Canadian oil sands on offer for independent refiners in Aug to save tax, quota

A rare cargo of Canadian oil sands arrived in August for China’s private refineries based in the Shandong province, which would be a more economical feedstock than crude oil or bitumen blend to produce asphalt, market sources said Sept. 6.

The oil tanker Baroness carried the 83,000 mt cargo loaded from Westridge Port in Canada and reached Shandong’s Dongjiakou Port Aug. 22, showed shipping fixtures and data intelligence company Kpler.
The oil sands cargo was imported as natural bitumen and asphalt, instead of the usual categories of crude oil or bitumen blend, sources with knowledge about the matter said.

Different from crude, natural bitumen and asphalt imports for independent refineries do not require import quota usage. They are consumption tax-free as well, while bitumen blend attracts Yuan 1,218/mt as a consumption tax before value added tax.

“Reporting oil sands as natural bitumen and asphalt helps to save both crude import quota and consumption tax,” a Singapore-based analyst said.

The Aframax Oberon is likely to ship another cargo of Canadian oil sands from Westridge to arrive at Yantai Port in Shandong in late September, according to Kpler.

Kpler showed CNOOC was the charterer, which mines Long Lake oil sands in Canada.

Iranian crudes

The Shandong-based independent refineries’ Iranian crude imports remained robust in August, with around 875,000 mt arriving in seven cargoes, S&P Global Platts data showed Sept. 6.

The volume jumped 51.9% from 576,000 mt in four cargoes in July.

Those imports were renamed as Oman, Omani Light, Upper Zakum, or Nemina blend, or Singma Blend, depending on the trading companies that bring in the barrels.

Most of those cargoes were brought in by trading companies and a few by refineries.

Bitumen blend

In addition, 880,000 mt of bitumen blend has been discharged into Shandong ports in August, surging 226% from the 14-month low of 270,000 mt in July, Platts data showed Sept. 6.

Despite the rebound, the inflow in August was far below the historical high of 2.64 million mt in May due to the introduction of hefty consumption tax June 12.

“The recent buying spree of crude feedstocks for November arrivals have stirred the demand for bitumen blend a little bit although demand for product asphalt remains weak,” said a trade source.

Most of those bitumen blend were imported by trading companies, which expected that independent refineries will come back to these feedstock once they run out of crude quotas. Moreover, most of the cargoes have no fixed buyers yet when they were brought into Shandong waters.

In addition to those discharged cargoes, there were around 1.28 million mt of bitumen blend in nine cargoes still waiting outside port limits to be discharged into September.

Bitumen blend is typically crude cargoes blended off Malaysian waters with heavy crude grades, mostly Venezuelan Merey in recent years.

Due to the consumption tax, some of those Merey crude cargoes have been marked as Nemina crudes, Malaysian Blend, while others were marked as bitumen blend due to crude import quota shortage.

Fuel oil

To save crude import quotas toward the year end, independent refineries also imported 494,000 mt of straight-run fuel oil in nine cargoes into Shandong as an alternative.

These cargoes were mostly from Russia, Malaysia and Singapore, with the volume rising 58.8% from 311,000 mt in July.

“Demand for fuel oil has remained strong in recent months, and we’ve got quite a lot of inquiries but supply has been tight,” said a trade source.

Different from bitumen blend, most fuel oil cargoes were imported by independent refineries themselves.

In addition, Zhejiang Petroleum & Chemical was said to also have started to import fuel oil for cracking due to quota shortage.

ZPC is likely to get an additional 4.5 million mt quotas for its Phase 2 project of 20 million mt/year in the last batch by October, which, however, seems still not sufficient for its operations. ZPC already shut a third 10 million mt/year crude distillation unit in end-July due to quota shortage.

Platts collects information covering feedstock imported for independent refineries in Shandong province, Tianjin, Zhoushan and Dalian, including 36 crude import quota holders, and other non-quota holders.

These 36 refiners have been awarded a combined 135.73 million mt in crude quotas in the first three batches, accounting for 86.5% of total allocations to the independent refining sector so far in 2021, with the last batch of quotas to be allocated by October.
Source: Platts