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Non-State enterprises may sue oil giants

By Tu Lei (chinadaily.com.cn)
Updated: 2008-10-13 18:22

Non-State-owned oil trading enterprises plan to sue two oil giants to break the oil monopoly, said sources familiar with the matter at an oil summit yesterday, according to China Youth Daily.

Zhao Youshan, president of Petroleum Flow Committee of the General Chamber of Commerce, made the remarks in a summit held yesterday, attended by more than 300 private firms.

"I may turn to the Anti-Monopoly Law to help non-State-owned enterprises get more oil," said Zhao. He has written 14 letters to the State Council, China's cabinet, for more oil in the past ten years.

The new Anti-Monopoly Law took effect on August 1, will focus not only on protecting and facilitating competition, but also on encouraging concentration, acquisitions and mergers to improve efficiency in markets.

In 1998, the State Council said in a document that all oil products produced by domestic oil refineries should be operated by two State-owned oil giants, China Petroleum & Chemical Corporation (Sinopec), and China National Petroleum Corporation (CNPC).

Following the rule, some local governments canceled non-Stated enterprises' operating rights on oil products.

Before 1998, the non-State-owned oil enterprises occupied 85 percent of the domestic oil cake, with tax revenue of more than 100 billion yuan ($14.64 billion) per year. But revenue has now dropped to around 20 billion yuan per year, and 80 percent of non-State owned oil enterprises have fallen in revenue, the newspaper reported.

Zhou Ziqing, who operates an oil-processing enterprise with an annual processing ability of 1.5 million tons, said his firm has not been working for more than one year due to a lack of oil.

"The loss per month is more than one million yuan," said Zhou.

Besides oil processing plants, many wholesalers and oil stations are in trouble.

This summer, a survey from Northeast China's oil-rich Heilongjiang Province shows its nine non-State-owned wholesaling enterprises have stopped business; and among the 1,200 gas stations, 700 have had losses, 300 closed doors, and only 200 are in normal business.

Figures provided by Zhao Youshan show that at the beginning of 2008, two thirds of non-State-owned wholesales enterprises collapsed, one third of gas stations went bankrupt, and more than 10,000 stations suffered losses, with tens of thousands of staff laid off.

Unmoved Monopoly

Since the State Council released the document ten years ago, the non-State oil enterprises have kept on fighting for more freedom, and some local governments have eased restrictions somewhat.

This summer, Heilongjiang Province reached agreements with CNPC for 10,000 tons of diesel oil per month, but the quota is too small to settle the problem.

According to the distribution plan, some gas stations can only get 14 tons per month at the most, which is only enough for one hour during peak demand.

In March and August of this year, the National Development and Reform Commission, together with the Ministry of Commerce, released files and required the two giants to sign long-term supply contracts with non-State oil firms.

Some experts, even some officials, said the old rules have hindered the development of the oil market, and suggested some departments should prohibit the out-dated file.

But the situation has not yet been improved at all, for the two giants have not shown any signal to private firms.

"The non-State firms have no possibility of negotiating with the oil providers, and the prices for us are higher than wholesales price without invoices," said Zhao.

Anti-Monopoly Works?

Breaking the current monopoly is urgent for Zhou Ziqing, and those small or big gas stations, especially when facing a global rise in oil prices, and Zhao realized the newly-approved "Anti-Monopoly Law" may serve as an effective tool.

However, Lawyer Zhao Guohua said although the monopoly evidence is sufficient, it is not the best way to solve the problem, for the loosened policy may lead to negotiations between the two parties.

Some experts said even if there are some breakthroughs on policies, the result would be temporary and unstable for there has been no reform of the current oil mechanism.

An energy expert, Shi Changhua, said several inadequacies in the oil industry have shown State monopoly cannot ensure supply, and an open and diversified oil market is better for oil safety. Although the open market may harm some State-owned enterprises' profits, the consumers may enjoy better service.

"The government should maximize the people's benefits, instead of the monopolies," said Shi.