01 August 2011 00:00 [Source: ICB]
|Reform is likely to boost jet fuel production|
On July 12, the National Development and Reform Commission (NDRC), China's regulatory body, announced a jet-fuel pricing mechanism that will adjust domestic jet-fuel prices on a monthly basis to better reflect the product's movements in international markets.
The mechanism will allow domestic ex-refinery jet-fuel prices to change on a timely basis in line with fluctuations in CFR China import prices. The move is likely to boost jet-fuel production as refiners find it more profitable compared with gasoil production, whose pricing is still capped by the government, the refinery sources told C1 Energy, an ICIS service in China.
The new market-driven jet-fuel price will allow refineries to pass on costs of imported crude to jet-fuel buyers.
However, gasoline and diesel production costs cannot be easily passed on to consumers, as retail ceiling prices are not directly linked with the international market, a source with a major state-run refinery said. Some state-run refineries have raised their jet-fuel output ratio by 0.5-1.0 percentage points after the government hiked the product's ex-refinery price by yuan (CNY) 800/tonne on May 25, the source said. "The ratio still has a growth room of 1.0-1.5 percentage points," said a source with one refinery in South China.
Usually, China's state-run refineries have yields of about 4-5% for jet fuel, 38-40% for diesel and 17-18% for gasoline, as assessed by C1 Energy.
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