Shandong provincial government mulls establishing a unified brand of oil products for independent refineries. Shandong Economic and Information Technology Committee (SEITC) on Sep 30 issued a proposal to municipal governments and related authorities that Shandong should step up a unified brand for local independent refineries petroleum products and encourage independent refiners to actively develop their own gas stations.
According to the proposal, SEITC encourages qualified refining enterprises to actively apply for refined oil wholesale business qualifications. The SEITC has already successfully applied for the oil wholesale right for nine independent refineries. According to the Management Measures on China Oil Product Market released by the Ministry of Commerce, any legitimate refinery with a topping capacity above 1-mil mt per year and national standard gasoline and gasoil output above 500,000mt per year can apply for the oil product wholesale right.
The proposal said the independent refineries should regard the development of oil product retail network as a key strategy.
Local governments should support and help independent refineries to set up some petrol stations, support refineries to establish varied cooperations with petrol stations. Refineries can buy stakes in, control, or rent petrol stations.
The SEITC said the Shandong independent refineries must establish a strong and unified product band to compete against state-run oil majors. The committee requested municipalities and county departments should play a role of coordinator and combine local independent refineries together to form a powerful force.
The committee also said that independent refineries should enhance cooperation with the two state-run oil giants Sinopec and PetroChina. The independent refineries can fully make use of the oil distribution channels of the two oil oligarchs.
Many obstacles ahead
In the face of the provincial government s proposal, independent refineries deem that the integration would be hard to realize in a short time due to many obstacles.
Refineries have been long afflicted with feedstock problems and incomplete oil products sales network. Integration of effective resources is conducive to improve competitiveness of independent refineries. However, the proposal didn t tell the details on how to conduct the integration, thus independent refineries are not optimistic about the feasibility.
Shandong has numerous independent refineries that have large differences in production capacity, sales channels and transportation means, so larges refineries with obvious advantages not enthusiastic about the proposal.
Unless the government provides effective subsidy policies, the unification and integration may be hard , a source with an independent refinery in Shandong said. This kind of integration was proposed long ago, we are numb to the proposal , said another refinery source.
In addition, product quality issues make it difficult for independent refineries to step into the oil retail market, according to refinery sources. At present, only very few independent refineries, such as Dongming Petrochemical, Jingbo Petrochemical etc., can produce national standard petroleum products that can go straight to the petrol stations, while most refineries products need to be blended before being put onto the retail market.
Moreover, Shandong province now has around 90,000 petrol stations, so the oil retail market is almost saturated. If independent refineries want to enter into the retail market, they can hardly set up many new stations and have to acquire existing private-run petrol stations. This would need a huge capital, which is a big problem.
As early as in 2004, Shandong Chamber of Petroleum and Clean Fuel Industry Commerce (transliteration) made a similar proposal about integrating independent refineries product brands, prices, sales channels and sales. This proposal has not been put into practice due to lack of government support and varied responses from refineries.
According to the proposal, SEITC encourages qualified refining enterprises to actively apply for refined oil wholesale business qualifications. The SEITC has already successfully applied for the oil wholesale right for nine independent refineries. According to the Management Measures on China Oil Product Market released by the Ministry of Commerce, any legitimate refinery with a topping capacity above 1-mil mt per year and national standard gasoline and gasoil output above 500,000mt per year can apply for the oil product wholesale right.
The proposal said the independent refineries should regard the development of oil product retail network as a key strategy.
Local governments should support and help independent refineries to set up some petrol stations, support refineries to establish varied cooperations with petrol stations. Refineries can buy stakes in, control, or rent petrol stations.
The SEITC said the Shandong independent refineries must establish a strong and unified product band to compete against state-run oil majors. The committee requested municipalities and county departments should play a role of coordinator and combine local independent refineries together to form a powerful force.
The committee also said that independent refineries should enhance cooperation with the two state-run oil giants Sinopec and PetroChina. The independent refineries can fully make use of the oil distribution channels of the two oil oligarchs.
Many obstacles ahead
In the face of the provincial government s proposal, independent refineries deem that the integration would be hard to realize in a short time due to many obstacles.
Refineries have been long afflicted with feedstock problems and incomplete oil products sales network. Integration of effective resources is conducive to improve competitiveness of independent refineries. However, the proposal didn t tell the details on how to conduct the integration, thus independent refineries are not optimistic about the feasibility.
Shandong has numerous independent refineries that have large differences in production capacity, sales channels and transportation means, so larges refineries with obvious advantages not enthusiastic about the proposal.
Unless the government provides effective subsidy policies, the unification and integration may be hard , a source with an independent refinery in Shandong said. This kind of integration was proposed long ago, we are numb to the proposal , said another refinery source.
In addition, product quality issues make it difficult for independent refineries to step into the oil retail market, according to refinery sources. At present, only very few independent refineries, such as Dongming Petrochemical, Jingbo Petrochemical etc., can produce national standard petroleum products that can go straight to the petrol stations, while most refineries products need to be blended before being put onto the retail market.
Moreover, Shandong province now has around 90,000 petrol stations, so the oil retail market is almost saturated. If independent refineries want to enter into the retail market, they can hardly set up many new stations and have to acquire existing private-run petrol stations. This would need a huge capital, which is a big problem.
As early as in 2004, Shandong Chamber of Petroleum and Clean Fuel Industry Commerce (transliteration) made a similar proposal about integrating independent refineries product brands, prices, sales channels and sales. This proposal has not been put into practice due to lack of government support and varied responses from refineries.
