Shandong Will Levy Oil Price Regulation Risk Reserve, Local Refineries May Be Under Pressure

Boots landing!

Local refineries in Shandong Province will be charged with the extra profit from floor price protection.

Recently, Shandong provincial taxation bureau issued the announcement of the State Administration of Taxation on the collection and management of oil price regulation risk reserve (hereinafter referred to as the announcement).

The announcement requires that oil products production and operation enterprises registered in Shandong Province (excluding Qingdao) that produce, commission processing and import gasoline and diesel oil shall pay risk reserves to the competent tax authorities in accordance with the collection standards approved by the national development and Reform Commission. The announcement will come into effect on October 26, 2020.

It is worth mentioning that this is also the first time that private oil refining enterprises have been explicitly included in the collection of product oil risk reserve. A local refinery source in Shandong told the 21st century economic report that according to the market reaction, there is no sign of large-scale expropriation for the time being, and the matter is still in a wait-and-see state.

Local Refineries or under pressure

"In fact, the participation of georefining in the collection of risk reserve in 2016 is not high. Considering the principle of fairness and justice in market competition, the turning in of reserve fund of refining in this year will be a high probability event." "PetroChina and Sinopec refineries have already included this amount in their costs, and some local refineries have taken risk reserves into account in their financial accounting in the first half of the year," the person said

Wang Yanting, senior analyst of jinlianchuang oil products, told reporters that from March 18, 2020 to June 11, 2020, the domestic oil price has gone through six stop adjustment windows. If it is collected according to the prescribed range, the amount of risk reserve paid by the refining company will be a considerable cost.

"If normal payment is made, the considerable profits brought about by low oil prices in the second quarter may shrink substantially. After entering the third quarter, domestic demand continued to be weak, and the overall market of refining was not optimistic, and the overall profit level fell sharply. " "Regulating the collection of risk reserves is undoubtedly another cold water for refineries at present," she said. Do not rule out later refining in order to ensure profits, the sale of the situation

At the end of the first quarter of 2020, the international crude oil price dropped to less than US $40 / barrel, and the domestic retail price entered the state of suspension adjustment, and the conditions for collecting the risk reserve for oil price regulation were met. In the first quarter of this year and the performance of the semi annual report, PetroChina and Sinopec both responded to the issue of risk control reserve.

"After the oil price hit the floor price in March this year, the company received a letter from the national development and Reform Commission on Levying risk reserves." At the performance conference at the end of August, PetroChina responded that "based on the output and sales of refined and chemical products, the risk reserve in the first half of the year was close to 13 billion yuan, which has been included in the current cost in financial treatment, and has not been formally handed in."

According to Jin Lianchuang's analysis, according to the current estimation, the risk reserve of refined oil from April 16 to April 28, 2020 is the highest, which is 1180 yuan per ton of gasoline and 1150 yuan per ton of diesel oil. However, during this period, a large number of private refineries used crude oil that had been purchased at a high price before. Therefore, the corresponding cost pressure is also very large.

Clear policy points

In the announcement issued by Shandong provincial tax bureau, the payment period of risk reserve is specified. If the payment is made on an annual basis, the payment shall be made before the end of February of the following year. The risk reserves that should be paid within the end of the second quarter of 2020 should be paid in the second quarter before the end of 2020. The applicant can pay the annual or quarterly payment.

At the same time, the announcement mentions the change of the subject of collection. In 2020, the collection of oil price regulation risk reserve will be collected by the Ministry of Finance in 2016, instead of being collected by the local tax authorities, and then handed over to the central government. The relevant collection standard is announced by the Ministry of finance, and the amount of levy is declared by the refinery itself.

In addition, the charging standard adopts subsection charging. According to the announcement, the charging standard of risk reserve for oil price regulation should be calculated as the price range of refined oil converted for the part with the average price of crude oil lower than USD 40 / barrel in each pricing cycle when the retail price is suspended. However, the specific reference crude oil varieties have not been published yet. Therefore, the specific payment standards need to be announced by the Ministry of finance.

During the last round of oil price slump (2016), the risk reserves of PetroChina and Sinopec were handed over by the group companies. After the announcement was launched, the collection and management of reserve for oil price regulation and control of private enterprises was put on the agenda, and some collection details were mentioned.

At the first quarter performance conference of PetroChina at the beginning of this year, the company's executives said that the floor price policy of refined oil was introduced late in 2016, and the corresponding fees were paid by PetroChina group, the parent company of the listed company, so that this part of the amount was finally reflected in the company's financial statements.

"The company needs to pay for this round of money." "But the company is also communicating with government departments to strive for more favorable policies," said Chai Shouping, CFO of PetroChina

At the beginning of 2016, the national development and Reform Commission (NDRC) released the improved product oil price formation mechanism on January 13, setting the lower limit of oil product price control as $40 per barrel, that is, when the crude oil price of the international market to which the domestic oil product price is linked is lower than $40 per barrel, the domestic oil product price will not be adjusted downward.

This is also known as the "floor price protection" policy by the industry: under the influence of this regulation, oil, especially petrochemical enterprises, will be protected in the cycle of oil price decline, and the gross profit level of their refining is much higher than that of their international counterparts.

In the above policies, it is stipulated that the unadjusted amount of refined oil price shall be included in the risk reserve, and a special account shall be set up for storage and use after being approved by the state. It is mainly used for energy conservation and emission reduction, improvement of oil quality and guarantee of oil supply safety.

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