China Focus: Oil import license ends state monopoly

2014-8-28

   Guanghui Energy Co. Ltd has become the first private enterprise licensed to ship crude oil into China.

  Xinjiang Guanghui Petroleum Co. Ltd, a subsidiary of Guanghui Energy Co. Ltd., has been approved by the Ministry of Commerce to import 200,000 tons of crude oil in 2014 and sell it to refineries, according to a statement submitted to the Shanghai Stock Exchange late on Wednesday.

  Industry insiders said the ice-breaking move opened to private businesses a lucrative sector that had been preserved for state-owned enterprises for decades.

  Shares of Guanghui Energy rose by the daily limit of 10 percent to 8.98 yuan (1.46 U.S. dollars) during Thursday's trading on the Shanghai Stock Exchange.

  "This is an opportunity for private enterprises to enter the upstream sector of the oil industry," said Lin Boqiang, director of the China Center for Energy Economic Research with Xiamen University.

  Granting the import license to private companies shows serious consideration of the national energy security, while opening up to private companies is conducive to industrial competition and improving the national energy security, said Lin.

  As the world's biggest energy consumer, China's dependency rates on imported oil and natural gas came in at 58 percent and 31.6 percent respectively in 2013, according to the China National Petroleum Corporation.

  Diversifying the source of energy has long been an approach of the Chinese government to improve national energy security. And insiders have long called for private capital to be welcomed into crude oil importing.

  China's crude oil imports are currently controlled by five state-owned enterprises.

  "The volume of 200,000 tons is small but it will expand in the future as this is just the beginning of the reform," said Lin.

  The academic predicted that more private enterprises will be granted crude oil import licenses.

  Guanghui Energy Co. Ltd is an arm of Xinjiang Guanghui Industry Investment Group Co. Ltd, the largest private energy company in Xinjiang with 109 billion yuan in 2013 sales revenue.

  Covering a sixth of China's territory, Xinjiang has about one-third of China's coal reserves and a quarter of the country's oil and natural gas reserves.

  Guanghui owns reserves of more than 20 billion tonnes of coal in Xinjiang, 1.592 billion tonnes of oil and 421.3 billion cubic meters of natural gas in Kazakhstan, according to its official website.

  With the license, Guanghui can import crude oil directly from its own oil project in Kazakhstan and sell it to refineries in China.