A framework agreement on establishing a limited aviation oil company was signed yesterday in Beijing by China National Petroleum Corporation (CNPC), China Petrochemical Corporation (Sinopec) and China Aviation Oil Holding Company (CAOHC).

The new company is based on the China Aviation Oil Supply Corporation, one of CAOHC's core companies and may be named the China Aviation Oil Supply Corporation Limited and will be officially set up next year.

CAOHC will hold 51 per cent of the shares of the new company, with CNPC and Sinopec taking 20 per cent and 29 per cent respectively.

CNPC is China's largest producer and supplier of crude oil and natural gas, Sinopec is the country's largest producer and supplier of oil and chemical products, while CAOHC is the largest aviation oil supplier in China.

The China Aviation Oil Supply Corporation has a sales network covering nearly 100 airports across the country and offers fuelling services to 108 domestic and foreign airlines.

Insiders say the move shows that the restructuring of the aviation oil supply business, which started nearly two years ago, has entered the operational stage.

In March, 2002, the State Council issued a plan for civil aviation reform. According to the plan, CAOHC, which was officially established later in 2002, would restructure its aviation oil supply business.

Meanwhile, according to China's commitment to the World Trade Organization (WTO), it will open its retail market for oil products at the end of the year. The wholesale market will open its door at the end of 2006.

The commitment will bring about heated competition in the oil products market in China.

It was under such a context that CNPC, Sinopec and CAOHC decided to jointly restructure the China Aviation Oil Supply Corporation.

It is expected that the restructuring will further integrate domestic aviation oil resources and unite the advantages of the three parties, according to a press release jointly issued after the signing.

Therefore, the aviation oil supplier can raise its international competitiveness and ability to withstand future risks after China opens the aviation oil market.

The new limited company, facing fierce competition in the future, will be customer-oriented and offer prominent services, said the press release.

Modern enterprise systems will be adopted by the new company, said Ma Jisheng, an information officer of the China Aviation Oil Supply Corporation.

Having CNPC and Sinopec as its shareholders, the company will surely have easier and more convenient access to oil products, which will help cut its cost, he added.

China refined 190 million tons of crude oil in the first three quarters of this year, up 15 per cent year on year.

During that period, production of gasoline, kerosene and diesel fuel reached 120 million tons, up 16.4 per cent; and the amount of imported finished oil products reached 3.85 million tons, up 88 per cent.

China Daily