China's wholesale market for crude oil and refined oil products will be opened to foreign investment from 2007, under new regulations issued by the Ministry of Commerce (MOC).

Two regulations, on the crude oil and refined oil markets, would break the monopoly of state-owed enterprises in both sectors, said Chong Quan, spokesman of the MOC.

The government promised to open the market on December 11 under its commitments to the World Trade Organization (WTO).

The regulations, published on the MOC website, are a response to the promise.

Before December 11, the wholesale market of crude oil was controlled by the government while China National Petroleum Corporation (CNPC) and China Petroleum and Chemical Corporation (Sinopec Corp.), China's two biggest oil firms, monopolized the wholesale refined oil market.

By clearly defining the qualifications of enterprises, the regulations would promote the establishment of a competitive pattern of SOEs, foreign companies and private enterprises in both sectors, said Chong.

Industrial insiders said the regulations indeed raised the market access thresholds for enterprises, which are required to have a minimum registered capital of 100 million yuan (12.8 million U.S. dollars) to gain crude oil wholesale rights.

They should hold oil exploration permits or be crude oil importers with an annual import volume of at least 500,000 tons. They should also have depots with a minimum capacity of 200,000 cubic meters.

Enterprises applying for crude oil storage qualifications should have a minimum registered capital of 50 million yuan and depots with a minimum capacity of 500,000 cubic meters.

Companies applying for refined oil wholesale rights are required to have a refining capability of at least 1 million tons or a minimum annual output of refined oil or diesel of 500,000 tons.

Enterprises in refined oil supply agreements with wholesale firms and annual sales of at least 200,000 tons or importers with minimum annual imports of 100,000 tons are also qualified to apply for refined oil wholesale rights.

The regulations have stipulations on the application procedures and supervision of enterprises.

Chong said private companies had entered the distribution and marketing sectors of refined oil products. By the end of last month, private firms doing wholesale business of refined oil accounted for 33.4 percent of the total private gas stations.

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