The oil product wholesale market will be open to domestic and foreign investors from next year, the Ministry of Commerce announced Wednesday.

The opening of the wholesale business supplying gasoline and other oil products to filling stations will start on Jan. 1, and fulfills commitments made by China on entry to the World Trade Organization (WTO) five years ago.

The wholesale business has long been monopolized by two State-owned conglomerates China Petrochemical Corp (Sinopec) and China National Petroleum Corp (CNPC), parent of US-listed PetroChina Co.

Under the new rules, multinational giants such as BP, Exxon Mobil or Total can invest in the sales of gasoline, diesel and kerosene to retailers.

The opening-up will bring in new entities that include State-owned, multinational and private companies, said ministry spokesman Chong Quan.

He said the two rules on processed and crude oil products would encourage market-oriented competition, enhance branding awareness and improve service quality.

Zhao Yuanheng, spokesman for BP (China), said that deregulation of the oil market would help diversify oil product supply and facilitate energy security as well as benefit consumers at the end of the service chain.

But an industry insider, who did not want to be named, cautioned that it would not be easy for newcomers to start a wholesale business,

"Since the wholesale license is separate from import and export licenses, it may be difficult for companies to enter the wholesale segment," he said, appealing to the authorities to further deregulate the market by easing the grip on oil product imports.

According to the two new regulations, newcomers should have either an import license or a refinery to engage in the oil product wholesale business.

"For crude oil wholesale business, they have to own either an exploration license or an import license, plus storage facilities. If companies do not meet these requirements, they can only collaborate with partners such as Sinopec or CNPC," the insider said.

The international trade division of the ministry was not available for comment on whether or when import and export controls of oil product would be lifted.

In accordance with WTO commitments, the country has already opened up the oil retail business, allowing foreign companies to run a limited number of filling stations or to operate larger networks with Chinese partners.

(China Daily December 8, 2006)