China proposes to relax oil storage policies

The Chinese government has released a draft regulation to update China’s oil storage policies, which were first published in 2006 to consolidate the regulations for crude oil and oil products under a single document.

The key revision under the proposal involves removing the requirement for distributors and oil storage companies to have a secure and steady supply of petroleum products, which can only be met currently by government-controlled oil majors Sinopec and China National Petroleum Corp.

Effectively, removing this clause lowers the barrier to entry in the Chinese market.

“The new draft emphasises storage capacity first … As long as you have enough storage capacity, you can apply to enter the industry,” said Dong Xiucheng, a professor at the China Petroleum University.

The proposal also includes a requirement that companies have a minimum storage capacity of 200,000 cubic metres to be able to distribute and store crude oil and at least 20,000 cubic metres for petroleum products.

Under the current regulation, companies must have a minimum storage capacity of 500,000 cubic metres to store crude oil and 200,000 cubic metres to be able sell it. For refined petroleum products, the current regulation requires a minimum storage capacity of 10,000 cubic metres to be able to sell or store these products.

Wholesalers of crude oil or petroleum products, as well as for-hire terminals, must also apply for a permit from the provincial government, subject to approval from the central government.

Other provisions in the proposal are mostly in line with current regulations. This includes the requirement that Chinese-owned companies must own a majority stake in firms that have more than 30 fuel retail outlets.

The deadline to send feedback to the proposal is August 19.