China National Petroleum Corp (CNPC), the country’s largest oil and gas
producer, plans to increase its refined oil production and imports in
the second quarter to ensure regular market supply.

The company will “run its refineries at full capacity and distribute
more oil to the market” to meet demand, CNPC said in a statement.

In the second quarter, the company will postpone maintenance of some
refineries and reduce stockpiles at some plants to increase supply, the
statement said.

The company’s crude oil processing in the first quarter increased more
than 6 percent compared with the same period of last year. It also
imported 820,000 tons of refined oil products during the same period to
increase domestic supply.

Eastern and southern regions in China recently reported shortages in
refined oil products such as gasoline and diesel. The shortage now
appears to be spreading to the northern parts of the country.

However, the National Development and Reform Commission (NDRC) said
earlier that the country has enough oil to ensure a stable supply and the
fuel-supply crisis of last year’s second half would not re-emerge.

High international oil prices have fueled the prospect of a price rise
on the domestic market, while rumors of a shortage have prompted some
producers and dealers to hoard oil, which has worsened the situation,
the NDRC said.

Reconstruction after the blizzards and spring plowing also added supply
pressure, it said.

Industry experts said that government-controlled oil prices on the
domestic market have led to the shortfall, as refineries cut back
production to avoid losses while producers and dealers hoard oil to gain more
profits in the case of a price rise.

CNPC and Sinopec, the country’s two largest oil companies, earlier said
they would redouble efforts to increase market supply and distribute
more oil to the shortage-affected regions.

China processed 55.81 million tons of crude oil in the first two months
of 2008, up 7.4 percent from the same period of 2007, the NDRC said
last week.

The growth rate was 1.7 percentage points higher than the same period
of last year.

Gasoline and diesel output surged 4.1 percent and 12.5 percent,
respectively. Natural gas production expanded by 20.3 percent.

According to the NDRC, the country’s crude oil output hit 30.78 million
tons in the January-February period, up 1.2 percent year-on-year,
while imports shot up 9.5 percent to 28.23 million tons.

By Wan Zhihong