Oil Processing Enterprises for Non-State-Owned
Trading and Import Qualification in July 2015.
The circular allows non-state companies
approved to import, export and refine oil products—and which meet energy consumption,
quality, environmental, safety and storage conditions—to apply for approval to import crude
oil. Up to August 2016, 16 companies had
obtained the right to import crude oil, importing
62.57 million tonnes in total.
Further deregulation adjusted the original oil
import-export management system and laid an
institutional foundation for the formation of a
transparent and open oil refining market featuring
orderly competition and diversified market participants. The move brought new opportunities to
small and medium-sized oil companies in trade,
financing and logistics. The utilisation rate of
private refineries was improved significantly.
Statistics show that average capacity utilisation
of Shandong’s refineries increased from 41.2% in
June 2015 to 60% in the first half of 2017.
5.1.5 Oil and Gas Exchanges Were
Steadily Established
The introduction of natural gas exchanges is an
important means to reform the natural gas pricing
mechanism and strengthen China’s voice in
international natural gas pricing. The role of
natural gas exchanges is repeatedly mentioned in
government documents, such as the 13th
Five-Year Plan (2016–20) for Natural Gas, the
Notice on Clarifying the Price Policies for Gas
Storage Facilities, the Notice on the Policies
Regarding City-Gate Station Price in Fujian
Province and the Notice on Promoting Deregulation of the Price of Gas Used for Chemical
Fertiliser Production. Gas suppliers and users are
encouraged to participate in oil and gas exchanges and other platforms to establish a transparent
gas price through trading.
The Chinese government accelerated the
introduction of natural gas markets, successfully
building two trading platforms, one in Shanghai
and the other in Chongqing. The Shanghai Petroleum & Gas Exchange, founded in December
2014, was put into trial operation in July 2015
and official operation in November 2016.
Unilateral gas trading volume exceeded 6.5 billion cubic metres in 2015 and 15 billion cubic
metres in 2016, accounting for around 8% of
total gas consumption in China. The volume was
expected to exceed 50 billion cubic metres in
2017. LNG bidding for 12 coastal provinces and
cities is now conducted through the Shanghai
Petroleum & Gas Exchange, and 174,800 tonnes
of LNG have been traded in total. The price
reached by bidding fully reflects local LNG
supply and demand. The Shanghai Petroleum &
Gas Exchange carried out the first round of
bidding for pipeline gas in September 2017. The
exchange plays an important role in aligning
supply with demand and establishing a reasonable price. With its influence growing, the
Shanghai Petroleum & Gas Exchange attracts
wide attention in and outside China.
Chongqing Petroleum and Gas Exchange was
unveiled in January 2017 and put into trial
operation in April 2018. Some provinces and
cities, including Xinjiang, Zhongwei, Shenzhen
and Hubei, are actively researching the formation
of regional natural gas exchanges.
Natural gas exchanges are important outcomes of oil and gas price deregulation. They
provide influential support for the deepening of
reform. Though their size is not yet large, their
role of allocating resources in a market-oriented
and optimal fashion and in providing equal
competition opportunities to downstream users is
now widely recognised.
China has created an oil futures market.
Despite China’s position as the world’s largest
crude oil importer, the second largest oil consumer and the fourth largest oil producer, China
has inadequate influence in the crude oil market,
and suffers from the Asian premium of paying
more for crude oil from the Middle East than
European or US refiners. The development of oil
futures provides a method of price discovery and
drives the reform of China’s oil products pricing
system. It can also help eliminate the Asian
premium, hedge against oil finance risks and
promote RMB internationalisation. Crude oil
futures were officially listed on the Shanghai
International Energy Exchange (INE), a unit of
the Shanghai Futures Exchange, in March 2018.
Special Report 4: China’s Energy System Revolution
459
Trading and Import Qualification in July 2015.
The circular allows non-state companies
approved to import, export and refine oil products—and which meet energy consumption,
quality, environmental, safety and storage conditions—to apply for approval to import crude
oil. Up to August 2016, 16 companies had
obtained the right to import crude oil, importing
62.57 million tonnes in total.
Further deregulation adjusted the original oil
import-export management system and laid an
institutional foundation for the formation of a
transparent and open oil refining market featuring
orderly competition and diversified market participants. The move brought new opportunities to
small and medium-sized oil companies in trade,
financing and logistics. The utilisation rate of
private refineries was improved significantly.
Statistics show that average capacity utilisation
of Shandong’s refineries increased from 41.2% in
June 2015 to 60% in the first half of 2017.
5.1.5 Oil and Gas Exchanges Were
Steadily Established
The introduction of natural gas exchanges is an
important means to reform the natural gas pricing
mechanism and strengthen China’s voice in
international natural gas pricing. The role of
natural gas exchanges is repeatedly mentioned in
government documents, such as the 13th
Five-Year Plan (2016–20) for Natural Gas, the
Notice on Clarifying the Price Policies for Gas
Storage Facilities, the Notice on the Policies
Regarding City-Gate Station Price in Fujian
Province and the Notice on Promoting Deregulation of the Price of Gas Used for Chemical
Fertiliser Production. Gas suppliers and users are
encouraged to participate in oil and gas exchanges and other platforms to establish a transparent
gas price through trading.
The Chinese government accelerated the
introduction of natural gas markets, successfully
building two trading platforms, one in Shanghai
and the other in Chongqing. The Shanghai Petroleum & Gas Exchange, founded in December
2014, was put into trial operation in July 2015
and official operation in November 2016.
Unilateral gas trading volume exceeded 6.5 billion cubic metres in 2015 and 15 billion cubic
metres in 2016, accounting for around 8% of
total gas consumption in China. The volume was
expected to exceed 50 billion cubic metres in
2017. LNG bidding for 12 coastal provinces and
cities is now conducted through the Shanghai
Petroleum & Gas Exchange, and 174,800 tonnes
of LNG have been traded in total. The price
reached by bidding fully reflects local LNG
supply and demand. The Shanghai Petroleum &
Gas Exchange carried out the first round of
bidding for pipeline gas in September 2017. The
exchange plays an important role in aligning
supply with demand and establishing a reasonable price. With its influence growing, the
Shanghai Petroleum & Gas Exchange attracts
wide attention in and outside China.
Chongqing Petroleum and Gas Exchange was
unveiled in January 2017 and put into trial
operation in April 2018. Some provinces and
cities, including Xinjiang, Zhongwei, Shenzhen
and Hubei, are actively researching the formation
of regional natural gas exchanges.
Natural gas exchanges are important outcomes of oil and gas price deregulation. They
provide influential support for the deepening of
reform. Though their size is not yet large, their
role of allocating resources in a market-oriented
and optimal fashion and in providing equal
competition opportunities to downstream users is
now widely recognised.
China has created an oil futures market.
Despite China’s position as the world’s largest
crude oil importer, the second largest oil consumer and the fourth largest oil producer, China
has inadequate influence in the crude oil market,
and suffers from the Asian premium of paying
more for crude oil from the Middle East than
European or US refiners. The development of oil
futures provides a method of price discovery and
drives the reform of China’s oil products pricing
system. It can also help eliminate the Asian
premium, hedge against oil finance risks and
promote RMB internationalisation. Crude oil
futures were officially listed on the Shanghai
International Energy Exchange (INE), a unit of
the Shanghai Futures Exchange, in March 2018.
Special Report 4: China’s Energy System Revolution
459