China: Majors line up to dominate forecourts
Following its accession to the World Trade Organization in December 2004, the country's retail oil market is set for a period of change that will see it dominated by Sinopec and PetroChina, supported by three international oil majors, says a report by Hawaii-based consultants Facts Inc.
The two state-owned companies, which hold over 60% of the country's retail sites, will dominate the sector, but international oil majors, notably BP, Shell, and ExxonMobil, will make important financial and technical contributions. That structure, predicts Facts Inc, will dominate China's retail market at least until 11 December 2006, when Beijing officially opens the wholesale oil market to foreign investment. "With their advanced technologies, and marketing and management skill, the joint-venture retail business is expected to develop fast."
However, for the time being, Facts Inc says there will be "limited room" for building more gasoline stations. Instead, the industry will mainly focus on merging and acquiring existing assets.
With such a large combined share of the market, there is little chance of the dominance of the two state-owned companies being challenged for a long time to come. In November 2004, Sinopec Corp took over 1,023 gas stations from its parent company, Sinopec, bringing the number of sites it operates to more than 31,000. PetroChina owned around 16,700 at year-end 2004. Nonetheless, important financial backing and marketing know-how will be provided by the Western firms.
Facts Inc says BP plans to jointly own over 2,000 forecourts in the country. A joint venture, BP PetroChina Petroleum, was set up in South China in November 2004 and is expected to operate 500 retail stations following a total investment of about Rmb4.7bn ($0.566bn). Another BP joint venture with Sinopec, Sinopec BP (Zhejiang) Petroleum, started up in November 2004, with an aim of owning 500 gasoline stations in eastern China's Zhejiang province.
In August 2004, Sinopec Shell (Jiangsu) Petroleum Marketing was set up in Nanjing, planning to acquire or build and operate 500 gas stations with a total investment of Rmb1.55bn over the following three years. In the same month, ExxonMobil set up a joint-venture sales company with Sinopec and Saudi Aramco in Fujian Province. Sinopec holds 55%, while ExxonMobil and Saudi Aramco each hold 22.5% in the company, which will operate 600 retail stations. ExxonMobil and Sinopec will team up for another project involving 500 gasoline stations.
France's Total signed an agreement with Sinochem, the country's fourth-largest state-owned oil company, in October to establish a joint venture to market oil products in the northeast and north. The joint venture is expected to build 200 gasoline stations.