Singapore — Restrictions imposed by eastern China's Shandong provincial government on the production, sales and procurement of oil products would likely have limited impact on the operations of the province's independent refiners and blenders for now, company sources said this week. Receive daily email alerts, subscriber notes & personalize your experience. The provincial government this week released a list strictly reiterating restrictions throughout the entire value chain, ranging from the production and usage of oil products, requiring oil companies to operate under their respective licenses, produce qualified materials, and to supply consumers with fuels meeting standards. Shandong has also mandated nine provincial authorities to launch random checks on production, transportation, circulation, tax reporting, as well as storage of oil products at oil companies within the province. "The wording was severe but the content was too general, leaving a wide gray area. We cannot assess the impact until we know how the government plans to monitor and punish those breaking rules," a Dongying-based refiner said. The list did not refer to any specific national or provincial standards and mandate, nor did it provide details on the products banned from production or consumption. For example, Shandong has prohibited blending oil products with chemicals but it did not list what blendstocks are banned. Independent refiners and blenders use a range of blendstocks such as light cycle oil, aromatics, solvents and methanol. Meanwhile, various government authorities have been investigating the oil industry in Shandong since October 2018 in areas such as safety production and environment protection. But there was no significant impact seen, according to a Shandong-based analyst. Shandong is home to most of China's independent refiners and blenders. Those refiners ran at an average rate of around 65.7% in the fourth quarter of 2018, increasing from 59.5% in Q3, but down marginally from 66.6% in Q4 2017, data from local information provider JLC showed. The robust refinery runs in the province indicated limited impact from the government checks. "Most [independent] refineries have the qualified certificates regarding oil products production," the analyst said. While one refinery was heard shut due to investigations, its low throughput has little impact on the overall independent sector. The 2.4 million mt/year (48,000 b/d) Wudi Xinyue Petrochemical was shut briefly in December due to frequent investigations, according to the analyst. It was not immediately clear if it was mandated to shut or had voluntarily suspended operations. The company could not be reached for comments. The refinery processed around 1.1 million mt of crude last year, or at an average 46% rate of its capacity. -- Oceana Zhou, oceanzhou@spglobal.com --Edited by Irene Tang, irene.tang@spglobal.com
Dongying's Shandong provincial government’s new restrictions and inspections on procurement, production and sales of oil products is not expected to immediately impact the work of local refiners and blenders. The wording of the rules imposed by authority is considered too vague, so until it's clear how the government plans to monitor and enforce them with potential punishments, refiners will not understand the impact of the rules, according to a producer in China. The list of restrictions cover production and usage of oil products, license requirements and ensuring fuels adhere to standards, without naming details.