THE Shanghai Petroleum Exchange said it will set up a trade center in northwest China's Shaanxi Province in a bid to expand business and enhance pricing power.
In cooperation with Shaanxi Yanchang Petroleum (Group) Co. and other local firms, including a railway operator, the new center is expected to start operation in Xi'an, the provincial capital, on November 8, SPEX announced on its Website yesterday.
Shaanxi Yanchang is China's largest private oil company.
SPEX said, with its customer resources in the eastern Yangtze River Delta, it expects to turn the center into a regional energy and chemical trading hub and pricing center in Shaanxi and neighboring provinces in two to three years.
The Shaanxi provincial government, which approved the center, has promised to allocate a supply of 500,000 to one million tons of oil products and 200,000 tons of methanol per year initially to activate trading, SPEX said. The amount will be gradually increased.
However, some traders seemed less than enthusiastic about the new center, citing concerns such as unfamiliarity with local market conditions. But they conceded that the rich resources in Shaanxi could help sustain trading activities.
"The main reason for setting up the Shaanxi center is the supply advantage," said Min Chunguang, general manager of Shanghai Donghao Oil Industry Co. "It is more of a trial since SPEX itself is only in its initial stages."
SPEX, launched last August, started with spot and forward trading of fuel oil, used by power plants and ships, and later included trading of chemicals like toluene, styrene and diethylene glycol, used to make plastics.
The establishment of SPEX marked a step forward in China's efforts to liberalize energy product prices. SPEX has said it will include more products like gasoline and crude oil when conditions allow.
SPEX was founded by the Shanghai government, its main shareholder, and units of state energy giants China National Petroleum Corp, China Petrochemical Corp, China National Offshore Oil Corp and Sinochem Corp.
China's second petroleum exchange, after SPEX, began business in July in the port city of Dalian with the aim of becoming the regional center in northeast China. Guangdong Province also plans a similar exchange.