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Expat's Eye
Print Edition> Expat's Eye
UPDATED: September 7, 2009 NO. 36 SEPTEMBER 10, 2009
Getting Gas
Some Chinese gas stations offer a one-way street
By GOU FU MAO
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MONOPOLY RULES: Gas stations operated by state-owned oil suppliers, including this PetroChina outlet in Shenyang, Liaoning Province, are major market players in China despite complaints about their service standards (LI GANG) 

My Chinese driver's license has put me at the wheel of rental cars across this giant country. I've been seeing bigger, better thoroughfares carrying ever-heavier loads of new hatchbacks and sedans as a nation of mostly first-time drivers takes the road.

Used to the elaborate all-night cafes and fluorescent-lit convenience stores dotted along Europe's motorways, it's been interesting for me to watch Chinese motorway sprouting to life along the highway. A recent pull over at two petrol stores in the same Chinese city says a lot for the gap between service standards at the firms fueling China's motors.

A filling station operated by (French-based oil conglomerate) Total and its Chinese partner Sinochem in suburban Shenyang, capital of northeastern Liaoning Province, features a neat, well-tended bathroom. It also has a well-stocked and smartly laid-out store with two tall wooden tables in the middle of the floor laden with soy sauce and vinegar providers, so drivers can spice up hot instant noodles and steamed bun snacks, both purchasable onsite.

The PetroChina store down the road in Shenyang's industrial zone is, however, cold and poorly stocked by comparison, seeming over-sized, over-staffed and overly lit compared to its joint venture competitor. Maybe it's culture, or maybe it's indifference. "PetroChina doesn't worry because it always has guaranteed market share, it never has to compete like the Western firms setting up here," said my friend Kevin Guo, who refills his Buick at Sinopec and Petrochina stores simply because they're the most prevalent.

Other driving friends have suggested that China's drivers aren't interested in comfortable pull-overs and snacks—they just want to drive. I'm not sure. My friend Kevin is impressed by the comforts on offer at Total-Sinochem, which has recently opened a store in his Beijing neighborhood. Well couldn't it be like this everywhere? Not really. Government preference for the big players makes fuel retailing a particularly difficult business for new entrants with on-site conveniences and snacks.

Since state-set retail prices are often far below international levels, new entrants cannot set their own prices to match increases in the price of oil. A whole bunch of small native competitors have taken the big local boys to court under the umbrella of the China Fuel Distribution Association. The organization's President Zhao Youshan told me that independent service stations are going to the wall because they sometimes cannot get supply off refiners like Sinopec, who also happen to be kings of the retail side of the business.

To try to survive, the independents are looking away from eastern coastal cities to rural central and western provinces, which account for only 20 percent of stations. There'll be a whole new generation of drivers out there, said Zhao, because these poorer regions are targets of government spending on infrastructure and social services.

The China Petroleum and Chemical Industries Association, which declined my interview request, reports that its members are coming back into the black thanks to falling global oil prices. PetroChina and Sinopec lost a combined 5.7 billion yuan ($800 million) in the first half of 2008 because high international crude prices and artificially low retail prices pushed profits into negative territory.

Growing affluence here means China's petrol stations will eventually boast Western standards of service and comforts. That's because Chinese oil firms have lots of money to match their ambitions to be global champions. China National Petroleum Corp., Petrochina's parent company, has $218 billion in assets and 1.4 million employees, making it the third largest employer in the Fortune 500 rankings. Sinopec was ranked fifth in employee numbers.

China is also buying stakes in foreign energy companies, and their know-how. The State Administration of Foreign Exchange (SAFE) took a 1.6-percent stake in French-based Total and a 1-percent stake in UK-based oil refiner-retailer BP. So I expect to see more of the kind of comforts I found at the Total-Sinopec store in Shenyang on future drives in other provinces.

Of course oil for China is more than fuel in the car. A friend of mine working at a U.S. supplier of anti-corrosives to Chinese oil refineries pointed me to ExxonMobil-Aramco's $6-billion integrated project in Fujian Province. "Phenomenal" is how he describes the growth in China's oil demand.

Foreign oil firms like Total, Exxon and Shell have been building giant refining plants across south China to supply the polyolefins and polyester that China pours into plastic goods and electronics it ships globally.

But oil's day may be done. Researchers around China have been trying to produce fuels from renewable sources like rice, cassava and wheat. That's what I'd prefer to be putting in the tank. But it would be great to get that with a cup of coffee on the side.

The writer is Irish and lives in Beijing



 
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