August 29, 2019 / 6:09 AM / a year ago

UPDATE 1-Chinese refiner Hengli sells 1st jet fuel export cargo -sources

(Adds details)

By Shu Zhang and Chen Aizhu

SINGAPORE, Aug 29 (Reuters) - Chinese private refiner Hengli Petrochemical Co this month sold its first jet fuel cargo for export through a state-owned firm, bypassing Beijing's export quota restrictions, three sources with knowledge of the transaction said.

Hengli sold the 40,000-tonne jet fuel cargo to state-owned China National Aviation Fuel Corp (CNAF), which exported the shipment, the sources said, in a transaction model that would allow the private refiner to step up oil product exports to international markets.

Hengli, which ramped up its 400,000 barrel-per-day (bpd) refinery in Dalian to full rates in late May, has not been able to obtain an aviation fuel export quota from Beijing, despite having submitted its application months ago, the sources said.

Hengli sold the cargo to CNAF in mid-August at a deeper-than-market discount of about $2.86 a barrel below the prevailing Singapore jet fuel quotes on a free-on-board basis to foster long-term business ties with China's dominant jet fuel distributor, said one source with direct knowledge of the deal.

The transaction was settled in yuan, the source said.

CNAF, to which the government granted 110,000 tonnes of jet fuel export quotas for 2019, then sold the cargo to Swiss trading house Vitol, said the source, without giving a price for this second transaction.

A Hengli spokesman confirmed the sale to CNAF but did not comment on the price. A CNAF spokesman declined to comment. Vitol did not immediately respond to an email seeking comment.

Hengli Petrochemical wants to be China's first private exporter of jet fuel, but the move against the dominance of state oil companies requires licensing and approvals that will be hard to come by.

Beijing has so far issued three batches of quotas for this year for refined fuel exports, but all went to state firms. A fourth batch is expected later in the year.

For the past a couple of years, no private refiners in China have been granted government quotas to export oil products. (Reporting By Shu Zhang and Aizhu Chen; Editing by Chrsitian Schmollinger and Tom Hogue)

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