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. Last Updated: 07/27/2016

BP Plans Gas Station Expansion Into China

SINGAPORE -- Oil giant British Petroleum is planning the industry's first big move into China's lucrative retail market with an 800 gas station network which could cost over half a billion dollars in southern Guangdong province.

Officials from BP, one of the world's top three oil companies, were in Beijing this week for talks with major Chinese oil company PetroChina on retail cooperation over the next few years, industry sources said Friday.

This is by far the most ambitious drive by an international oil company seeking a slice of China's multi-billion dollar, but highly protected retail market, which is slowly being opened to foreigners.

China has some 80,000 gas stations, of which foreign companies own only 300. Guangdong has 4,000 gas stations in total, of which 100 are run by foreign oil firms.

Sources said the talks were part of the early-April agreement in which BP bought 20 percent of PetroChina's $3.1 billion initial public offering, in return for a stake to jointly market natural gas and fuels in China's coastal provinces.

Sources said negotiations were picking up steam, but details on the talks were sketchy.

"The talks are going on between BP and our big bosses. Guangdong will be the primary target BP and other foreign companies are keen on, as it is a big and freewheeling market," a PetroChina official said.

A senior China-based BP official contacted by Reuters declined to comment.

Industry sources said it would cost 2 million to 10 million yuan ($241,000 to $1.2 million) to acquire an existing station or build a new one, depending on the form of cooperation with the Chinese partners and the location of the station.

They said BP would mostly acquire existing stations instead of building new ones as the market was already oversupplied.

BP has investments in China totaling $2.5 billion in a range of activities including oil and gas production, refining and retailing and chemical production.

Its expansion into China follows two years of major acquisitions that saw it paying a total of more than $80 billion for Amoco and Arco from among the U.S. oil majors, and Burmah Castrol, the British lubricants group.

Also eyeing the Guangdong market, one of China's top oil consuming provinces, is ExxonMobil. The U.S. oil titan may take up a strategic interest in China's second largest state oil giant China Petrochemical Corp., or Sinopec in its IPO.

Sinopec is in full gear preparing for its stock offer in New York and Hong Kong expected in September and sees alliances with such strategic partners as BP, Royal Dutch Shell and ExxonMobil as key to its IPO success, sources said.

Sinopec is the dominant player in Guangdong, holding 60 percent of the wholesale market and some 20 percent of the retail market.

PetroChina, however, is a minor player in the province, taking up 20 percent of the wholesale business and operating some 200 petrol kiosks. But the tie-up with BP in Guangdong would place it almost on a par with Sinopec.

Sinopec has 1,000 gas stations in Guangdong after a massive acquisition campaign in the first half of the year.