Sinopec Group Increases Crude Oil Supply to Local Refineries      

The supply shortage of oil products continues despite the full-capacity operation in the two oil giants in China. The operating rate of local owned refineries in Shandong province is low because of an insufficient crude oil supply. With the intervention of governments departments including the National Development and Reform Commission (NDRC), Sinopec Group will increase a certain amount of crude oil supply each month to local owned refineries in Shandong for commission processing.
   According to executives from Sinopec Shandong Co., Ltd., Sinopec Group will allocate 550 000 tons of crude oil to local owned refineries in Shandong for commission processing in the second quarter of 2008. Crude oil from Xinjiang was delivered to those refineries in April. Crude oil from Zhongyuan Oilfield and Shengli Oilfield will also be transmitted to local owned refineries in Shandong.
   In November 2007 Sinopec allocated 500 000 tons of crude oil to Shandong's local owned refineries.
   Sinopec Group has offered the first batch of crude oil to four local owned refineries in Shandong now, and will supply still more crude oil to more local owned refineries for processing according to the market need.
   According to an executive from a local owned refinery, China has been seriously short of oil products since 2008. There was already an overall shortage of diesel in Guangdong in mid-April. At the end of 2007, NDRC requested the two oil giants - Sinopec Group and CNPC to take commission processing as a long-term strategy, to meet the growing domestic demand for fuels. What is more, state provides Sinopec Group a subsidy for its oil processing business from April 1st.
   A local owned refinery's executive says Sinopec Group refines imported crude oil itself with lower cost, and allocates domestic crude oil to local refineries for refining, with a higher cost. Sinopec Group is more worthwhile in economics.
   Sinopec Group buys back 93octane gasoline from local owned refineries in commission processing at RMB6 700 per ton and diesel at RMB6 600 per ton. According to Song Zengting, Deputy General Manager of Changyi Petrochemical Co., Ltd., the profit local owned refineries made is only enough to pay workers' wages and maintain operations. It is of course much better than the loss they have suffered in fuel oil processing in recent times.