The Ministry of Commerce yesterday announced qualifications for companies to apply for licences to run retail and wholesale businesses of oil products as well as oil storage.

The regulation virtually lifted the three-year ban forbidding companies other than Sinopec and China National Petroleum Corp (CNPC) China's two largest oil companies to build new filling stations.

The regulation, the ministry said, is part of the government's efforts to reform the management of the opening-up of oil markets. China is set to allow foreign investors to retail oil starting from this Saturday in line with World Trade Organization requirements.

According to yesterday's "oil market management provision," applicants for retail business should have oil supply contracts with legal wholesalers and meet development plans of local governments.

For wholesale and storage businesses, additional requirements are needed, including storage facilities with capacity of no less than 4,000 cubic metres, and other infrastructure such as transportation pipelines, railways, and wharves.

Industry insiders yesterday said many companies can meet the qualifications which are not as strict as they had imagined.

The regulation, by itself, allows new domestic companies other than Sinopec and CNPC to build new service stations.

In 2001, the government regulated that only Sinopec and CNPC were allowed to build new stations. It aimed to help the two companies consolidate the market to fend off competition when the market opens up.

Meanwhile, the government has revoked thousands of wholesale licenses, and forbidden companies other than affiliates of the Big Two for new wholesale licenses.

"Despite the strong desire to invest in the market, many companies have been shied away because of the restrictions," Di Jiankai, director of Department of Commercial Reform and Development of the Ministry of Commerce, said.

With government help and massive acquisitions in past years, the two companies now control 56 per cent of the retail oil market, compared with 40 per cent three years ago.

The two companies also make up 90 per cent of the wholesale market.

Analysts said the new regulation did not loosen the control over the wholesale market which is due to open up in two years.

"They only set standards for wholesale business. This does not mean new players can move in right now," said a Sinopec official. "Wholesale restrictions are still effective."

According to yesterday's regulation, provincial governments can approve applications for retail and storage business, while the commerce ministry has the final say for applicants for wholesale business.