Blacklisted Chinese refiner Hengli Petrochemical has purchased at least 2 million barrels of West African crude, pivoting toward mainstream, non-sanctioned supplies, Reuters reported Thursday, citing sources.
The privately owned refiner, which operates a massive 400,000 barrel-per-day integrated complex in the northeastern city of Dalian, was banned by the US Department of the Treasury's Office of Foreign Assets Control under Economic Fury maximum-pressure campaign targeted at curbing Iranian energy revenues.
Although Hengli had immediately issued formal stock exchange filings denying any trade dealings with Iran, the company has actively begun inquiring about non-sanctioned West African and Middle Eastern grades for delivery from June onward to establish a fully compliant baseline, the report said.
The company recently finalized the purchase of at least two million barrels of West African crude slated for arrival in China around late June or July, it added.
Under OFAC guidelines, a blacklisted entity can petition for administrative removal from the Specially Designated Nationals list by demonstrating a material change in circumstances or proving that the initial basis for the designation no longer applies.
To maintain refinery utilization rates during this legal transition, Hengli has relied on a three-month operational cushion of crude inventories and has continued its procurement operations utilizing Chinese Renminbi settlement infrastructure.
However, physical trade flows are expected to face significant operational friction.
The report highlighted that supplying mainstream, non-sanctioned barrels to a blacklisted end-user is highly complex.
Major sellers and shipowners are intensely wary of exposure to US secondary sanctions and compliance scrutiny, meaning future transactions will likely have to be structured through an intricate chain of intermediaries and middlemen.
Neither Hengli Petrochemical nor the US Treasury responded to' requests for comments.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)