Beijing, June 10th, 2011 - PetroChina and Sinopec plan to increase the number of gas stations to enlarge their distribution networks, according to reports in the China Business News on Monday.

The paper said PetroChina will increase the number of its gas stations in Guizhou and Zhejiang provinces, and its rival, Sinopec, will build more in Chongqing, the Xinjiang Uygur autonomous region and Liaoning province.

A PetroChina official told China Daily that he has not been informed of the plan, but said it is normal for branch companies to build new gas stations to meet the growing demand from local markets.

"Our branch companies in the provinces are in charge of the wholesale and retailing," he said. "The new move totally depends on changes in the market."

In May, PetroChina signed a framework agreement with a local government to invest 1 billion yuan ($154 million) to build 40 more gas stations and upgrade the existing 20 in Tongren county, Guizhou province.

Three months earlier, the company signed an agreement with the local government of Zunyi in Guizhou to build 48 more gas stations and reconstruct distribution facilities including oil tanks and natural gas pipelines.

Sinopec, which holds a 70 percent share of the country's retail gas market, plans to build 500 gas stations during the 12th Five-Year Plan (2011-2015) period in the Xinjiang Uygur autonomous region.

Speaking on condition of anonymity, an industry analyst said the number of new gas stations to be built is not high, but is still significant because the overall arrangement will influence their future marketing.

One-third of the petroleum in Guizhou is produced at PetroChina's refineries, but the company's market share in Tongren county is less than 15 percent.

The increase in the number of gas stations is necessary for the company, said a second analyst, who declined to disclose his name.

The first analyst said the geographical spread of gas stations in developed areas is already mature enough to meet demand, so the companies are looking for opportunities in underdeveloped areas such as Xinjiang and Guizhou.

PetroChina had 17,996 gas stations nationwide by the end of 2010, 600 more than in 2009. Sinopec had 29,000 gas stations by the end of last year with an annual growth rate of 8 percent for newly built stations.

"In such a scenario, PetroChina wants to gain a greater share of the market with the support of local government in the core areas that Sinopec has not occupied," according to the first analyst, who added that both companies have strong logistics networks, so they will be able to register a satisfactory profit, despite fierce competition. - China Daily

Sinopec says losses at Chinese refineries pile up as they refine more

Singapore, June 9th, 2011 - Chinese refineries have been suffering as international crude oil prices have remained high this year, and state enterprises have had to ramp up production to make up for the lost output from private refineries, the country's largest refiner, China Petrochemical Corp, said Thursday.

"The more they refine, the more losses they suffer. This is the plight for the local refining industry," China Petrochemical Corp., or Sinopec Group, said in a report on its website.

Sinopec said this is a major contributing factor in local private refineries to slashing output or shutting down for maintenance. With run rates by Shandong refineries falling by 70%, refined product supply has shrunk drastically.

Local retail prices for refined products, which are regulated, have not caught up with higher crude prices, causing Chinese enterprises to suffer huge losses in the refining sector.

Front-month ICE Brent crude oil futures have risen by 23.1% since the start of the year till the end of May, whereas domestic retail prices for gasoline and diesel have only gone up around 9-10% through two price increases -- in February and April.

In addition, recent surges in international oil prices -- keeping topping margins under pressure -- have led Chinese private refineries to drop run rates to an average of 30% of capacity.

This has burdened oil giants Sinopec and PetroChina with the responsibility to continue directing most of their output to the domestic market to ensure a steady supply at the retail level.

PetroChina, the listed arm of China National Petroleum Corp., reported a loss of Yuan 6.13 billion ($946 million) from its refining business in the first three months of this year, while Sinopec's listed arm Sinopec Corp. recorded an operating loss of Yuan 576 million by its refining segment.

"In accordance with arrangements by the head office, Sinopec's Qilu refinery operated at full capacity to maintain supply of refined products to the local markets," Sinopec said.

The 15 million mt/year (301,233 b/d) Qilu refinery, based in east China's Zibo city, Shandong province, processed more than 30,000 mt/day (219,900 b/d) of crude oil in May, the report said.

In May, the refinery produced close to 30,000 mt more products than a year earlier, the report said, without providing actual production figures. - Platts