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Oil wholesale market heats up

By Wang Yu (China Daily)
Updated: 2007-05-26 07:07

New players in the oil products wholesale industry are set to get down to business following the commerce authority's distribution of the first bunch of licenses on Thursday.

"We expected to win an oil products license wholesale because we meet all the requirements. Next we will step up efforts to build up a sales network for our new refinery, which will be on-stream soon," Liu Junshan, a spokesman for Beijing-based China National Offshore Oil Corporation (CNOOC), told China Daily on Friday.

The Ministry of Commerce (MOFCOM) disclosed on its website on Thursday that it had granted oil products wholesale licenses to eight State-owned and private companies, the first batch of new players to enter the industry since the oil products wholesale sector was deregulated last December.

CNOOC Refinery Co Ltd is one of the eight newcomers. Its Guangdong Huizhou refinery is under construction and is to be on-stream next year.

"With a wholesale license, we can start securing sales for the refinery. We will try every means possible, including acquisitions and self-construction, to get access to sales terminals in South China," Liu said.

The CNOOC spokesman was tight-lipped about how many filling stations his company was planning to either build or buy for the refinery. He did say his company would adopt a flexible market approach to establishing a scale sales network in South China.

The eight new players entering the market are: CNOOC Refinery Co Ltd and its sales subsidiary, Sinochem International Oil Co, as well as subsidiaries in Guangdong, Jiangsu and Zhejiang provinces; Sichuan Ludi Oil Sales Co Ltd; and Wuhu Erhuan Oil Co Ltd.

Cao Xiaoxi, chief engineer of Sinopec's Economic and Development Research Institute, said most of the newcomers are based in South China because the fuel supply is tight there. It also boasts high economic growth.

A senior press manager with Sinopec, Asia's top refiner, said having new players in the market would surely heat up competition, though Sinopec and PetroChina's dominant positions would not be shaken in the short term.

"That is because China's oil supply is tightly controlled by PetroChina and by us. Also, it is not easy to import a large quantity of crude under the quota system or to build up a widespread sales network in a short period of time," the press manager said on condition of anonymity.

Altogether, 2,512 companies in China own oil products wholesale rights, including the newly approved eight, according to the MOFCOM. The ministry's statistics show that 1,654, or 65.8 percent of the country's oil product wholesalers, are run by PetroChina and Sinopec.

(China Daily 05/26/2007 page10)