China oil majors boost fuel supply, bow to Beijing

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BEIJING, Nov 19 (Reuters) China's state-owned oil majors on Monday set out detailed plans to end a lingering supply crisis, bending to pressure from Beijing to fulfil their ''social responsibility'' by selling more cheap fuel to domestic consumers.

Top refiner Sinopec <0386.HK> unveiled a 10-step programme including near-record diesel imports, higher processing rates for December and delayed maintenance at five plants, as shortages and rationing continue across much of the country.

Rival CNPC, parent of PetroChina <0857.HK>, pledged to curb exports and urged its refineries to exceed planned output, a company Web site said, though it gave no figures.

A 10 percent rise in state-set motor fuel prices at the start of the month had aimed to end China's worst fuel crisis in four years by easing refiners' losses from sales into the controlled domestic market. But with global crude above a barrel, they are still in the red and diesel supplies are patchy.

Facing inflation that rebounded to a decade-high level last month, however, leaders seem unwilling to contemplate a second hike. Instead they are using political clout to force state-owned companies to put government interests before corporate profits.

''We require every producing and sales unit to... take overall interests into account, do everything possible to ensure market supplies, and at the critical moment properly fulfil the political and social responsibilities of a state-owned enterprise,'' Sinopec said in a 10-step plan to end shortages.

The firm will import 200,000 tonnes of diesel in December -- which would bring national imports to a three-year high -- and boost refining by 200,000 tonnes the same month to about 14.5 million tonnes, said a company Web site (

CONCRETE COMMITMENTS China's fuel shortages, triggered periodically by the gap between domestic and international prices, often become showdowns between Beijing and its refiners, which publicly pledge to ensure supply even as they choke back on loss-making sales.

China's motor fuel prices have risen by about two-thirds since early 2003, while global oil prices have trebled.

After being forced to concede the large and unexpected Nov.

1 price rise, the government will be reluctant to bow again to market forces, and will instead be more forceful in pressuring the companies that it technically controls, analysts say.

Premier Wen Jiabao called on refiners last week to ensure supplies, and although official pleas have been ignored before, the concrete details laid out in Sinopec's 10-step plan to smooth fuel flows suggest this is more than just lip-service.

''It looks like there have been some negotiations between the companies and the government,'' said Victor Shum, at consultancy Purvin&Gertz in Singapore.

''Beijing gave in a bit with the 10 percent increase and now the companies are expected to do their bit as state-owned companies to ensure supply,'' he added.

Apart from higher imports and refining, the company will delay maintenance at Zhenhai -- the country's largest refinery -- Jinan, Hainan, Yangzi and Jiujiang plants and bring a unit at Gaoqiao refinery on line ahead of schedule.

It plans to cut kerosene output by 80,000 tonnes in November and use the capacity to produce diesel, the report said, and import 277,000 tonnes of refined oil products -- likely covering just diesel, kerosene and gasoline. That compared with just 196,000 tonnes of imports in September and October.

Sales units are also expected to set up ''leading groups'' to resolve the problem of long queues around the clock, said a section of the report, published in a company newspaper beside a photograph of a line of trucks snaking out of a service station.


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