"We are proactively preparing for wholesale business in line with the new license criteria," said Liu Junshan, China National Offshore Oil Corporation (CNOOC) spokesman.

Liu implied that CNOOC's refinery in Guangdong needed a wholesale license to build up sales channels before it comes onstream in 2008.

The guidelines detail MOFCOM's Regulation of Crude Oil Market Management and its Regulation of Refined Oil Market Management released in December. The regulations were designed to open up China's wholesale oil market, traditionally dominated by CNPC and Sinopec.

The two regulations stipulate that oil product wholesalers must have one-time annual crude processing capacity of over 1 million metric tons. And all applicants should own an oil product depot with a minimum storage capacity of 10,000 cubic meters. The previous restriction on the number of gas stations a private company must own has been lifted.

Although the market has been deregulated to a certain degree, the number of newcomers will depend on their profit-making capacity. China's current oil product pricing mechanism does not guarantee a decent profit margin and therefore is not luring new players, Niu said. The Chinese government keeps a tight grip on the pricing of major oil products, keeping the price below the global level to avoid supply fluctuation and inflation.

"China's oil-refining business is plagued by huge deficits because of the high crude price and the low domestic wholesale price. The current oil product pricing system does not encourage new wholesalers. Therefore, there might not be many newcomers in the short term," said a senior media official at Sinopec , Asia's top refiner, on condition of anonymity.

But in the long term, Sinopec must be fully prepared for tough competition, as further reform of the oil-pricing mechanism is expected, the official said.

1

2

3

(For more biz stories, please visit Industry Updates)