PetroChina and BP, the largest Chinese and European oil firms, launched a gas station business joint venture in Guangdong Province in South China yesterday, marking a further move in BP's foray into China's booming oil fuel retail market.

The venture, 51 per cent held by PetroChina, was set up as a result of a memorandum of understanding reached with BP's acquisition of 20 per cent of the listed shares from PetroChina's global initial public offering as the sole strategic investor in 2000.

Called BP PetroChina Petroleum Co and registered in the city of Jiangmen in Guangdong, the joint venture comes after the launch of another BP joint venture with Sinopec, China's largest oil refiner, for running 500 gas stations in eastern China's Zhejiang Province earlier this month.

As it prepares to open up China's oil retail market fully in December according to its commitment to the World Trade Organization, the Chinese Government has also approved a joint venture between Royal/Dutch/Shell and Sinopec for Jiangsu Province, with more Sino-foreign ventures also waiting for a go ahead.

The Guangdong venture is allowed to run 500 gas stations with a total investment of about 4.7 billion yuan (US$566.27 million). At the end of September it was running 358 stations, said Graham Body, general manager of the venture. The venture will meet its 500 target through acquisitions and building new ones in three years.

The Guangdong market is highly competitive. It is dominated by Sinopec, which runs 36 per cent of the 5,500 gas stations in the province and holds 49 per cent of the market share, in terms of sales volume.

BP PetroChina Petroleum Co hopes to increase its market share from a present 20 per cent to 25 per cent initially, Body said. The company is expected to sell 2.2 billion litres of fuel this year.

Projection of the BP brand among Chinese consumers is, however, more essential to BP, said Gary Dirks, vice-president of BP group and president and chief executive of BP China.

BP will also have a more secure fuel supply with the partnership with PetroChina, which will be the sole supplier of the joint venture, Body said. As China is scheduled to open up its oil wholesale market in 2006, BP is exploring new business opportunities with Chinese players, Dirks said.

PetroChina has set up a group to co-ordinate the business of the joint venture and that of its stations in Guangdong not included in this venture, said Lin Aiguo, president of the refining and marketing company of PetroChina.

Besides the fuel business, the Guangdong venture would also emphasize non-fuel services, including convenience stores and car care, which, although largely untapped in China, contribute a significant part of BP's profits in developed markets, Body said.

By the end of September, BP PetroChina Petroleum Co had convenience stores at 185 of its gas stations, some of which had registered 30 per cent business growth year-on-year this year, Body said.

(China Daily November 19, 2004)