Bloomberg: Shell Says in Retail Venture to Tap China’s Rising Fuel Demand

By Winnie Zhu

Jan. 18 (Bloomberg) — Royal Dutch Shell Plc said it has agreed with a privately owned Chinese company to build retail service stations in southwestern China to tap rising demand for auto fuels in the world’s second-biggest car market.

Shell will team up with Chongqing Shuorun Petroleum Co Ltd. to build a network of service stations in Chongqing province, Liu Xiaowei, a spokeswoman for Shell in Beijing, said by telephone today.

Europe’s largest oil company by market value is competing with rivals including BP Plc and China’s two biggest oil companies for market share in the retailing of diesel and gasoline. China Petrochemical Corp. and China National Petroleum Corp. run more than half of the country’s 80,000 retail stations.

“This is a part of our strategy to expand business in the huge Chinese market,” Liu said. “We have just finished negotiations and have applied for a license,” Liu said. She didn’t provide further details, including how many stations Shell and its partner plan to set up.

Shell, which has 40 filling stations in China as of 2000, agreed in 2004 to set up a joint venture with China Petrochemical, the nation’s largest refiner, to build a network of about 500 gas stations in the eastern province of Jiangsu, according to data from its Web site.

China is opening up its oil sales market to foreign and privately owned domestic companies under its World Trade Organization obligations. Overseas companies that own a refinery or hold an import license will be allowed to sell oil products in the country from Jan. 1, 2007, China’s commerce ministry said in a statement on its Web site on Dec. 7.

Lubricant Market

Shell last year bought a 75 percent stake each in the nation’s two leading lube oil producers, giving it a potential 9.5 percent share of China’s lubricant market, the world’s second-largest, the company said September. 22. Shell bought stakes in Beijing Tongyi Petroleum Chemical Co. and Xianyang Tongyi Petroleum Chemical Co.

China’s 2007 oil demand will rise 5.4 percent to 7.35 million barrels a day, the International Energy Agency said in a Dec. 13 forecast, an increase from an estimated 6.98 million barrels a day in 2006.

The country’s vehicle sales rose 25 percent last year to 22 million units, surpassing Japan as the world’s second-largest automobile market, according to data from the China Association of Automobile manufacturers.

To contact the reporter of this story: Winnie Zhu in Shanghai at [email protected]
Last Updated: January 18, 2007 06:50 EST

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