China's four biggest state petroleum companies have combined with other entities to create the world's fourth petroleum futures exchange at Nanjing, capital of Jiangsu Province.
The move is the latest effort by Beijing to nudge the country'S petroleum sector closer to world market oriented operations.
NANPEX CREATED
The Nanjing Petroleum Exchange (Nanpex), established Dec. 9 by China National Petroleum Trading Corp., China National Offshore Oil Corp., China Petrochemical Trading Corp., and China National Chemicals Import, will be China's second commodities futures exchange.
Each of the state companies will take a 12.5% interest in the $20 million venture. Remaining interests are held by Jiangsu Petroleum 20%, Sinochem Hong Kong 17%, and NJ International Development, a Hong Kong subsidiary of Nanjing Economic and Trade Division, 13%. It is scheduled to begin trading in March 1993. The other three petroleum futures exchanges are New York Mercantile Exchange (Nymex), New York, International Petroleum Exchange (IPE), London, and Singapore International Monetary Exchange (Simex), Singapore.
Operations will cover futures and options trading of oil carried out in accordance with standards established at Nymex IPE, and Simex. Officials expect Nanpex will have a turnover of $90 million/month within 6 months of start of trading.
MARKET REFORMS
Creation of Nanpex inspired by government steps toward a market economy, follow proposals to bring China's oil prices in line with world prices. Those proposals, expected to be implemented in early 1993, include slashing subsidies to oil enterprises.
Officials say Nanpex will reflect physical prices in China's market and thus help boost them closer to world market levels. Currently oil in China is sold at $38/metric ton (about $5/bbl). The oil price increase is one of the steps China must take in preparing to reenter the General Agreement on Tariffs and Trade next year.
By 1995, the price for oil sold domestically in China is expected to reach world market levels.
I Beginning in 1993, China National Petroleum Corp. (CNPC) will loosen control over 14 oil producing areas. These producing areas will be authorized to set their own prices, market products, and conduct foreign trade. CNPC will buy oil from these areas at world prices. In return, the producing areas no longer will receive capital funds from CNPC for oil exploration. CNPC will fund only development of newly discovered reserves.
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