China has given the green light to two feasibility studies to set up 500 joint-venture petrol stations proposed by PetroChina and Britain's BP in Guangdong province and, another 500 by Sinopec and the Royal Dutch/Shell Group in the East China's Jiangsu Province, said sources.

The two projects mark the first Sino-foreign deals in China's petroleum and chemicals sector following the country's accession to the World Trade Organization (WTO) roughly two years ago.

The joint venture between Sinopec and oil major Royal/Dutch Shell would cost US$200 million, said a Sinopec official yesterday.

The official said Jiangsu is China's third largest oil consumer following Guangdong and Zhejiang provinces, with annual demand for gasoline and gas oil estimated at a combined 8 million tons.

However, Shell's Beijing-based spokesman Nick Wood said the firm had not officially obtained the approval from the Chinese Government.

The go-ahead for the Sinopec-Shell feasibility study comes after two years of negotiations during which China's State oil firms raced to build a market share in the wake of mounting competition by foreign counterparts.

Shell, BP and ExxonMobil won an entry ticket to the world's fastest growing retail oil market in 2000 by paying a combined US$2.65 billion for equity in the initial stock offerings of Sinopec, PetroChina and CNOOC. As part of the package, each firm was offered the chance to jointly build or acquire 500 petrol stations in the bustling East and South of the country.

In the Shell/Sinopec venture, the former will hold 40 per cent and the latter 60 per cent.

The joint ventures will supply oil to seven Jiangsu cities, including Nanjing, Wuxi, Zhenjiang, Suzhou and Xuzhou.

In the PetroChina joint venture in Guangdong, with registered capital of 12.76 million yuan (US$1.54 million), BP is expected to contribute 3.17 million yuan (US$0.38 million) to the deal, said the sources.

The joint venture aims to turn over annual sales equivalent to 2.5 million tons of oil, accounting for one-fourth of the province's total.

China's refined oil retail market is expected to be open to foreign investors by the end of this year according to the country's WTO commitments.

Guangdong is the largest oil product consumer in China with 5,500 gas stations but no more than 500 of those service stations in the province recorded an annual sales volume of more than 5,000 tons each.

Close