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Proposal Triggers Complaints from Private Oil Firms

China's independent oil firms are unhappy at government plans for the opening-up of the finished oil wholesaling sector. 

The Ministry of Commerce published a proposal on Thursday outlining the requirements for companies wishing to operate in the finished oil wholesaling business once the market is freed up next year.


The new policy would require firms wishing to take part have at least two years' experience in the domestic finished oil retail market and own, or have shares in, at least 30 gas service stations.


The proposal also insists firms have oil tanker capacity of at least 4,000 cubic meters, a registered capital of more than 100 million yuan (US$12 million) and outlines other safety and environmental protection requirements.


The proposal has triggered complaints from the country's privately-held oil companies.


"The threshold is too high for us to participate in the wholesaling market when the finished oil business opens up," said Zhao Youshan, vice president of China Chamber of Commerce for Petroleum Industry (CCCPI), the country's first association for independent oil firms.


"Almost none of the domestic privately-owned oil companies have 30 service stations -- they only have eight to 10 at most," Zhao told China Daily on Friday.


Independent firms own some 30,000 of the country's total 80,000 gas service stations, but ownership is massively fragmented, he added.


"Industrial policy in China's oil sector has long suffocated the aggressive expansion of independent oil firms wanting to join the finished oil business," said Zhao.


Yu Chun, president of Jiangyin Daxin Petroleum Co. Ltd., a medium-sized privately-owned oil company in east China's Jiangsu Province, felt similarly frustrated.


"I'm getting confused about whether the central government is promoting non-state-owned business in the world's fastest growing economy or trying to strangle it," he told China Daily on Friday.


"Few independent firms will be able to survive the new policy," Yu said.


Wang Degang, the oil chamber's deputy secretary-general, told China Daily the association will hold a meeting next Monday to discuss counter-measures.


Industry analysts said the government's move aims to rationalize oil business growth. "The government has good reason to raise the qualifying standards for handling oil wholesaling in China," said Zhou Fengqi, former director of the Energy Research Institute at the National Development and Reform Commission.


"The move will force oil firms to restructure into conglomerates to fend off the inevitable fierce competition from foreign market players when the oil business opens up," he added.


(China Daily June 4, 2005)

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