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China's Oil Wholesale Market Opens Up
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The oil product wholesale market in China will be open to domestic and foreign investors from next year, the Ministry of Commerce announced yesterday.

The opening of the wholesale business supplying gasoline and other oil products to filling stations will begin on January 1 and fulfills commitments made by China on entry to the World Trade Organization (WTO) five years ago.

The wholesale business has long been monopolized by two state-owned conglomerates China Petrochemical Corp (Sinopec) and China National Petroleum Corp (CNPC) the parent of US-listed PetroChina Co.

Under the new rules multinational giants such as BP, Exxon Mobil or Total can invest in the sales of gasoline, diesel and kerosene to retailers.

The opening-up will bring in new entities that include State-owned, multinational and private companies, said ministry spokesman Chong Quan. He said the two rules on processed and crude oil products would encourage market-oriented competition, enhance brand awareness and improve service quality.

Zhao Yuanheng, spokesman for BP (China), said that deregulation of the market would help diversify oil product supply and facilitate energy security as well as benefit consumers at the end of the service chain.

But an industry insider, who didn't wish to be named, cautioned that it would not be easy for newcomers to start a wholesale business. "Since the wholesale license is separate from import and export licenses it may be difficult for companies to enter the wholesale segment," he said. The insider called on the authorities to further deregulate the market by easing their grip on oil product imports. 

According to the two new regulations newcomers should have either an import license or a refinery to engage in the oil product wholesale business.

"For the crude oil wholesale business they've to own either an exploration license or an import license, plus storage facilities," said the insider. "If companies don't meet these requirements they can only collaborate with partners such as Sinopec or CNPC." 

The international trade division of the ministry wasn't available for comment on whether or when import and export controls of oil products would be lifted.

In accordance with WTO commitments China has already opened up the oil retail business allowing foreign companies to run a limited number of filling stations or to operate larger networks with Chinese partners.

(China Daily December 7, 2006)

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