Due to a weak domestic market, China Petroleum and Chemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC) have both decided to increase their exports of refined oil products in order to alleviate the problem caused by mounting stock volumes, reported the Guangzhou-based 21st Century Business Herald.

In January, Chinese refineries will export 320,000 tons of petrol and diesel oil, according to the report, 10,000 tons more than the last year's monthly average.

An official with Sinopec says that the company plans to export 150,000 tons of diesel oil in January, to which the company's three major south China subsidiaries – Maoming, Guangzhou and Hainan refineries – will contribute 70,000 tons, a 65,000 ton increase against preceding months, while Sinopec's eastern refineries will contribute 80,000 tons in diesel exports.

"We still have a decent operating rate in our domestic refineries, but market demand is declining towards an annual low, with the result that our refineries are carrying heavy stocks," the official explained. "By increasing our exports, we can balance the markets at home and abroad."

At the same time, a CNPC official claimed he was unaware of any plans concerning the company's export activity. But according to the previous years' figures, January's export volume is likely to hit 50,000 tons, and possibly more. In addition, West Pacific Petrochemical Company, a CNPC-controlled refinery based in Dalian is also scheduled to export 120,000 tons of petrol.

Business data indicates that according to current FOB prices in Singapore, Chinese domestic refineries will respectively lose 185 yuan (US$27.09) for every ton of petrol but gain 294 yuan (US$43.05) per ton of diesel oil exported, after deductions of 17 percent VAT, freight and insurance, etc.

Sinopec and CNPC suspended the export of refined oil products last June to satisfy the demands of the domestic market.

Business analysis also suggests that the two national oil giants may increase their export volume further, given the still high operating costs of their domestic refineries.

(China.org.cn by Maverick Chen, January 13, 2009)