Ruentex pact paves way for Sinopec retail spin-off

China Petroleum & Chemical Corp's (Sinopec) pact with Taiwanese retailing major Ruentex Group last week will help the oil giant negotiate better terms with potential investors and business partners for the fuel retailing business that it plans to spin off on the stock market, analysts say.

A memorandum of understanding between the two firms called for joint merchandise procurement to cut costs, operating together Sinopec's convenience stores at its petrol stations in Shanghai as a pilot, and potential e-commerce co-operation, Sinopec said last Tuesday.

"This is a smart move," said BNP Paribas head of Asia energy research Por Yong Liang. "The pilot in Shanghai will give it the opportunity to see if the strategic partner can make a difference in boosting its non-fuel sales. By making the agreement public, it also puts pressure on other interested potential partners and strategic investors to offer better terms and pricing."

As part of state firms' reform, Sinopec said it would sell up to 30 per cent of its fuel retailing business to non-state strategic and financial investors to enhance governance and efficiency.

Chairman Fu Chengyu said in March that the firm aimed to complete the sale by the end of next month.

"Many [potential] investors have expressed interest in participating [in the stake sale] and have made contacts with us," Sinopec said.