The "exit" of private oil enterprises and "entry" of State-owned enterprises and foreign enterprises are the direct reasons for the above change. According to the Administrative Measures for the Product Oil Market issued by the Ministry of Commerce (hereinafter as the Measures), the stipulated industry thresholds are higher for private enterprises. The implementation of the Measures means demise for private enterprises without oil depots, dedicated rail lines, anchoring docks, stable long-term product oil supply channels.
In 2007, the concerned government department started to make annual qualification inspection of product oil operation enterprises. Those that fail to meet with the requirements of the inspection and cannot make rectification within a certain time limit will have their operation qualifications terminated. The China Chamber of Commerce for Petroleum Industry which represents the interests of private oil enterprises said that over 90% of the private enterprises in China do not possess or do not meet the re-application qualifications and will not be able to pass the annual inspection for 2007, thus these companies will not be able to obtain the new operation license.
Among the first group of 8 enterprises with the qualification for product oil wholesale operations released by the Ministry of Commerce in May, there is only one private oil enterprise. This shows the reality of marginalization of private enterprise. Facing a difficult development situation and operational pressures, many private oil enterprises in Shanghai, Zhejiang, Fujian, Shandong and Shaanxi opted for exit.
Compared with private enterprises' entrenchment, State-owned oil giants are taking advantage of the new policies and forging ahead with great strides. Among this year's first group of 8 enterprises with product oil wholesale operation qualifications, 7 belong to State-owned oil groups: 4 to SINOCHEM, 2 to CNOOC and 1 to CAOSCO. These three State-owned enterprises are emerging big State-owned oil groups in the product oil circulation industry, following CNPC and Sinopec.
Seizing the opportunity of its granting of product oil wholesale qualification, CNOOC has recently sped up its pace of "coming ashore". With the Guangdong Oil & Gas Association acting as go-between, CNOOC has made contact with 200 local private fueling stations over the matter of acquisitions. Negotiations about 150-160 of them are being round up. The above acquisitions along with the putting into operation of its Huizhou refinery project with an output of 7.30 million ton product oil will fast bring CNOOC into the product oil terminal field.
As for foreign oil giants' strategies in this round of market adjustment, they do actively take part in the acquisition and integration of private oil enterprises. For example, Shell, BP and Mobil have all participated in negotiations over the "package" sales of private oil enterprises. But, due to policy restrictions and oil source problems, foreign oil giants in the product oil circulation field will continue to choose to cooperate with State-owned oil giants. This model of both competition and cooperation will be further strengthened. This can be seen from the 3 enterprises of the 2nd group approved for product oil wholesale operations released by the Ministry of Commerce in June.
China's goal for building an oil market is to nurture diversified market entities, gradually form a market pattern with diversified oil sources and operational entities as well as differentiated brands and services, and establish a unified, open, competitive and orderly oil market system.
