"We do not believe a State-planned pricing mechanism would last as the market matures and energy prices are raised to curb consumption. Therefore, we have to be ready for market-oriented competition by figuring out every way to enhance our market share and lower costs," the official said.

Who benefits?

Given current market circumstances, it is not difficult to see who will benefit from the new guidelines and rules. Private firms cannot afford to enter the wholesale market as long as the current oil price mechanism is in place, restricting profits, said Han Xuegong, a senior consultant at CNPC.

Instead, State-owned energy giants, such as top offshore oil producer CNOOC and Sinochem, who are not after instant profits, will be the real beneficiaries, both Han and Niu from the SIC said.

"CNOOC will get its Guangdong refinery onstream very soon. Also it has large storage facilities ready. The opening up of the market is certainly positive news for CNOOC," Niu said.

Foreign oil firms will be also eager to seek wholesale oil licenses, because they have to feed their filling stations in China. Moreover, it would not be a difficult mission for them to meet market deregulation rules in terms of either storage facilities or refineries, said Dong Xiucheng, vice-dean of the School of Business Administration at China Petroleum University.

"But the key is they need time and approval to get these facilities ready. So they won't be as enthusiastic as CNOOC or the other State-owned giants," Dong said.

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