According to Reuters, this week four Chinese oil company executives said that Chinese oil refiners are calling for tax cuts before they start making low-sulphur shipping fuel when the new global clean fuel rules come into effect in 2020.
For companies to economically produce very low-sulphur fuel oil (VLSFO), China’s government must end a 1,218 yuan per ton consumption tax and give rebates of the 14% value-added tax on fuel oil.
“Tax is a key hurdle to release domestic production and expand China’s bonded bunker fuel market,” said Harry Liu, an executive director at IHS Markit.
Although China Petroleum and Chemical as well as PetroChina said that together, they could make 14 million tons of VLSFO a year in 2020, they said it would not be economical to do so without a tax change.
With current taxes, Chinese supplies would be $150 per ton more expensive than the same supplies from Singapore.
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