The mainland's state-backed oil refining majors will have a tough time meeting Beijing's deadlines to upgrade refining facilities and improve fuel quality unless the government gives them financial support, analysts say.
"It will be a big stretch for the oil companies to meet the requirement," CLSA head of Asian oil and gas research Simon Powell said. "They have endured eight quarters of refining losses [in the past few years]. Refining is not a great business."
In a cabinet meeting chaired by Premier Wen Jiabao on Wednesday, the State Council decided that state-backed refiners should ensure nationwide supply of petrol and diesel meeting National IV emission standards by the end of next year, and much tougher National V standards by the end of 2017.
It is the first time Beijing has set a timetable for diesel emission standards more stringent than National III, and the decision is aimed at improving the country's worsening air pollution.
Beijing has asked refiners to supply National IV petrol nationwide since 2011. But so far it is available in fewer than 20 big cities because of the time and huge capital investment needed to upgrade refineries.
But the biggest source of roadside pollution is commercial vehicles, which are mostly run on diesel on the mainland. Diesel contains much more sulphur than petrol and so is even more expensive than petrol to refine into fuel meeting the same emission standards.
The National V standards are supposedly equivalent to Europe's Euro V standards, and are very stringent, with the maximum allowable sulphur content of emissions just one-fifth that of National IV.