In throwing a lifeline to the ailing owners of non-branded
petrol stations that once sold four-fifths of China's motor
fuel, Beijing will undermine the power -- and the profits -- of
its two top oil firms, which now weild significant authority.
"It's a major, major breakthrough. The two majors have
managed to dominate the market with one thing -- supply. And if
that is changing, it will be a very interesting development,"
said Yan Kefeng, of Cambridge Energy Research Associates.
The change may also open new doors for international majors like
Shell , BP and Total who are eager to
expand their retail foothold in the world's second-biggest oil
consumer without being tied to one of the domineering duo.
The policy was approved by the State Council last week and
expected to be announced by the National
Development and Reform Commission, the top economic policy
body, the source, a representative for independent dealers who
was informed about the government document. Official announcement is expected in the coming week or two.
China's cabinet also ordered the state oil firms to
guarantee a profit margin of 5 to 7 percent for the hundreds of
dealers wholesaling fuel and diesel, and to supply fuel and diesel to independent retailers, or petrol station
operators, with a set profit of 4.5 percent or more, said the
industry veteran, who operates his own wholesale business.
"It's been a struggle for the independents for nearly 10
years. We are very grateful to the government for the new
policy, which we believe will benefit the country as well as
hundreds of thousands employed at these firms," said the
representative, who declined to be named due to the sensitivity
of the issue.
The independents, who distributed as much as 80 percent of
China's fuel through most of the 1990s, were effectively
squeezed out of business after 1998, when Beijing launched a
massive industry overhaul to create the two powerful state
firms.
Although most are now shuttered due to their inability to
secure supplies from the major refiners, there are still about
600 wholesalers, about a quarter of the country's total.
The source said that number could fall to 100 by mid-year,
however, as they struggle to comply with a government screening
process started at the beginning of 2007 that sets tough
criteria such as sufficient storage facility."Those who meet the entry threshold will benefit from the
new policy. We support the government screening. The market
needs that," said the source.
The source said that PetroChina and Sinopec had been
notified of the new policy. A Sinopec fuel marketing official
told local media that he had heard of the decree but not yet seen
it, and that Beijing might find it difficult to implement.
Cera's Yan said the policy may help China fight the fuel
shortages that have become more frequent in recent years, as
the unabating rise in crude oil prices hammers margins for
refiners, who are forced to sell their gasoline and diesel at
low domestic prices set by Beijing.
Last autumn, rather than lose money, the big refiners opted
to cut back production and sales, analysts say, causing a
shortage that spread from the booming coast to inland regions.With more
competition, Beijing hopes that won't recur. "A well-functioning market
is key to supply security. That
has been proved in many regulated and un-regulated markets,"
said Yan.
PetrolWorld 010308
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