China’s Independent Refiners: A New Force Shaping Global Oil Markets

China’s independent refiners account for roughly one third of the country’s downstream, yet for years, these private companies, nicknamed ‘teapots’ for their simple refining configuration, were virtually unknown to global crude markets. The independent refiners processed fuel oil as feedstock and, running at low utilisation rates, their retail market share in China was limited mainly to Shandong province, where most of them are located.

The independent refiners sprang to global attention after they first received quotas to process imported crude oil in July 2015. Since that time, Chinese crude buying has surged—even though end product demand growth is slowing—with the teapots accounting for the vast majority of China’s incremental purchases. They have tapped into a wide variety of suppliers, impacted regional pricing dynamics and crude flows to China.

With access to new sources of feedstock, the independents increased throughput substantially and have challenged the state-owned majors’ monopoly, especially in the domestic products market, thanks to support from the local government and, at times, creative tax practices. At the same time, the state-owned majors have lobbied the government to clamp down and tighten scrutiny of the independents. In 2017, the wave of liberalization that enabled the ‘teapots’ rise seems to be drying up and the political and economic challenges they face are mounting.

By: Michal Meidan

Related Publications

  • China’s loans for oil: asset or liability?

    By: Michal Meidan

    China’s leaders have long been concerned with the strategic vulnerabilities associated with rising oil imports. In their efforts to hedge against these, Chinese policy banks have handed out loans that are repaid with oil. By 2015, repayment for these loans generated 1.4-1.6 mb/d of crude and fuel oil deliveries from Venezuela, Russia, Brazil, and Ecuador […]

    Download Publication
  • China’s 13th Five-Year Plan: Implications for Oil Markets

    By: Michal Meidan

    China’s 13th Five Year Plan (13FYP) outlines the country’s economic transformation for the coming five years and beyond. As the main blueprint for China’s ‘rebalancing’, it will impact economic growth and energy demand patterns. China’s economic growth is slowing, and the economy is now clearly shifting from an export oriented growth path to a more […]

    Download Publication
  • The structure of China’s oil industry: Past trends and future prospects

    By: Michal Meidan

    China’s oil sector has been dominated by three large state-owned oil companies in charge of developing the country’s domestic reserves, building and operating pipelines, managing China’s increasingly sophisticated downstream, and filling its strategic petroleum reserves (SPR). Over the years, as China’s demand has outstripped production, they have also become major investors in the global upstream […]

    Download Publication

Latest Tweets from @OxfordEnergy

  • An OIES study (Saudi Arabia: Shifting the Goal Posts) cited in a new article in The Economist on OPEC long-term all…

    February 23rd

  • Heightened Geopolitical Risks in the Middle East and Potential Impacts on Oil Markets

    February 22nd

  • A new OIES paper on evolution of Japanese oil industry: Considering that demand for refined petroleum products will…

    February 20th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.