Two new guidelines for wholesale oil product and crude licenses are set to bring about de facto market deregulation. But analysts say reform of the oil-pricing mechanism is crucial in terms of whether new players enter the market.

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"The two guidelines give maneuverability to the market regulations issued by the Ministry of Commerce (MOFCOM) late last year, deregulating the wholesale oil product industry. Previously, there were only general principles for market deregulation, which were not operational," Niu Li, a veteran economist with the State Information Center (SIC) affiliated to China's top economic planner, the National Development and Reform Commission, told China Daily.

The new requirements for private and foreign companies to get licenses are appropriate, according to Niu. "My overall impression about the guidelines and deregulation rules is that they are adequate to free up the market while keeping enough control to ward off speculation," he said.

The Ministry of Commerce issued two guidelines recently on how domestic and overseas companies can apply for wholesale crude and refined oil licenses. The application review process takes 40 working days for domestic private companies and four months for foreign firms.

"We are proactively preparing for wholesale business in line with the new license criteria," said Liu Junshan, China National Offshore Oil Corporation (CNOOC) spokesman.

Liu implied that CNOOC's refinery in Guangdong needed a wholesale license to build up sales channels before it comes onstream in 2008.

The guidelines detail MOFCOM's Regulation of Crude Oil Market Management and its Regulation of Refined Oil Market Management released in December. The regulations were designed to open up China's wholesale oil market, traditionally dominated by CNPC and Sinopec.

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