China Allows Private Companies to Import Oil

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Last updated at: (Beijing Time) Monday, January 14, 2002

China Allows Private Companies to Import Oil

China will for the first time allow private companies to import crude oil and refined oil products this year. However, analysts say the change will have little effect on the State-dominated sector because of weak market demand.

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Little effect on state-owned sector

China will for the first time allow private companies to import crude oil and refined oil products. China plans to allow other companies besides the present four State-designated traders--Unipec, Chinaoil, Sinochem and Zhuhai Zhenrong Corp -- to import 7.2 million tons of crude oil and 4 million tons of refined oil,such as diesel and gasoline, this year.

The new importers can be either private-run or State-owned,according to China's commitment to the World Trade Organization (WTO).

However, analysts say the change will have little effect on the State-dominated sector.

An analyst at a Sinopec research center, who wished to be unnamed, said, "I would not call the opening-up a breakthrough."

"Even though they could import crude oil, private companies may have difficulty in selling it, as most of the refineries are controlled by the two State companies, Sinopec and PetroChina."

The two companies' refineries process more than 90 percent of the crude oil in China.

Weak market demand

According to the WTO requirement, China's non-State companies can increase their crude oil imports by 15 percent per year for the next 10 years.

Their refined oil imports will also be allowed to rise by 15 percent until 2004, when the import quota on refined oil is eliminated.

As required by the WTO, China lifted the import ban on gasoline and diesel to allow as much as 16.58 million tons of refined oil to come in this year, including 4 million tons for non-State companies.

A spokesman for Sinopec, the largest refined oil supplier in China, said imports by these companies are unlikely to reach 4 million tons "because they lack the retail outlets to sell imports."

Domestic refineries suffered dismal losses last year because of weak market demand and price drops.

Insiders are concerned, if imports increase sharply, the market -- slightly oversupplied --will be hurt.

Starting this year, tariffs for gasoline will drop to 5 percent from 9 percent, and diesel will remain at 6 percent.

China will open the retail market for refined oil to foreign companies in three years and the wholesale market in five years.

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