CPC is eying Chinese oil market

The state-run Chinese Petroleum Corp (CPC, 中油) is planning to make inroads into China by relocating part of its distribution and sales operations across the Taiwan Strait, CPC sources said yesterday.

CPC management is now working first to open gas stations and oil storage tanks in port cities along the Yangtze River, the longest river in the China, according to CPC officials.

Under cut-throat competition at home after the Formosa Plastics Group (台塑) edged into Taiwan's oil market last September -- a move which ended CPC's five-decade monopoly -- the CPC decided recently to "move out," initially targeting China's diesel oil markets, CPC officials said.

Before CPC actually branches out, the company will have to obtain export permits from the Energy Commission under the Ministry of Economic Affairs, CPC officials said.

CPC's announcement that it will seek to open operations in China was made known now only after the Taiwan government began recently to ponder reviewing the "no haste, be patient" policy devised years ago to curb rapidly expanding Taiwan trade with and investment in China.

Actually CPC has already sold some 2,000 metric tons of liquefied national gas (LNG) to Guangdong province earlier this year on a trial basis via a Hong Kong-based agent, and CPC has "quietly" sold diesel oil to China over the last two years, also on a trial basis, according to CPC officials.

Last week, CPC struck a tentative accord with China's flagship petroleum company, the Beijing-based China National Offshore Oil Corporation (CNOOC, 中國海洋石油), to jointly explore for oil reserves in the Taiwan Strait.

The agreement, only revived recently after a five-year hiatus, features joint oil exploration in waters located southeast of the mouth of China's Zhujiang (Pearl River), according to CPC sources.

Encompassing 15,400km2, the targeted area straddles the imaginary demarcation mid-line in the Taiwan Strait that has been tacitly accepted by both Taipei and Beijing for decades.

If everything goes smoothly, a formal pact on cross-strait cooperation is expected to be signed by the end of this year, paving the way for the two companies to launch formal exploratory drilling, probably in 2002, CPC officials added.

Under the initial contract, CPC and CNOOC will each contribute US$500,000 for oil and LNG exploration in the area, which lies 250km south of the city of Swatow in the Chinese province of Guangdong.