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First private oil group set up amid disputes
(Xinhua)
Updated: 2005-06-29 23:53
China's first private petroleum group, the Great United Petroleum Holding
Co., Ltd (GUPC), announced its establishment Wednesday at the Great Hall of the
People, a symbolic site of the People's Republic of China.
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| Gong Jialong, chairman of
the Great United Petroleum Holding Co., Ltd speaks at a press conference in Beijing on June 29,
2005. [Xinhua] | "It marks a breakthrough in
China's oil industry long monopolized by the state-owned economy," said Bao
Yujun, director of the All-China Society of the Private Economy at the ceremony.
However, with nearly 1,000 guests, including foreign envoys, experts and
entrepreneurs of the petroleum industry, there is no official from the central
government giving a formal attendance to the ceremony.
Initiated by several domestic private petroleum enterprises, the conglomerate
declared to have nearly fifty private enterprises as shareholders and a capital
of about five billion yuan (603.9 million US dollars) and announced to be the
largest private petroleum enterprise of China.
Gong Jialong, chairman of GUPC, said that with GUPC as the parent company,
they aim to establish a transnational group corporation with several
subsidiaries covering all sectors of the oil industry chain including
exploration and mining, refinery and chemicals, storage and logistics, wholesale
and retailing, and import and export.
According to Gong, the corporation plans to draw a total capital of 500
billion yuan with nearly 1,000 enterprises as shareholders in three to five
years and chooses to be listed at a proper time.
But Gong admitted that the group will still not have some necessary
qualifications from the government including a wholesale license for oil
products, the import licenses for oil products and fuel oil and a license for
petroleum exploitation.
The unification of private enterprises to establish such a conglomerate will
give impetus to breaking the monopoly of China's petroleum industry and bring
more competition to the market, said Liang Yangchun, a researcher with the
department of industrial economy of the Development Research Center of State
Council.
However, to enter the market as an equal partner with China's state-owned
giants, GUPC still has to wait for a long time, said Liang.
China's petroleum industry has been monopolized by large state- owned
enterprises such as the China National Petroleum Corporation (CNPC), China
Petrochemical Corporation (Sinopec) and China National Offshore Oil Corporation.
Although growing stronger in recent years due to the development of China's
market economy, the country's private petroleum enterprises only saw some
progress made in the refinery and sales sectors with the exploitation sector
having been a taboo for the private economy.
Early in February, the State Council, China's cabinet, issued a document that
for the first time allowed non-public capital the access to crucial industries
like power, telecommunications, railway, civil aviation and oil exploitation.
It is deemed by Gong as one of the major supports from the government for the
establishment of GUPC.
Despite the encouragement from the document, many private enterprises
complain that as the operational methods were still not issued, it is just a
ticket for them to enter the exploitation sector while not an assurance to play
in the game.
The soaring oil price led to larger profits flowing to the exploitation
sector of the industry, especially in China where the price of oil products is
kept by the government at a much lower level than other countries.
To obtain oil sources either by entering the exploitation sector or going
overseas is a major incentive for the unification of private petroleum
enterprises, Liang said.
However, GUPC experienced a hard period before the establishment. Since
starting preparations in January, the establishment date has been delayed again
and again and debates have been heard from time to time.
With many different investors, the newly established entity will have to deal
with their friction in or outside the corporation, said Cao Xiaoxi, deputy
engineer-in-chief of the economic and technological research academy of Sinopec,
China's second largest oil producer and the largest oil refiner.
Gong Jialong has expressed publicly many times the wishes to cooperate with
state-owned petroleum giants and transnational giants in the domestic and
overseas market.
However, experts do not hold a positive attitude for Gong's expectation.
Xu Zucheng, an official with the exploitation sector of CNPC, China's largest
oil and gas producer, said that the necessary precondition for them to compete
and cooperate with the private petroleum group as an equal entity is the
assurance of laws and regulations, not only from the government but also from
the enterprises themselves.
"Separately, China's private petroleum enterprises are just like boats
jolting in the sea. The conglomerate is just like an aircraft carrier. We hope
it will allow us to brave the wind and waves successfully," said Gong.
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