By Zhang Bin (张斌)
Issue 588, Sept 24, 2012
News, page 5
Translated by Zhu Na
Original article: [Chinese]

Recently the EO met with three people working in the Chinese oil industry, they didn't want to be identified by name, so let's just call them Messrs Li, Wang and Zhang.

We talked to them about the new rules aimed at encouraging private investment in China's oil industry.

On June 20, the National Energy Administration issued new guidelines that aimed to encourage and guide private investment in the energy sector. All the projects listed in the national energy plan, aside from those that have otherwise been clearly prohibited by law, are now open to private capital.

However, there were no provisions that mentioned opening up the right to import crude oil that industry players say is the main factor that puts private companies at a disadvantage.

Mr. Li, the owner of a small chain of private gas stations (he used to own five but now only has two), told us that these new rules will have no effect on China's oil industry.

Mr. Wang, chairman of a local refinery in Shandong province, said not only will the new rules not change anything, they'll actually strengthened the position of the monopolies. There was still a bit of competition before, however, after the policy is introduced, which adds additional conditions, there won't be any competition at all."

Mr. Li agreed with him, and said "before the "New 36 Clauses" came out, there were many private gas stations, [the number of private gas stations] gradually reduced in these two years ... At the end of 2010, Sinopec purchased 38 private gas stations in Shandong."

Mr. Zhang, the general manager of a provincial-level state-owned oil group, noted that "even we are kept out of this, it's becoming harder and harder for us to do business, let alone for those private companies."

Zhang Yue (张跃), Chairman of the Petroleum Chamber of Commerce said that allowing private companies to import both crude and refined oil is currently the most direct way to break the grip of the monopolies. It's only when they have control of oil sources that private companies will have the basic conditions to compete."

At a conference in August, Zhang Yue explained how the three big state-owned companies dominated the domestic oil industry.

Zhang said that CNPC (China National Petroleum Corporation), Sinopec (China National Petroleum & Chemical Corporation) CNOOC (China National Offshore Oil collectively controlled over 95 percent of the crude oil either produced or imported into China. The three companies also had close to 80 percent of the country's oil refining capacity. CNPC and Sinopec and their subsidaries also control over 75 percent of the distribution network and own more than half of the country's gas stations.