China terminates management rules on petroleum market, reducing entry barriers

Singapore — China on late July 3 announced the termination of its two sets of management rules governing the oil product and crude markets, relaxing the barriers for investors on starting wholesale, retail and storage business in the two commodity markets.

The Ministry of Commerce, or MOFCOM, terminated the "Management Rules on Oil Product Market" and the "Management Rules on Crude Market" in order to implement the "Regulations On Optimizing The Business Environment" and reform management in petroleum circulation, the ministry's Order No. 1 of 2020 dated July 1 showed.

The Chinese government has been working on lowering entry requirements for petroleum circulation, according to government documents.

"The terminations enable us to apply for wholesale, retail and storage license with easier administration process and save time," said a source with an international major, which has plans to expand its oil business in China.

According to the two management rules, introduced in 2006, enterprises were required to gain approvals from the Ministry of Commerce before starting crude oil sales and storage, oil product wholesale and retail business, as well as storage business.

In August 2019, the government proposed to expand the access to the petroleum business by abrogating the approval requirements for wholesale and storage, as well as passing the retail licensing authority to the local governments from the commerce ministry, according to the Opinions on Accelerating Circulation Development and Promoting Commercial Consumption issued by the State Council.

MOFCOM released an opinion document in April this year seeking public comment on the possible replacement for the two management rules.

The opinion document stated guidelines for the local government, related provincial energy and commercial bureaus, and business applicants on wholesale, storage and retail licensing requirements.

"But there are still challenges for setting up storage of retail business in developed regions, such as difficult-to-get good locations due to limited land availability," an independent trader said.