Monday, August 18, 2003
Shell wins approval for 500 petrol stations in China
Reuters Singapore, August 18
Royal Dutch/Shell has pipped ExxonMobil and BP to win government approval to set up 500 petrol stations in China, becoming the first foreign oil firm to get a foothold in the fast-growing retail market.
The government has given the green light to the results of a feasibility study by Shell and China Petroleum and Chemical Corp (Sinopec) which proposes a $200 million joint venture to run service stations in Jiangsu province, in the east of the country, a Sinopec official said.
"The approval means that the Chinese government officially recognises the project," said the official in Jiangsu province, China's third-biggest oil consumer market.
But Shell's spokesman in Beijing, Nick Wood, said the firm had heard nothing official yet from the Chinese government.
At stake is access to the retail side of the world's fastest growing major economy, where new car sales topped one million in 2002 and grew almost 80 per cent in the first half of 2003 over the same period last year.
Industry sources expect BP and ExxonMobil to receive approval for similar ventures now Shell and Sinopec are going ahead.
The approval comes after about two years of negotiations during which China's state oil firms raced to build market share before competition kicked in.
OTHER DEALS TO FOLLOW
Shell, BP and ExxonMobil won entry tickets to the state-controlled retail market in 2000 when they bought a combined $2.65 billion worth of shares in stock offerings of Sinopec, PetroChina and CNOOC Ltd
As part of the deal, each firm was offered the chance to build or acquire with Chinese partners 500 petrol stations in the bustling east and south of the country.
"China can't just approve Sinopec. Others should follow soon," said an oil marketing executive with PetroChina, China's largest oil and gas company. Sinopec will hold 60 per cent of the new venture, while Shell will hold 40 percent.
The firms plan to operate petrol stations supplying seven of Jiangsu's cities -- Nanjing, Suzhou, Lianyungang, Wuxi, Zhenjiang, Xuzhou and Changzhou, said Wood from Shell.
The Sinopec official said the Jiangsu market is the third biggest in China, behind Guangdong province in the south and Zhejiang province in the east, with annual demand for gasoline and gas oil estimated at a combined eight million tonnes.
Oil demand in China is expected to grow nearly five per cent this year to 5.19 million barrels per day, overtaking Japan as the world's second-largest oil consumer after the United States by 2004, the Paris-based International Energy Agency has said.
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