Retail ties help Sinopec move to mixed ownership

Han Xiaoping, chief information officer of China Energy Net Consulting Co, said participation of public funds and insurance companies in Sinopec's reform is in line with SOEs' principle of benefiting the public.

"It can be a good way to pay back the public by bringing more social security funds and pension funds into SOE reforms," Han said.

Li Li, research and strategy director at ICIS C1 Energy, a Shanghai-based energy information consultancy, said the funds will help Sinopec grow. She said that Sinopec's reform is not limited to raising capital but also includes downstream operational cooperation with multiple partners to boost its performance.

Sinopec sells $17.5b stake in retail unit to investors

Sinopec retail plans on track

Sinopec has signed cooperation agreements in the past two months with many companies, including Fosun International Ltd, Taiwan-based Ruentex Development Co Ltd, business-to-consumer online supermarket Yhd, logistics company SF Express Co Ltd, gas supplier ENN Energy Holdings Ltd, Tibet Highland Natural Water Ltd and appliance producer Haier Electronics Group Co Ltd.

"Sinopec is looking for expertise and ideas to boost its nonfuel business, which is expected to have huge potential to grow," Li said.

In the West, nonfuel business accounts for more than 50 percent of a gas station's profits. Up to 69 percent of the gas stations in the United States are supported by a convenience store. But more than 99 percent of Sinopec's retail sales come from fuel.

Sinopec said that nonfuel business can be a "gold mine" for the company. Revenue from products other than fuel totaled 13.3 billion yuan in 2013, and it expects the figure to reach 15 billion yuan in 2014.

"Sinopec has strong capabilities in upstream oil and gas exploration and production, but it is not a professional in the retail business," Li said. "That's why there is only one energy company among dozens of its partners."

The cooperation has already started to benefit the company.

Chai Zhiming, deputy chief executive of the retail unit, said that eight gas convenience stores with new products and services provided by Sinopec's partners in Shanghai achieved a 50 percent rise in daily revenue during a soft opening.

ENN, the only energy company among Sinopec's partners, specializes in downstream natural gas distribution.

Li said that compared with PetroChina Co Ltd, the country's biggest oil and gas producer, Sinopec needs a "helper" in the gas sector. "The next step of Sinopec's reform will be public listing and integration afterward," Li said. "The integration with partners is not an easy task, and it takes time to see it through."

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