Sinopec, China's largest oil refiner, has started providing crude oil to local private oil refineries in Shandong province and inviting them to help raise the overall production of refined oil products in a bid to better ease the current shortages of oil supply around the country, the China Business News reports.
The move came in response to the demand by China's National Development and Reform Commission (NDRC) which strongly urged the country's two big oil giants - Sinopec, or China Petroleum & Chemical Corporation, and PetroChina, or China National Petroleum Corp - to make every effort to ensure market supply of refined oil products.
Under an arrangement coordinated by NDRC, China's top economic planning agency, local refineries will buy crude oil at a government set monthly price from the two oil companies and then sell part of their refined gasoline and diesel products back to Sinopec or PetroChina at a price negotiated by the two crude oil suppliers and local refineries.
A manager with a local refinery in Shandong told the newspaper that the firm has obtained crude oil from Sinopec's Shengli oil field at a price of 4,400 yuan per ton. The price of the refined oil products to be sold back to Sinopec, totaling 30,000 tons, will be 2,000 yuan higher per ton than the crude oil price.
The report notes the real point for this cooperation deal is not winning profits for the local refinery but gaining recognition from the government and state oil firms. The refinery has a processing capacity of several million tons but receives less than 100,000 tons of crude oil allocation from the government.
Meanwhile, PetroChina, China's largest oil producer, is also supposed to provide crude oil to refineries in the country's northeast and Shandong.
In a related development, a first ever draft energy law published by the central government stipulates that energy firms will be required to use their own capital to finance and build up reserves of energy products including oil, natural gas and uranium to compliment state reserves of natural resources.
The China Business News reports the energy firms must fill the obligatory reserves to the amount designated by the government and receive supervision from energy authorities.
An expert involved in drafting the law told the newspaper that the obligatory reserves referred to those that could only be employed by the central government, not including stocks for the enterprises' normal production.