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Govt urged to open up crude oil import market

Govt urged to open up crude oil import market

A long line of trucks wait for a diesel refill near an oil station in Luding county, Sichuan province, on Oct 23.[Photo/ China Daily]

BEIJING - Some of the country's private-held oil companies are clamoring for the relaxation of the tight government control of crude oil imports to alleviate the widespread chronic diesel shortfalls during seasonal spikes.

So far the country's three biggest State-owned oil companies dominate more than 95 percent of China's crude imports. The small refiners and filling stations in the downstream sector suffer a shortage of raw oil when demand rises, as a result.

The dominance of oil sources by the biggest national oil conglomerates gives a distorted picture of the real market situation, which is deep at the root of the long-term diesel shortage during peak seasons, said Qi Fang, president of Zhangjiakou United Petroleum and Chemical Co, which runs six private filling stations in Hebei province.

China's fuel shortage is deteriorating since the demand hike during the autumn harvest amid the price cuts on fuel by the government in October that have largely eroded refiners' margins.

On Oct 29 the government ordered the country's top two oil refiners, Sinopec and PetroChina, to raise the amount of diesel distribution to areas in dire need and to avoid diesel shortfalls affecting the agriculture sector.

"It's absurd that this year's diesel shortage is occurring at a time when international crude oil supply is abundant and the crude prices are sliding," said Zhang Yue, president of China Chamber of Commerce for Petroleum Industry (CCCPI), a non-profit organization backed by the country's private-held oil companies.

Zhang, who chairs the Tadee Group, involved in petroleum storage services based in southeastern Zhejiang province, blamed the State-owned oil firms for hoarding oil that forced some local refiners to shut down, leading to a diesel shortage in the filling stations.

Sinopec, however, said on its website that its refineries were operating at full capacity, trying to meet the demand.

"We strongly ask for a more open and fair petroleum market, in which local oil companies are allowed to participate in the upstream oil exploration and import crude and fuel from overseas market, " Zhang said.

According to CCCPI's figures, the proportion of local filling stations have dropped from 60 percent to 40 percent in recent years after Sinopec and PetroChina tightened their controls of crude oil amid aggressive mergers and acquisitions for local refineries and filling stations.

"The number of local refineries will continue to shrink if the monopoly of top State-owned oil companies continues, which may lead to long-term diesel shortfalls in the market," Qi said.

Gao Yan, vice-director of Unirule Institute of Economics, a non-governmental economic research centre, however, warned that the opening up cannot be too bold at the very start.

He suggested the government introduce more State-owned oil companies besides the top three in the fray. The primary task is to increase the domestic supply before gradually opening the market to local companies, he said.


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