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Shell wins license to trade oil products in China's domestic wholesale market

Singapore — China has awarded a license to oil major Shell to independently trade oil products in China's domestic wholesale oil market, a sign that Beijing is keen to attract more international participation in its oil sector.

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Shell (Zhejiang) Petroleum Trading Co, a wholly-owned subsidiary of Shell China, has obtained the domestic oil product wholesale license from China's Ministry of Commerce, the company said in a statement Wednesday.

The license will enable Shell China's Zhejiang branch to carry out purchases and sales of oil products for its customers in the Chinese market, the company said.

"After obtaining the wholesale license for oil products, we will be able to provide better trading services to our customers," said Jacek Dziembaj, global head of Shell's trading and supply business department.

Kang Wu, head of Asia analytics at S&P Global Platts Analytics, said: "The wholesale business of refined products has long been dominated by Chinese national oil companies and is typically reserved for Chinese companies. The latest license to a wholly-owned foreign company is unique and set to increase the competitiveness of the wholesale market in China."

Shell currently has more than 1,300 retail stations in China through joint ventures and sole proprietorships, Shell said. It also has a joint venture with state-run China National Offshore Oil Corp to operate a large petrochemical complex capable of producing 2.2 million-2.3 million mt/year of ethylene in Huizhou City in southern Guangdong province.

"Shell will still have to buy oil products from Chinese oil suppliers for wholesaling in the domestic market as they don't have an oil product import license," said an oil trader in south China.

"But this could be an indication that China is showing goodwill towards foreign companies amid the ongoing US-China trade war," the trader added.

Beijing is increasingly showing willingness to work with international companies in its oil sector.

CNOOC said in December that it had signed agreements with nine international oil companies, including oil majors, for offshore exploration in the Pearl River Mouth Basin in southern China.

The agreements were signed with US companies Chevron and ConocoPhillips, Norway's Equinor, Canada's Husky, Kuwait Foreign Petroleum Exploration Co (KUFPEC), Australia's Roc Oil, Shell, South Korea's SK Innovation and France's Total.

--Analysis by Cindy Liang, cindy.liang@spglobal.com

--Sambit Mohanty, sambit.mohanty@spglobal.com

--Edited by Alisdair Bowles, newsdesk@spglobal.com