Oil Monopoly Icebreaker Group's Crude Oil Import Rights Approved

PetroChina and Sinopec ’s monopoly on crude oil imports was officially broken. The newspaper was informed that Zhenhua Petroleum Holding Co., Ltd. (hereinafter referred to as “Zhenhua Oil”) under the China Ordnance Industry Group (hereinafter referred to as the “Army Group”) has been approved to have a real sense of crude oil import rights.

Zhenhua Petroleum previously had the qualification to import non-state-owned trade crude oil. However, according to the current crude oil import policy, non-state-owned trade crude oil can not be directly circulated in the domestic market, and can only be processed by PetroChina and Sinopec's refineries.

Informed sources said that the future of non-state-owned imports of crude oil within the quota, Zhenhua Petroleum can be directly imported, their own control. Zhenhua Petroleum also became the third domestic domestic company to supply crude oil for its own refining companies following the two major oil groups.

The Ordnance Group has abundant oil and gas resources overseas, and the downstream refineries have been deployed in China for many years. The acquisition of the right to control the import of crude oil means that the Ordnance Group has opened up the entire oil industry chain. Qi Fang, president of the Chamber of Commerce of the Petroleum Industry of Hebei Federation of Industry and Commerce, said that the central enterprises outside the two major groups are changing the pattern of oil monopoly, which will also give private enterprises more vitality.

Break through the monopoly

In 2009, Zhenhua Petroleum had a quota of approximately 1.2 million tons of non-state-trade imported crude oil. Informed sources said that this year's quota must be greater than this number. Zhenhua Petroleum's public statistics show that it is estimated that about 4 million to 5 million tons of crude oil will be imported in 2010, involving an amount of about 25 billion yuan.

Zhenhua Petroleum’s crude oil imports are mainly supplied to Huajin Group, which is controlled by Ordnance Group. Huajin Group is a major shareholder of Liaotong Chemicals (000059.SZ). Sinopharm Group acquired 60% of Huajin Group’s shares in early 2006. Therefore, it indirectly holds Liaotong Chemical Industry and becomes the actual controller of Liaotong Chemical Industry.

Informed sources said that Liao Tong Chemical's main source of oil supply is Zhenhua Petroleum. According to the statistics, Liaotong Chemical signed five "crude oil procurement contracts" with the weapons companies from May 2009 to September 2009. The company purchased 780,000 tons of crude oil and required about 2.9 billion yuan in purchases. At the same time, the company expects to import about 4 million to 5 million tons of crude oil in 2010, involving an amount of about 25 billion.

At present, China's crude oil imports are divided into state trading and non-state trading. At present, five state-owned oil companies, including PetroChina and Sinopec, are engaged in state-run trade imports. Since joining the WTO in 2003, there has been no restriction on this part of imports.

According to the WTO commitments, China has started to issue non-state trade quotas every year since 2002, allowing non-state trading companies to import certain quantities of crude oil, and increase quotas year by year. At present, there are 22 companies that have non-state oil crude oil import qualifications, but two-thirds of them have state-owned enterprises.

Non-state-owned trade crude oil imports can only be used in the refinery processing of PetroChina and Sinopec, and may not be supplied to local refineries or distribution. This is also the core and key to non-state trading crude oil import management.

It is this quota of non-state-owned crude oil import that Zhenhua Petroleum has approved for direct import. In 2010, the Ministry of Commerce issued a total of 25.3 million tons of non-state-owned crude oil import quotas. Prior to this, including the refining companies, the Federation of Industry and Commerce, etc., continued to write, and it is precisely this part of the oil source that is required to be released.

Mystery company

The Northern Group Company of the Ordnance Corps (hereinafter referred to as the "Northern Company") actually began its petroleum trade as early as 2001. For a long time before Zhenhua Petroleum was established, the Northern Company had many opportunities for oil trading.

In 2001, the Northern Company made its first oil business. In 2001, Iraq agreed that Northern companies can purchase Iraqi oil and participate in the UN oil-for-food program. At that time, Iraq’s barrel of oil could make a dollar. However, at the time, the Northern Company had no qualification for oil operations and could only entrust oil business to third parties.

The Northern Company’s then-partner partner was Sanpré Energy, the United States. For the first time, the Northern Oil Company earned $800,000. In 2003, the Chinese government promised to allow a group of enterprises to enter the oil import trade under the name of non-state trading of crude oil, and the Northern Company established Zhenhua Petroleum.

Using the reputation of the Ordnance Group in overseas trade and various resources, Zhenhua Petroleum will target in resource-rich Central Asia. Since then, it has developed rapidly and managed four overseas oil fields. In 2009, sales revenue reached 21.4 billion yuan. It has signed long-term contracts with Iraq’s national oil companies and became Iraq’s second largest buyer of crude oil in Asia. It has also signed crude oil purchase contracts with oil producers and energy giants such as Petrobras, Congolese National Oil Company and ConocoPhillips.

Rich upstream oil and gas resources also strengthened the determination of the Binggong Group to strengthen the refining and chemical industry. In 2006, Orong Group became the largest shareholder of Liaotong Chemical. In April 2007, Liaotong Chemical invested 10.7 billion yuan to build 450,000 tons of ethylene and its associated 4 million tons of raw material refining projects. The reporter learned that the project has been fully put into operation in early 2010, and the operating rate has reached 100%. The company will need 4 million tons of crude oil each year.

The report from Shenyin Wanguo stated that the production of Liaotong Chemical Ethylene Project marks the proper use of the existing overseas petroleum resources by Weapons Group and the opening of the upstream and downstream industrial chains to form a complete oil and chemical industry cluster of the Weapons Group.

influences

The reporter learned from a person close to the National Development and Reform Commission that the Ordnance Group obtained qualifications for direct crude oil imports and was also touched by other central enterprises independent of the two major groups. It also hoped to obtain direct crude oil import qualifications. "But there are no indications that other companies will have this qualification." According to the above sources, Sinopec Sinopec raised objections to liberalizing the import restrictions on crude oil.

For a person in charge of a private oil company, the Ordnance Group obtained the qualification for direct import of crude oil, which helps private enterprises break through the monopoly of crude oil import trade and form a diversified import pattern. "At least we are now looking for more opportunities for oil sources, do not look at the faces of the two groups, they do not give, we can also find soldiers." General manager of a private oil company in Liaoning said.

The above-mentioned sources told the reporter that in fact, in last September, Huajin Group held the first product promotion fair in Panjin City, and more than 160 business leaders from across the country engaged in oil products and chemical industry attended. Fu Zhenlong, manager of Huajin Group's sales company, put forward the principle of “sharing benefits and sharing risks together.” This reporter learned that Tongliao Chemical’s 4 million-ton refinery has been completed and was put into operation in October last year.

Qi Fang told reporters that with the commissioning of the 10 million tons refinery project of CNOOC Huizhou and the entry of China National Chemical Industry and Ordnance Industry Group, the choice of oil sources for private enterprises was more. Qi Fang said that although these upstream enterprises have a complete layout, they lack the operating outlets and sales channels. This is the basis for their cooperation with private enterprises.