Chinese independent refiner Panjin Haoye has been producing Group II base oils at its 124,000 b/d refinery in northeast China since April.
The 200,000 t/yr base oil unit is producing Group II N100, N150 and N350. The supplies are categorised as No.15, No.32 and No.68 white oils respectively.
Categorised this way, they avoid paying China's 1711.52 yuan/t ($266/t) consumption tax. Supplies categorised as base oils are required to pay this tax.
Many Chinese producers have categorised their supplies from new plants in this way in recent years to benefit from lower tax costs at a time when light-grade base oil prices are unusually weak.
The rise in domestic base oil prices in China over the past year has widened their premium to white oils. The trend has reduced the incentive to categorise supplies as white oils and spurred more producers to bring additional capacity on line.
