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China found three independent oil refiners evaded fuel tax

China found three independent oil refiners evaded fuel tax and punished a unit of a state oil major for irregular crude oil trade following months of investigations, part of a broader clampdown to consolidate its massive refining sector.

Under a drive to rein in surplus refining capacity and cut carbon emissions, Beijing last year introduced measures such as cutting import quotas and slapping a hefty tax on imports of blending fuels.

That has led to China's first annual fall in crude oil imports, the world's largest, in two decades.

The clampdown is also set to result in a shrinking market share of the small independent refiners in China's oil imports, while allowing state refiners such as Sinopec Corp to reclaim market dominance.

"The crackdown on teapots and blenders and the emission policy led to the collapse in 2021 crude imports. These are long lasting effects and will continue into 2022." said Liu Yuntao, analyst with Energy Aspects.

In a statement late on Wednesday, Liaoning province, an oil hub in the country's northeast, found three independent refiners evaded fuel taxes and said it will prosecute the personnel involved.v

The companies, Panjin Beifang Asphalt Fuel Co, Liaoning Bora Biological Energy Co and Panjin Haoye Chemical Co Ltd, were found to have evaded fuel consumption taxes on the refined oil products they sold, according to the Provincial Tax Service of Liaoning.

The first two firms are controlled by private oil and chemical firm Bora Group based in the city of Panjin. “Companies evaded fuel tax...by presenting taxable refined oil products as chemical products that are not subject to the consumption levy," the Provincial Tax Service said.

However, the government has managed to maintain normal operation of the plants during the investigations, the agency added.

In October, Reuters reported that Unipec, the trading arm of Asia's largest refiner Sinopec, had stepped in to supply crude oil to Liaoning Bora and Panjin Haoye Chemical.

A senior official with Bora Group declined to comment when contacted by Reuters and deferred media queries to the Panjin city government. Calls to Haoye Chemical were unanswered.

Also late on Wednesday, the powerful state planner, the National Development & Reform Commission, said PetroChina facilitated blind development of outdated refinery capacity by "irregular" reselling of crude oil to 115 independent plants over the years.

The firm is a subsidiary under China National Petroleum Corp.

PetroChina said earlier it has always been cooperating with the government probe.

These investigations began in early 2021 and were later expanded to cover private refiners in east China's Shandong province, the country's largest teapot oil hub that accounted for a fifth of Chinese crude oil purchases.

Reuters reported in November that the Shandong government ordered its refineries to self-inspect and self-rectify any irregular fuel tax practices.

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