Chen Li, executive deputy director-general of the Institute of the Economic System and Management under the State Council, made the remarks at the International Conference on China's Oil and Gas Sector Regulatory Reform which was held Thursday in Beijing.

"Qualified domestic and foreign companies will be allowed to invest and operate in wholesale and retail markets in pilot cities," he said.

Foreign product sharing contract (PSC) partners, who jointly tap oil fields with domestic oil companies, will also be granted permission to sell their oil and gas directly to the market in certain pilot cities, he added.

Chen declined to name the cities, but said they are carrying out feasibility studies on which city or cities should be chosen.

At present, overseas oil companies are not allowed to become directly engaged in China's wholesale and retail markets for refined oil products. PSC partners have to sell their products to the market through domestic oil companies.

Zhou Dadi, director of the Energy Research Institute of State Development Planning Commission, said the move will spur competition in the sector.

"Domestic oil companies should learn how to cope with competition, otherwise they will not survive once overseas firms flock in," Zhou said.

Currently, China imposes a tariff of around 69 percent on imported refined oil. After China's entry to the World Trade Organization (WTO), however, that will be reduced to 6 percent. Non-tariff barriers like quotas on oil products will also be phased out. In five years, the oil sector will be completely open to the outside world.

To sharpen their competitive edge and survive the impending competition, China's oil giants are all planning to float on overseas markets.

PetroChina and Sinopec, China's two largest oil companies, listed on major overseas stock markets in April and October.

China National Offshore Oil Corp, the sole company authorized to tap oil reserves in China's waters, is expected to debut on the New York and Hong Kong stock markets in February next year.

(China Daily 12/15/2000)