Sinopec is set to become the second state-run Chinese major after PetroChina to enter the retail fuel market in Singapore. It has purchased two properties in the city state since the beginning of this year and intends to build filling stations on both plots.
According to the Straits Times, Sinopec outbid other potential investors in auctions for the sites. It paid S$42.5 million (US$31.2 million) for an empty 1,689-square metre plot on Yishun Avenue in February and then bought a plot on Bukit Timah Road from Ho Bee Land, a real estate and investment firm, several months later.
The value of the latter deal has not been disclosed. Jonathan Wong, the head of gasoline sales for Sinopec’s Hong Kong division, said the price had been “around S$45 million (US$33 million)”.
Wong added that he did not know when Sinopec expected to open the new stations in Singapore. “There are no firm dates yet,” he said. “We’re looking at some time next year.”
The Chinese company has not said where it will source gasoline for sale in Singapore, but the Straits Times quoted unnamed industry sources as saying that they expected an affiliate of Royal Dutch Shell to provide the fuel. As of press time, Shell had not confirmed these reports. When contacted by the newspaper, a representative of the multinational said: “We do not comment on specific commercial discussions.”
Sinopec’s reasons for seeking to build and launch filling stations in Singapore are unclear. The city state’s fuel market has been shrinking for some time, with the number of retail fuel outlets having dropped from 220 to 170 over the last 15 years.
The head of Singapore-based fuel consultancy Ong Ban Hong Leong, Ong Eng Tong, told the Straits Times that the Chinese firm’s motivations appeared to be more political than economic in nature. “For China, I believe that they are keen to show their flag in Singapore. They are also more cash rich,” he commented.
The newspaper also quoted an unnamed oil industry executive as saying that Sinopec might be trying to establish a foothold in Singapore ahead of assuming a larger role there. “There’s no economic sense having just one or two stations,” he speculated. “Word in the market is that Shell may release 10-15 stations to them. Lease or sell, we do not know.”
The executive also remarked that Sinopec’s entry might disrupt the local fuel market in a way that benefits consumers. “They [Sinopec] have about 16 stations in Hong Kong, a very similar market to Singapore, and they are known there for slashing prices and giving very high discounts,” he said. “If they do the same here, then all oil companies will be thinning their margins.”
Sinopec is already active in Singapore. Within the last two years, it has teamed up with BP to set up bunkering operations and has also started selling lubricants on the local market. Additionally, it has opened a branch office in Singapore under the name Sinopec Hong Kong Singapore.