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Break up of State oil monopoly?

Updated: 2013-09-26 00:41
By Bao Chang and Du Juan ( China Daily)

Those who cooperate with CNPC and Sinopec as their oil suppliers need to provide a supply contract of more than three years to the local government in Chongqing municipality and others are required to have their own oil storage with ample reserves.

"This requirement represents a big burden for private oil station owners," Ye Tan, a renowned financial commentator wrote in her blog.

"CNPC, Sinopec and CNOOC own the franchise of oil exploration, so we can't exclude the condition that they discriminate against downstream enterprises at the oil refining and retail segments, taking advantage of their control of the industrial upstream. When crude oil production is limited, main SOEs may decrease their supply to other refining companies, which would suffer production reductions in that case," said Xu.

In order to ensure the safety of the non-renewable energy oil, the presence of three national petrol companies in the exploration development sector, which is considered an administrative monopoly, conforms to common international practices, according to Xu.

However, the government still needs to find ways to further ease market access in the oil refining and retailing sectors to offset the influence of the administrative monopoly in the exploration sector, Xu added.

Engaging in businesses including refining, oil chemicals, oil stations and lubricating oil in China, multinational oil and gas company Royal Dutch Shell Plc now runs more than 600 petrol stations in the market, data from the company's website show.

Kang Yan, a senior partner at Roland Berger Strategy Consultants (Shanghai), said that Shell Oil Co has been striving to expand its petrol station network in China as part of its efforts to deepen the company's global presence.

"This represents Shell's decision for a long-term development in the Chinese market," Kang added.

Shell operates its independent-branded oil stations in China through acquisition and lease deals. In addition, the company also jointly established hundreds of oil stations with Sinopec.

More competition in the industry would be beneficial because oil prices would decrease once competition becomes fierce and service at petrol stations would also improve, according to Kang.

"If all the petrol station retailers, State-run, foreign and private, could sell the finished-oil products explored by CNPC, Sinopec and CNOOC, a competitive tendency would be formed among the three oil majors in the finished oil market. Each would choose oil products with low prices and good quality," Xu said.


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