Chinese private oil companies forced to close shop due to lack of supply

Private oil companies are struggling to survive in China in the face of high oil prices, crude oil supply shortages and the country’s monopoly set up in the oil sector. “This is a critical time for private Chinese oil companies,” said Zhao Youshan, director of the Oil Circulation Commission, a think tank under the China General Chamber of Commerce. According to him, a few years ago there were 663 private oil wholesalers in China, but this figure has since fallen by about two-thirds due to oil shortages. For this reason, around one-third of the 45,000 private service stations in operation just a few years ago have packed up shop. In China, a few state-owned oil companies, such as China National Petroleum Corp. (CNPC) and China Petrochemical Corp. (Sinopec Group), control oil exploration and production. Since these state-owned oil companies have their own downstream businesses, they do not prioritize petroleum product sales to private oil companies, Zhao said. However, Sinopec planned to provide 2.5 million tons of crude oil to private ‘teapot’ refineries in East China’s Shandong Province this year, including one million tons from Northwest China, according to an internal document of the company. An official from Sinopec’s branch in Shandong once unveiled its plan to provide crude oil to local private refineries coming from Xinjiang, Zhongyuan Oilfield and Shengli Oilfield. Sinopec supplied crude oil to local refineries at the price of 6,570 yuan (US$959) per ton and repurchased diesel oil at 8,500 yuan (US$1,240) per ton in July, according to sources from local refineries. (August 25/September 3, 2008)