China issues new regulations for wholesale oil market

Chinas Ministry of Commerce issued a regulation governing the administration of the oil product market on December 4, 2006, with effect on January 1, 2007. The regulation was published mainly to fulfill China’s WTO commitment to open its wholesale market for oil products by the end of 2006. Presently, the wholesale market for oil products is monopolized by China Petrochemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC). Compared with the interim regulation issued in 2004, the new regulation focuses on the following: opening of the domestic oil products market; requirements for oil product licenses; strengthening of the examination and approval process; and, implementation of supervision and inspection by government authorities. According to the regulation, a license system will be implemented to regulate the operation of the domestic oil product market in China, including oil product wholesale license (OPWL), oil product storage license (OPSL) and oil product retail license (OPRL). The new regulations raised the market access thresholds for enterprises, which are required to have a minimum registered capital of RMB100 million (US$12.82 million) to gain crude oil wholesale rights. Companies applying for refined oil wholesale rights are required to have a refining capability of at least 1 million tons or a minimum annual output of 500,000 tons. (January 10, 2007)