Chinese oil giants beef up diesel supply

Updated: 2011-11-03 16:33


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BEIJING-- China's two oil giants have announced measures to increase diesel supply to ease shortages in many parts of the country at the demand of government authorities, local media reported Thursday.

The National Development and Reform Commission (NDRC) talked with two State-owned oil companies last week, ordering them to beef up diesel distribution to areas in urgent need and with inadequate reserves, the Beijing News reported.

China Petrochemical Corporation (Sinopec Group) and China National Petroleum Corporation (CNPC), were told to guarantee supply for agricultural production during the autumn harvest season, the newspaper said.

Many regions in China have seen tight diesel supply since September as a result of rising seasonal demand.

The strain was worsened as refineries reduced output for fear of losses after the government announced price cuts on retail gasoline and diesel in early October in line with falling global crude oil prices.

Nearly half of China's private gas stations do not have guaranteed fuel supplies, according to a recent survey by the oil distribution commission of the China General Chamber of Commerce.

Currently, tight diesel supply mainly exists in the middle and lower reaches of the Yangtze River and other southern regions since the harvest in the north has finished, the newspaper quoted analysts as saying.

Sinopec Group and CNPC have ordered their oil refineries to run at full capacity and increase supplies for regions worst hit by the shortages, according to statements posted on the companies' websites last week.

Sinopec Group said it had sent 64,000 more tons of diesel to the provinces of Jiangsu, Zhejiang, Anhui, Hubei and Hunan recently and planned to increase oil processing this month.

Lin Boqiang, director of the China Center for Energy Economics Research of Xiamen University, said it is the two State-owned oil companies' social responsibility to ensure diesel supply, the Beijing News reported.

China's oil product prices are under government control and refiners have long complained about rigid oil product prices and volatile crude prices creating uncertainties for their businesses.

The government gives handsome subsidies to major refiners in compensation for their annual losses.

By the end of last year, China's annual oil refinery capacity stood at 560 million tons, of which Sinopec Group and CNPC accounted for 75 percent.