A group of 38 private oil companies in northeast China has accused PetroChina and China Petroleum & Chemical (Sinopec), the country's two biggest oil firms, of trying to bankrupt them by controlling prices and withholding supply. '[PetroChina and Sinopec] refuse to supply us with oil at prices at which we can survive. They want to retain their monopoly,' said a spokesman for one of the affected companies, Shenyang Pengda. 'Our business licences are waste paper,' added Liu Guifeng, chairman of Changchun Xinda Materials. The companies complain that Sinopec is building six 3,000 cubic metre oil depots in Shenyang, which already has 19 such storage facilities - five of them empty. In March the companies, led by Harbin Longqing Petrochemical Trade, Changchun Xinda Materials and Shenyang Pengda, submitted a petition containing their grievances to the secretariat of the National People's Congress, which forwarded a three-page summary to the State Council, the Communist Party's Central Committee and the State Development and Planning Commission. 'The problem is that the two completely control the supply of oil products. They charge an additional 200 yuan (about HK$187.44) a tonne above the wholesale price, making it impossible for us to operate normally,' the companies said in their petition. 'As a result, our assets worth billions of yuan are idle and our workers have been laid off, leading to serious problems of social instability. The resolution of the problem can be delayed no longer. 'The 16th congress of the Communist Party promised equal treatment for private and state companies. Where is it? China's oil resources belong to the whole country, not to two companies. They should not enjoy a monopoly and the state should take it back from them and distribute it in line with fair and orderly market competition. The monopoly of the two firms is even worse than during the years of state planning.' The 38 firms, which control assets worth 5.5 billion yuan and employ 23,000 people, said they would be willing to buy oil products at prices which would give the two majors a per tonne profit of 100 yuan. PetroChina spokesman Bi Jianguo said: 'These are national policies. The state is cleaning up and restructuring the market.' He said the issue was a matter for the State Economic and Trade Commission (SETC). Sinopec officials would not comment. Analysts said Beijing was unlikely to side with the petitioners, as the government wants to consolidate oil distribution and bolster PetroChina and Sinopec before opening the market to foreign competition. UOB Kay Hian analyst Michael Lee said: 'The policy may be unfair to the small companies but will their complaints be taken seriously by the government? I think it's unlikely. The government will look at the bigger picture.' BNP Paribas Peregrine head of China research Eva Chu Wen-yee said, 'They want to introduce competition but they want it to be between the quality players and they want to eliminate unruly market competition.' Many smaller refined oil traders have engaged in price wars, and some have been accused of selling poor quality products that failed to comply with environmental regulations. In June 2001, SETC said PetroChina and Sinopec would be the only two firms allowed to open new petrol stations. Last September it issued a document encouraging independent stations to join Sinopec and PetroChina's franchises. In their petition to the National People's Congress, the 38 companies said they received wholesale licences after a reorganisation of the petrochemical industry in 1998. But they said State Planning Commission document 885 - issued in 1999 to address private firms' supply problems - had never been implemented. Graphic: pet12gbz
