Sinopec given approval for private capital injection

Asia's largest refiner, China Petroleum and Chemical Corp (Sinopec), said on Tuesday that it has received approval for a 107.1 billion yuan ($17.2 billion) capital increase for its marketing subsidiary, a big step in the country's mixed-ownership reform of State-owned enterprises.

Sinopec said that the National Development and Reform Commission, the top planning agency, and the Ministry of Commerce had approved the cash injection by 25 foreign and domestic investors into Sinopec Marketing Co Ltd.

The investors will own 29.99 percent of the unit and Sinopec will own the rest. The transaction is in progress, according to the company.

Fu Chengyu, chairman of Sinopec, told reporters last year that the company will pursue mixed-ownership reform to share the benefits of its operations with private and social investors.

He said Sinopec will become a full service provider instead of merely remaining an oil company, which he called a "big dream".

As a start, the company began to provide dining, car washing and online-shopping package claims at its retail fuel stations late last year.

"Any consumer-goods manufacturer would like to sell its products through Sinopec's platform," Fu said.

Sinopec Marketing is considering a listing plan, according to a source close to the company.

Lyu Dapeng, a representative of Sinopec, said during a previous interview that bringing private investors into its retail segment is just a start, and the company has more projects underway.

Investors see Sinopec's huge client base, with about 80 million drivers and more than 30,000 fuel stations (80 percent of which have convenience stores), as a platform for many businesses, said Li Li, research and strategy director at ICIS C1 Energy, a Shanghai-based energy consultancy.

Cooperation with other companies will help Sinopec increase its non-fuel profits by drawing on expertise from other sectors.

In the West, the non-fuel business accounts for more than 50 percent of a fuel station's profits. In the United States, the proportion can be up to 69 percent.

However, 99 percent of Sinopec's retail sales at its fuel stations come from gasoline and diesel, which means there is huge potential for change.

Affected by overcapacity in China's oil refining industry, Sinopec's major business unit－refining－has been losing money for years.

Improving its financial performance is a longstanding strategy of the company, said Li Yan, oil analyst with Shandong-based energy consultancy Longzhong Information Technology Co.