China drafts new rules for fuel storage markets

Beijing has issued a draft of new regulations for China's growing oil and fuel storage industry, helping loosen the state-owned oil majors' grip on the sector as the nation pushes to reform its vast energy markets.

The government is looking to update storage policies issued in 2006, consolidating regulations for crude oil and rules for oil products under a single framework.

The main change in the draft is that it removes requirements for distributors and storage companies to have secure and steady supplies of refined products, a condition that only state majors like Sinopec and China National Petroleum Corp could comply with. Although the clause will still exist for crude.

"(The draft) has lowered the threshold for entry to the wholesale and storage industry," said Dong Xiucheng, a professor at the China Petroleum University.

"The new draft emphasizes storage capacity first ... As long as you have enough storage capacity, you can apply to enter the industry."

Under the draft proposals issued by the commerce ministry, companies must have a minimum storage tank capacity of 200,000 cubic metres to distribute and store crude oil and at least 20,000 cubic metres for refined products.

Experts and traders said those requirements were in line with industry averages.

Another draft rule requires storage companies and wholesalers of crude oil or refined oil products to apply for a permit from the provincial government, which will be subject to approval from Beijing.

Other regulations were largely in line with existing rules, such as the clause that stipulates Chinese companies must hold the majority stake in any firm with more than 30 retail outlets. BP and Shell operate gas stations in China through joint ventures with state-owned companies like Sinopec.

The document comes after the government said in May it would allow private companies to invest in its oil and gas storage.