The Ministry of
Commerce yesterday announced qualifications for companies to
apply for licenses to run retail and wholesale businesses dealing
in oil products or oil storage.
The regulation virtually lifts a three-year ban forbidding
companies other than Sinopec and China National
Petroleum Corp (CNPC), China's two largest oil companies, to
build new filling stations.
China is now set to allow foreign investors to sell oil from
this Saturday in line with World Trade Organization
requirements.
According to yesterday's announcement, applicants for retail
businesses should have oil supply contracts with legal wholesalers
and must fit with development plans of local governments.
For wholesale and storage businesses, additional requirements
are needed, including storage facilities with capacity of no less
than 4,000 cubic meters, and other infrastructure such as
transportation pipelines, railways and wharves.
Industry insiders yesterday said many companies can meet the
qualifications, which are not as strict as they had imagined.
The regulation also allows new domestic companies other than
Sinopec and CNPC to build new service stations.
Since 2001, only Sinopec and CNPC have been allowed to build new
stations, the aim being to help them consolidate their market share
and fend off competition when the market opens up.
The government also revoked thousands of wholesale licenses, and
excluded companies other than affiliates of the 'Big Two' from
wholesale licenses.
"Despite a strong desire to invest in the market, many companies
have been shut out by the restrictions," said Di Jiankai, director
of the Ministry of Commerce's Department of Commercial Reform and
Development.
With government help and massive acquisitions in recent years,
the two companies now control 56 percent of the retail market,
compared with 40 percent three years ago. They also make up 90
percent of the wholesale market.
Analysts said the new regulation will not loosen control over
the wholesale market, which is due to open up in two years.
"They only set standards for wholesale business. This does not
mean new players can move in right now," said a Sinopec official.
"Wholesale restrictions are still effective."
According to yesterday's regulation, provincial governments can
approve applications for retail and storage business, while the
ministry has the final say on applicants for wholesale
business.
(China Daily December 9, 2004)