GreenergyDaily

Jul. 3, 2025

The provincial government of Shandong, China's refining hub, has increased fuel oil import tax rebates for six independent refineries to improve their profitability as they struggle with low margins and fuel demand, Reuters reported today, citing sources.

The Shandong provincial tax bureau increased the consumption tax rebates that the independent refiners, also known as teapots, will receive for the sale of gasoline and diesel refined from imported fuel oil by 25 percentage points to between 75% and 95%, three sources with direct knowledge of the matter said this week.

The change applies to Chambroad Petrochemicals, Hongrun Petrochemical, Lihuayi Group, Xinyue Group, Shandong Jincheng Petrochemical Group and Xintai Petrochemical, the sources said.

The refiners were notified about two weeks ago, said one of the sources.

FGE's Associate Director of the East of Suez Oil Service Mia Geng said in a June 27 note the independent refiners had been suffering from low margins and shutdowns as a result of the rules and the provincial government likely also wanted the refineries to run more to boost industrial output and economic activity.

Geng expects the tax changes should increase high-sulphur fuel oil demand and raise the refineries' run rates.

However, the changes are unlikely to spur fuel oil demand in the short-term since crude oil is currently cheaper, a trading source and one of the sources with direct knowledge of the change said.