China Drafts New Rules Easing State Oil Majors' Grip On Storage
Beijing on Wednesday issued a draft of new regulations
for China's growing oil and fuel storage industry,
helping loosen the state-owned oil majors' grip on the
sector as the nation pushes to reform its vast energy
The government is looking to update storage policies
issued in 2006, consolidating regulations for crude oil
and rules for oil products under a single framework.
The main change proposed is to remove the requirement for
distributors and storage companies to have secure and
steady supplies of refined products, a condition only
state majors like Sinopec and China National Petroleum
Corp can meet. The clause will still exist for crude oil.
"(The draft) has lowered the threshold for entry to the
wholesale and storage industry," said Dong Xiucheng, a
professor at the China Petroleum University.
"The new draft emphasizes storage capacity first ... As
long as you have enough storage capacity, you can apply
to enter the industry."
The draft proposal has also tweaked the tank capacity
obligations from the 2006 document.
If the draft is implemented, companies must have a
minimum storage tank capacity of 200,000 cubic metres to
distribute and store crude oil and at least 20,000 cubic
metres for refined products. Experts and traders said
those requirements were in line with industry averages.
To only do one of those - either distribution or storage
- the requirements are halved to 100,000 cubic metres and
10,000 cubic metres respectively.
That compares with a minimum of 500,000 cubic metres for
a company to store crude and 200,000 cubic metres to sell
it in the 2006 document. To sell or store refined
product, according to those regulations, a company must
have at least 10,000 cubic metres of storage.
Another draft rule change would require storage companies
and wholesalers of crude oil or refined oil products to
apply for a permit from the provincial government, which
will be subject to approval from Beijing.
Many traders and executives at independent refiners often
known as "teapots", which could benefit from the changes,
were still digesting the document.
"We don't know what to make of this new regulation. It's
unclear whether we can apply to trade crude in China," a
trader with an independent refinery said.
Other regulations were largely in line with existing
rules, such as the clause that stipulates Chinese
companies must hold the majority stake in any firm with
more than 30 retail outlets. BP and Shell operate gas
stations in China through joint ventures with state-owned
companies like Sinopec.
The document comes after the government said in May it
would allow private companies to invest in its oil and
It also comes as Chinese authorities prepare to launch
the nation's first crude oil futures contract, which will
set a benchmark price for domestic oil using both local
production and imports.
Aug. 19 is the deadline for public feedback on the draft