Currently, Total Group has penetrated from the second-layer cities into China's largest economic metropolitan of Shanghai. Two Total-labeled gas stations in Shanghai are under development. A company spokesman said that it plans to build and operate a distribution network for oil products consisting of 300 gas stations in Shanghai, and Jiangsu and Zhejiang provinces.

How foreign oil companies have been able to take to the market in China like a duck to water when private Chinese oil companies are sinking has left many of these owners scratching their heads. "Despite the fact that foreign companies also face the problem of oil supply, their accesses to oil supply has been guaranteed due to their cooperation with the large domestic oil majors," said Dong Xiucheng, Vice Dean of the Business Management School under the China University of Petroleum. "Furthermore, foreign companies are capable of building oil depots to transfer oil and import oil products from overseas to sell."

Ren Yuling, a counselor to the State Council, cautioned that private oil retailers selling their "packaged assets" to foreign buyers could threaten the nation's petroleum security.

Zhao, however, didn't think such worries were necessary and believed it was quite "normal" and in line with the nature of a market economy and wouldn't be a threat to the national petroleum security, saying "it is similar to arguments justifying the opening of the finance sector to foreign investment."

"It's good in general, " said senior oil analyst Hang Xuegong, arguing that the sell-off of the private stations is conducive to improving the efficiency of domestic gas stations, optimizing oil distribution and encouraging healthy competition. Currently, domestic gas stations are inferior to their peers overseas in terms of operation efficiency and distribution.

Supports and solutions

Li Pumin, Spokesman of the National Development and Reform Commission (NDRC), said the government encourages the development of private companies with favorable policies and private oil companies could secure a stable stake of the market if they don't give up and manage to grow and profit.

The NDRC is working on a plan to directly supply oil products to private oil retailers, with the first batch of oil being around 5 million tons. Zhang Jiuda, a researcher with the NDRC, disclosed that the body is considering providing support to private oil retailers short of oil products.

"We are thinking about sparing a portion of oil products for private distributors," said Zhang. "But how much should we give them? How to subsidize them and at what prices? We have to consider the details and the feasibility. "

Yet, Qi Fang, Director of the Hebei Oil Chamber, thought that 5 million tons of oil products would be insufficient to bail private oil retailers out of trouble. He said that oil consumption last year in China totaled 320 million tons, and based on this, the supply of 5 million tons is far from being enough to meet the demand of private oil retailers. Supposing private oil retailers operate about half of the distribution network nationwide, then the 5 million tons can only supply a minimal portion of their total demand.

Xu Dingming, Deputy Director of the Office of the National Energy Leading Group, proposed that the government adopt prompt measures and sell 10 million-20 million tons of oil products to private retailers at reasonable prices every year, arguing that the suggested amount accounts for less than 10 percent of China's annual oil output and will not affect the major oil giants. Xu also advised the government to allow private oil retailers to avail themselves of international oil resources and sell imported gasoline in order to secure more opportunities for their survival and development.

Dong Xiucheng, a professor with the China University of Petroleum, however, thought the government is sometimes reserved with its support for private oil retailers as some of them went bankruptcy not only because of supply shortage but also due to an overstretched capital chain, the small scale of their operations, as well as bad branding. They find it difficult to finance because they fail to match some large state-owned enterprises in terms of credit and scale. "Private oil retailers have to sharpen their edges while looking for sufficient oil supply," said Dong.