover. Besides, ship-owners mainly adopted a cautious sentiment to the market and purchased on a need-to basis.
ZPC: Bigger is Better with Crude & Products Quotas
Zhejiang Petroleum and Chemical Company, ZPC, which is 51% owned by Zhejiang Rongsheng Group, plans to build a 40 million mt/a refinery and associated petrochemical facilities by two phases. The units of its first phase have been started production. On July 9, ZPC was qualified to export refined oil. In the past five years, China’s refined oil markets faced more and more serious oversupply. With marketization reforms in the refined oil markets and growth in the vehicle possession, both the crude oil refining capacity and the demand for refined oil continued rising in the past five years. China’s crude oil refining capacity, refined oil output and refined oil demand volume reached 905 million tons/a, 382 million tons and 333 million tons in 2019 respectively. But with the slowdown in the economic growth, promotion of new energy vehicles and upgrades in the economic growth pattern, China’s refined oil demand growth rate slowed down gradually. In particular, the diesel demand saw negative growth in 2018 and 2019. In the short term, the export is still the most effective method to ease the oversupply of refined products.
Meanwhile, ZPC is the first independent refinery which is allowed to export refined oil after 2017. In history, only in 2016, some independent refineries got refined oil export quotas, but after that, the private exports were stopped. Therefore, the approval of Zhejiang Petroleum & Chemical is also an important event in China’s oil refining industry. It promotes the reforms in China’s energy sector and gives private companies and foreign companies great confidence in China’s opening-up reforms.
It is predicted that ZPC will likely soon appear in the list of companies with refined oil export quotas together with Sinopec, PetroChina, CNOOC, Sinochem and CNAF. After ZPC is awarded refined oil export quotas, it will further alleviate the circulation pressure caused by the release of the capacity of the Yushan Green Petrochemical Base refining and chemical integration project, and it will have a positive impact on the development of the entire oil and gas industry chain in China (Zhejiang) Pilot Free Trade Zone. According to public sources, the second phase of ZPC will start trial runs at the end of this year with CDUs capacity of 20 million mt/a. At present, ZPC has been awarded 20 million mt of crude oil non-state import quotas and 1 million mt of LSFO export quotas under general trade.
