Southern Holdings Group (Hainan) Co., Ltd. relies on the policy advantages of zero tariffs, bonded warehousing, and free and convenient cross-border trade of Hainan Free Trade Port to deeply layout the ESPO business of imported mixed crude oil, and build a full chain supply system with international refinery direct procurement, smart logistics network, and terminal customization services as the core.

 As a strategic hub connecting high-quality resources in Central Asia and Europe with the Asia Pacific market, the company's annual import volume exceeds 500000 tons, and its business covers refineries across the country and Southeast Asia, forming a closed-loop service capability of "resource locking bonded warehousing multimodal transportation precise delivery".

Characteristics of ESPO for mixed crude oil:

ESPO crude oil is a mixture of medium crude oil and heavy and high sulfur crude oil.

 Unlike heavy oils with high sulfur content, ESPO crude oil has a sulfur content of about 0.6%, which is closer to low sulfur crude oil. Its API gravity point is closer to typical high sulfur crude oil, making it a special variety with better quality than traditional crude oil. It can be used as a substitute for various medium to heavy crude oils in the Asia Pacific region, replacing similar quality crude oils from West Africa, the Middle East, and Latin America, and even replacing some oil from declining oil fields in North America, such as Alaska North Slope oil.

Thanks to its geographical advantage, ESPO crude oil can be delivered to Asian customers in about 4 days, while tankers from the Persian Gulf take three weeks.

 In addition to significantly reducing transportation time, it also makes oil transportation costs lower and oil prices more competitive.

 In addition, tariff subsidies also give this new variety of crude oil a competitive advantage in terms of price.

1、 Strategic resource layout and business model

Upstream resource collaboration

Establish a long-term agreement+spot dynamic procurement mechanism with international refineries such as Kazakhstan National Oil Company and Russian Lukoil, locking in an annual agreement volume of 1 million tons.

 Relying on the geographical cost advantage of Kazakhstan refineries, the mixed crude oil ESPO produced by them has a FOB price about 15% lower than similar products in Europe.

 At the same time, by hedging against price fluctuations through crude oil futures, a hedging coverage rate of 70% will be achieved through the Singapore paper market in 2024.

Bonded warehousing network

Operate an 80000 cubic meter intelligent bonded oil depot in the bonded port area, equipped with a fully automated temperature control system, oil and gas recovery device, and blockchain traceability platform to achieve full process monitoring of "one tank, one code".

 Through the bonded warehousing model, imported mixed crude oil ESPO can be temporarily exempted from tariffs, significantly reducing the cost of capital occupation.

 In March 2025, the company completed its first 50000 tons of Kazakhstan mixed crude oil ESPO diesel bonded warehousing, increasing inventory turnover efficiency by 30%.

Multimodal transportation system

Building a three-dimensional logistics network of "sea transportation+pipeline transportation+railway+highway":

Shipping: Cooperate with COSCO Shipping to open direct shipping routes, with a single ship capacity of 100000 tons and a 12% reduction in transportation costs compared to traditional shipping routes;

Railway transportation: relying on railway freight dedicated lines, it directly reaches the terminal market, reducing transportation time by 40% compared to highways;

Land transportation: Our own fleet of 200 hazardous chemical vehicles covers domestic areas and provides precise door-to-door delivery services.

2、 Core competitive advantage

Policy Empowerment and Cost Advantage

By utilizing the policy of "opening up the first line and regulating the second line" of Hainan Free Trade Port, the comprehensive cost of importing mixed crude oil ESPO is 10% -15% lower than that of the mainland.

 After the closure operation in 2025, the company plans to expand its transit trade, with a target monthly export volume of over 100000 tons, and further improve its profit margin through the policy of "processing value-added exceeding 30% without tariffs".

Digital operational capability

Independently develop a smart oil supply chain platform that integrates functions such as supply and demand matching, online bidding, logistics tracking, and financial services.

 The platform integrates customs, maritime and other regulatory data to achieve online import declaration, inspection and quarantine processes, and improves customs clearance efficiency by 50%.

 In 2024, the platform will match a trading volume of 150000 tons.

Flexible customized services

Customer segmentation: Provide "price lock and supply guarantee" services for shipping companies, locking in price fluctuations within 3 months;

 Design a "quantity based settlement" plan for downstream customers to reduce prepayment pressure;

Product Innovation: Launch the "Bonded Diesel Storage and Distribution" service, allowing customers to flexibly allocate domestic and foreign resources according to their needs;

Value added services: United Bank launches the "Oil Trade Connect" supply chain finance product to provide low interest financing for small and medium-sized customers.

3、 Development Status and Future Planning

Market Size

Achieve revenue of 2.8 billion yuan in 2024, a year-on-year increase of 35%;

 The market covers China and three Southeast Asian countries, with over 300 end customers.

Policy opportunities

Benefiting from the "processing value-added duty-free" policy of Hainan Free Trade Port, we plan to carry out EN590 blending business in 2025 to enhance product added value;

4、 Qualification and Compliance System

Core qualifications: Possessing a hazardous chemical business license, customs AEO advanced certification enterprise qualification, and ISO9001 quality management system certification;

Compliance management: Establish a "five in one" risk control system (resource procurement, warehousing and logistics, transaction settlement, safety and environmental protection, legal compliance).