Big money rolls into free trade zone from across the world

Since the establishment of the China (Zhejiang) Pilot Free Trade Zone in April 2017, remarkable progress has been made in the development of its oil and gas industrial chain.

The FTZ handled 3.59 million metric tons of bonded bunker fuel oil supply in 2018, accounting for more than 30 percent of the national total. It made the FTZ one of the world's top 10 oil supply ports, according to statistics from the Zhejiang FTZ.

In 2018, the trade volume of petroleum products in the FTZ reached 221.39 billion yuan ($33 billion).

As of February 2019, the Zhejiang FTZ has 12,501 registered companies. It includes 3,198 oil companies, making the region one of China's largest oil company clusters.

Alex Beard is head of oil and gas at Glencore, the world's biggest publicly traded commodity trader. He thinks that Zhejiang FTZ will become the next world petroleum refining center. He sees the advantages of Zhejiang's geographic location and constantly improved oil-refining capacity.

Located in Zhoushan city in Zhejiang province, the Zhejiang FTZ is the only pilot free trade zone consisting of land and anchorages at sea, covering an area of 119.96 square kilometers. It is complemented by the Zhoushan Archipelago, which is the door to the Pacific Ocean and the only corridor connecting it to the Yangtze River.

The Zhejiang FTZ has set a goal to promote the investment in and free trade of the whole oil industry chain and to improve the global allocation of bulk commodities under a well-regulated and legally compliant environment.

Innovative achievements

Zhejiang FTZ has taken further steps in system innovation. Currently, the FTZ has made 83 achievements in this regard. Some of the practices have then been promoted elsewhere by the State Council.

Last October, led by China Zheshang Bank, China's first bulk warehouse financial service provider in a free trade zone was founded in the Zhejiang FTZ. It is expected to upgrade the bulk commodity trading services provided in the FTZ.

Aiming to become a significant delivery point for crude oil futures and fuel oil futures, the FTZ has made great achievements since a crude oil futures contract began trading in China last March.

On March 7, the first crude oil future delivery was completed in Zhoushan. After the 380 bonded fuel oil futures contracts were listed and traded last July at Shanghai Future Exchange, Zhoushan made its first future delivery of 48,000 tons of 380 bonded fuel oil futures.

Pierre Lever, CEO of Argus Asia, said that Zhoushan is close to main shipping routes with a great number of marine fuel suppliers which gives the region a high level of service and competitive price. He added that the FTZ is especially suitable to the marine fuel industry.

Low carbonization and clean energy are global trends for energy consumption as the proportion of fossil energy, such as coal, continues to drop. The Zhejiang FTZ is meeting the trend as the region is speeding up a three-year action plan to supply low sulfur marine fuel oil.

The FTZ has also strived to develop the liquefied natural gas - or LNG - industry. ENN Zhoushan, which is China's first privately owned LNG import terminal, began operating last year. It is expected to become the biggest receiving and filling station in eastern China with a 10 million tons annual capacity.

On the fast track

A great deal of oil products cannot do without a fully equipped storage and transportation base, and Zhoushan is China's biggest. Its capacity is 28.79 million cubic meters.

The "One Center and Three Bases Demonstration Zone" consists of the Trading Center of International Oil Products and the bases of international petrochemical, international maritime services, and international oil product storage. It also has internationalized renminbi for cross-border trade in bulk commodities. This all gives the Zhejiang FTZ an advantage to develop the whole industrial chain.

In February, Saudi Aramco, the world's largest oil company, signed a memorandum with the Zhoushan city government to invest in the Zhejiang Refining-Chemical Integration Project. Located on Yushan Island, the project is planned to start production this year with 20 million tons refined in the first phase.

Besides accelerating oil industry chain layout in the region, Zhejiang FTZ is creating a friendly environment for businesses and providing global oil companies with high-quality and efficient service.

It took Zhang Hui, from Qinhuangdao, Hebei province two hours and six minutes to get his company registered at Zhejiang FTZ General Service Hall. This included business registration, official seals and invoices, opening a bank account and other processes.

According to the local customs, the time needed to enter and exit the port was controlled at 33.8 hours and 2.3 hours respectively. Both are faster than the average time of clearance at the customs in Hangzhou, capital of Zhejiang province.

Since the zone's establishment, there are 367 foreign companies set up in Zhejiang FTZ with a contractual investment of $5.05 billion and $410 million of pay-in investment. A large number of internationally renowned oil companies such as Saudi Aramco, BP, Total, Glencore and Trafigura Group have set up business there.

pamelalin@chinadailyhk.com

(China Daily 04/03/2019 page10)