The export level would compare with 1998 customs declared exports of 15.6 million tonnes and would be the lowest volume of exports for years, the industry sources said.

An official with State Petroleum and Chemical Bureau (SPCB) said that China intended to cut crude exports compared with last year.

SPCB, under the State Council and founded shortly after the oil industry restructuring last July, is charged with overseeing macro policy of the country's petroleum and chemical industry and coordinating between CNPC and Sinopec.

However, the official declined to state the exact level of exports that China was expected to make.

Industry sources, however, said China's crude exports were likely to fall to 7.5 million tonnes in 1999.

"There is little sense keeping the currentexport volume as we have been losing money," said an official with China National Petroleum Corp (CNPC). The official said the company had to pay a 17 per cent value-added tax on crude exports, which made them unprofitable compared with international market prices.

China wants to increase domestic refinery production, largely to limit the need for oil product imports.

Refineries have been asked to gear production to make more diesel. The country has a ban in place on diesel imports.

Industry sources said it was unclear whether the plan to reduce crude exports would affect crude supply to term buyers like Japan, which has committed to buying between six and eight million tonnes per year between 1996 and 2000.

Price negotiations between CNPC and Japanese buyers have not yet started, industry sources said.

A crude oil trader with China National United Petroleum Corp (Chinaoil) said that they would maintain the 1998 pricing formula and monthly supply volume pending the start of negotiations withJapan.

North Korea has been another term buyer of Daqing crude, taking an annual volume of around one million tonnes.