Chinese “Teapots” make Russia #1 Supplier of Oil to China

China’s small independent refineries, often nicknamed ‘teapots’, account for a fifth of its refining capacity, consume about half its fuel oil imports and many use quite sophisticated technology.

Nearly 100 plants scattered across the country can churn out 1.8 million barrels of oil per day. (bpd)

The plants, which earned their nickname because of their small size and basic equipment, have upgraded and expanded in recent years to compete in a market where state-set pump prices can shave margins to razor thin levels or destroy them entirely.

“China’s independent refineries are key swing producers of diesel and, to a lesser extent, gasoline. They are also key suppliers of bitumen, accounting for about 60 percent of national production,” Argus said.

Faced widespread diesel shortages, the government even relaxed its crude regulations, ordering from majors PetroChina (PTR.N) (0857.HK) and Sinopec (SNP.N)(0386.HK) to provide their smaller rivals with feedstock.

Now, thanks to China’s Teapots, Russia has overtaken Saudi Arabia to become the number one supplier of oil in the Chinese market.

According to data released yesterday by the General Administration of Customs, Russia last year boosted its year-on-year supplies of crude to China by 24% to 52.5m metric tons (1.05m bpd), while Saudi Arabia dropped back to second place with 51m metric tons (1.02m bpd).

The Teapots are now importing as much as 1.2m barrels of crude oil per day or 15% of the country’s total after Beijing gave them permission to use overseas oil in 2015. Russia’s role in supplying these teapots with crude from its Siberian oil fields has been boosted by the proximity of its Far Eastern port of Kozmino to Qingdao, one of the ten busiest ports in the world, and a main hub for private-sector oil imports.

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