Sinopec plans to open its China oil distribution networks

China’s oil refining giant Sinopec plans to open its distribution networks to outside capital, in a move that could loosen the large oil companies’ grip over the country’s fuel markets.

Sinopec and its main rival, CNPC, control most of China’s oil sector, from the upstream oilfields to the long pipelines that cross the country to the gasoline pumps at their branded petrol stations. Reformers believe breaking their duopoly, particularly over natural gas pipelines and fuel distribution networks, would make the economy more efficient and help spur growth.

Sinopec said on Wednesday that it would allow social capital – in China, a term that refers to state-controlled pension funds and the like – or private capital to take up to 30 per cent stakes in its oil product marketing operations. The company has 30,532 petrol stations and more than 10,000km of oil product pipelines.

The announcement fits the mantra set by a Communist party conclave in the autumn to let the market play a “decisive role” in allocating resources. Regulators are allowing synthetic gas produced from coal to be marketed freely, in what could be a pilot for the industry.

Draft regulations in 2012 allowed private investors to take minority stakes in state-controlled infrastructure sectors, including energy. That was seen as an attempt to tap fresh sources of capital without eroding the state’s control over infrastructure, rather than a step towards full privatisation.

Still, opening oil distribution could help China’s independent petrol stations, which often have trouble getting supply from the majors.

Reformers are lobbying for the two oil companies to allow natural gas produced by third parties to transit through their pipelines, a reform that has so far been resisted by CNPC.

A more radical option was to hive off the gas pipelines into a separate pipeline monopoly, allowing equal access to all. Such a reform could potentially benefit Sinopec, which only controls a minority of the country’s natural gas pipelines and has to ship some of its gas through CNPC’s lines, as well as independent producers.

It is too early to tell whether Sinopec’s latest move will yield real changes or just shuffle state money between different players. In 2012, CNPC allowed the state-pension fund and an infrastructure fund to help fund the third phase of its west-east pipeline, a concession that left it firmly in control of the asset.