Draft rules for oil-trade cause concern

September 01, 2006 | BY

clpstaff

By the end of 2006, pursuant to its agreement with the World Trade Organization, China will allow foreign companies into the business of distributing petrol…

By the end of 2006, pursuant to its agreement with the World Trade Organization, China will allow foreign companies into the business of distributing petrol and other oil products from refiners to filling stations, which to date has been dominated by the state-owned Sinopec and PetroChina.

Foreign oil companies are currently allowed to operate a limited number of filling stations independently or as part of a larger network with domestic partners.

However, The Wall Street Journal reports that a draft version of the new distribution rules is vague on major points about the requirements for licences and what exactly it allows. This is causing some concern for foreign companies that are eager to gain wider access to China's growing market for oil and to develop their strategies for market entry at a wholesale level.

According to a general representative of French energy company Total, the Ministry of Commerce's draft regulations leave unclear whether the minimum of 30 filling stations can be accessed on a national basis or will be counted on a provincial basis. Other opaque areas in the rules are whether foreign distributors are required to build their own depots and whether a wholesale licence will allow the distribution of petrol and other oil products to filling stations not owned by the foreign companies.

The final rules may emerge just days before the December 11 2006 deadline to meet the WTO agreement and are expected to become effective from January 1 2007.

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