Sinochem, Total setting up joint venture By Xie Ye (China Daily) Updated: 2004-10-11 08:39
Sinochem Corp, the fourth largest State oil company in China, signed an
agreement with France's TotalFinaElf on Saturday to establish a joint venture to
market oil products in North China.
The agreement accompanies the ongoing visit of French President Jacques
Chirac to Beijing. The deal will allow Total to become the fourth foreign giant
to build a stronghold in China's fast-growing retail market for oil products,
after its global rivals BP, Royal Dutch/Shell and ExxonMobil.
According to the agreement, Sinopec and Total will invest 900 million yuan
(US$108.8 million) in the joint venture. Sinochem will hold 51 per cent.
The JV is expected to build 200 petrol stations in Northeast China's Liaoning
Province, North China's Hebei Province, Beijing and Tianjin in seven years.
Sinochem said in a statement that the annual gasoline and diesel sales of the
joint venture would reach at least 800,000 tons by 2012.
The agreement, however, is still subject to central government approval.
Total's move reflects a fresh wave of foreign investment in China's once
tightly controlled retail oil market. As the market is to open to foreign
companies by December according to China's commitment to the World Trade
Organization, foreign giants are teaming up with domestic companies to deploy
their presence in the lucrative market.
In May, BP and Shell clinched separate deals to form joint ventures with
Sinopec and PetroChina the two largest domestic oil companies to operate 1,500
service stations in the booming coastal provinces of Zhejiang, Jiangsu and
Guangdong during the next three years.
The long-awaited deals mark the first time that China has officially allowed
foreign companies into its retail oil market.
In August, ExxonMobil agreed with Sinopec to manage and operate more than 600
service stations in Fujian Province.
"Every big foreign company is craving to create a niche in China's retail
market for oil products, which now is one of the fastest growing markets in the
world," said Han Wenke, deputy director of the Energy Research Institute of the
National Development Reform Commission.
Saturday's deal is also a breakthrough for the government in lifting its ban
on new domestic players in the retail oil market, analysts said.
Since 2001, the government required that no companies other than Sinopec and
PetroChina be allowed to build new service stations. The government hoped the
move could help the big two sharpen their competitiveness to fend off
competition from foreign giants before the market is opened.
Sinopec and PetroChina now own more than half of the 80,000 petrol stations
in China.
As the market opens to foreign investors, the industry expects that domestic
firms such as Sinochem and China National Offshore Oil Corp - China's third
largest oil company - will be able to obtain retail licences and build service
stations.
