Caixin
Jan 03, 2019 05:30 AM
FINANCE

Shell Unit Gets Nod to Tap China’s Wholesale Oil Market

Shell Zhejiang, a unit of Royal Dutch Shell’s China operation, wins a license for wholesale oil product trading in China. Photo: VCG
Shell Zhejiang, a unit of Royal Dutch Shell’s China operation, wins a license for wholesale oil product trading in China. Photo: VCG

China licensed a unit of Royal Dutch Shell to become the first international oil major to tap China’s wholesale oil-products market as Beijing steps up efforts to further open the oil sector.

Shell China’s wholly owned subsidiary Shell (Zhejiang) Petroleum Trading Ltd. Co. won the license from the Ministry of Commerce, allowing the company to trade oil products independently on China's domestic wholesale oil market, Shell China said Wednesday.

China has moved to open up its oil sector as part of Beijing’s commitments to liberalize the economy and bolster the domestic oil market. In July, the government scrapped a limit on foreign ownership in gasoline-station joint ventures and a cap on the number of stations foreign investors can operate.

In 2015, China granted foreign companies access to the wholesale oil-product business by removing it from a list barring foreign entry. A handful of companies have won such licenses, including a Hong Kong-registered oil trader, a venture between the Guangzhou city government and British oil company BP and a venture funded by France’s Total SA and the state-owned chemical giant Sinochem Corp.

Shell Zhejiang is so far the first wholly foreign-owned company to win such a license. Public records from the commerce ministry showed that Shell Zhejiang submitted the application for the license in December last year.

Li Yang, an analyst at oil market information provider JLC, said the new license will expand Shell China’s business in China and grant it more say in price-setting on China’s wholesale oil market. Previously, Shell China mainly bought oil products from the three state-owned oil giants and Shaanxi Yanchang Petroleum Group for retail at its stations.

Shell China currently operates about 1,300 gas stations across China. A company executive told Caixin earlier that Shell China planned to double the number of stations by 2025.

Yang Xia, an oil analyst at commodity market information portal SCI99.com, said the increased openness to foreign players of China’s wholesale oil market will lead to greater market competition and expand the efficiency of the market.

China’s wholesale oil market faces an oversupply, according to Yang. Shell Zhejiang will find it easy to tap upstream suppliers, she said.

In December, state-owned oil major CNOOC signed agreements with nine international oil companies, including Royal Dutch Shell, Chevron Corp. and ConocoPhillips Co., to explore oil and gas resources in the Pearl River Mouth Basin, in the south of Guangdong province.

Contact reporter Han Wei (weihan@caixin.com)

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