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Wednesday, 12 December, 2001, 13:22 GMT
Oil giants to sell petrol in China
Sinopec web page
China's state-owned oil companies will retain control
BP is spearheading a massive push by international oil giants into petrol retailing in China.

The UK energy group has entered into a joint venture with China's second biggest state-owned oil firm, Sinopec, to set up a chain of 500 petrol stations in the New Year.

Royal Dutch Shell and the US group ExxonMobil are believed to be hot on BP's heels, with Sinopec chairman Li Yizhong confirming that talks with both these oil giants are ongoing.

The joint ventures will be the first time China has officially allowed foreign companies into the lucrative retail market for gasoline and diesel fuel, although some have already run a handful of petrol stations by acquiring private ones, the official China Daily newspaper reported.

Marketing drive

Petrol stations all over China have been lavishly revamped in the last couple of years.

Now even forecourts on the edge of small provincial towns sport floodlit, logo-covered canopies and modern pumps.

Demand for retail petrol and oil is growing at 4.5% a year.

Private car ownership has soared since China opened its market to foreign auto-makers in the 1980s and the days when state-built, slat-sided Dongfeng (East Wind) trucks were the major traffic on the highways are long gone.

Lucrative regions

The BP-Sinopec joint venture will get a headstart in the market by being established in the prosperous east coast province of Zhejiang.

"We would take 500 existing well-managed petrol stations in well-positioned cities like Ningbo to found the joint venture with BP in East China's Zhejiang Province,'' Mr Li said.

Similar regions are pencilled in for Shell, which would operate in Jiangsu province, and ExxonMobil, in Fujian.

Under the terms of China's entry into the World Trade Organisation (WTO), which took place this week, foreign firms will be allowed 49% ownership of petrol retailing joint ventures within three years.

Mr Li said Sinopec would take an initial 60% slice of the new venture but gave no other details.

BP says its investments in China are "the largest of any foreign oil company" and worth $3.5bn.

The investments attracted protests from human rights groups at its annual shareholders' meeting.

In 2000, BP spent $378m to acquire a shareholding in Sinopec at the time of the company's $1.43bn flotation on the Shanghai Stock Exchange, which was China's biggest ever stock market debut at that time.

BP also bought a stake a stake in PetroChina for $578m.

A spokeswoman for BP in London was unable to say if the Chinese forecourts would be rebranded in BP's distinctive green and yellow colours.

See also:

07 Aug 01 | Business
China stocks reel as rulers disagree
26 Jul 01 | Business
China's 'firewater' to float
01 Mar 01 | Business
China's stocks near record
19 Feb 01 | Business
China reforms stock market
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