Sinopec to Allow Private Capital to Invest In Marketing Business

Sinopec, China's leading petroleum refiner and oil producer, announced Wednesday that it will allow private capital to invest in its oil product marketing business, a move aimed at pushing forward a mixed ownership structure and break the monopoly of State-owned enterprises.

The board of Sinopec agreed to restructure and diversify the ownership of its oil product marketing business by introducing private capital, the company said in a statement filed with the Hong Kong and Shanghai stock exchanges on late Wednesday.

"The shareholding percentage for private investors will be determined according to the market conditions," it said.

The board chairman is authorized to determine investors, their shareholding percentages and terms and conditions of participation, under the condition that the private shareholding does not exceed 30 percent.

"It is good news for Sinopec," said Li Hong, an oil analyst at SunSirs China Commodity Data Group, a market intelligence group.

She told the Global Times on Wednesday that Sinopec will most likely pick up some competitive private enterprises that already worked with it before. The introduction of the private market players will enable resource sharing which will strengthen its performance.

The restructure will also serve as a pilot program for State-owned enterprises reform by allowing market forces play its role, she said.

"If it [Sinopec's case] runs well, other SOEs may follow suite," Li noted.

Sinopec's move may be due to coming under political pressure to break its monopoly and restructure to prevent power abuse following PetroChina's corruption scandal, Chen Peng, a business manager at Shtar Science & Technology Group, a Shandong-based refiner, told the Global Times on Wednesday.

"Nobody is willing to share a cake with others," he said.

However, by introducing private investors, it may prevent potential corruption on procurement and sales, as well as improve the product quality, Chen noted.

China has decided to allow more private capital into the market to develop a mixed ownership economy.

(chinamining.org, edited by Topco)