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Asia's leading refiner Sinopec is said to be forming a new subsidiary that will specialize in the sale of fuel oil and bunker fuel in the Chinese market, Reuters reports.

Operating under the company name Sinopec Fuel Oil Sales Corp., the new sales and marketing arm will aim to source bunker fuel from Sinopec's local refineries rather than relying on imported product.

The company will also carry out fuel oil marketing, targeting local "teapot refineries", which import fuel oil to use as feedstock.

These refineries, mainly located in the southern province of Guangdong, China's manufacturing hub, and in the eastern Shandong province, use fuel oil as feedstock as they have limited access to crude oil. The use of cheaper feedstock enables them to compete with the state-owned refineries when producing products such as gasoline and diesel for the domestic market.

News of Sinopec's plan to launch a new bunker and fuel oil subsidiary follows the announcement last week that the oil giant aims to increase its market share of fuel oil in 2010.

Sinopec said that 'greater efforts' would be made to expand and increase its market share for both fuel oil and jet fuel and that it would improve its sales of lubricants, asphalt and petroleum coke by "leveraging its brand advantages".

Chinese bunker market

The country's leading bunker supplier is China Marine Bunker (PetroChina) Co. Ltd. (Chimbusco), which is 50 percent owned by PetroChina.

In December 2009, Chimbusco said that it forecasts annual demand for marine fuel in China to increase by 11-20 percent between 2009 and 2013.

General Manager Qin Zhigang, said that sales growth is expected to continue during the 2009-2013 period, but at a slower rate than the 39 percent surge in bunker consumption recorded in 2008 when the size of the market was estimated at 6.3 million tonnes.

Qin Zhigang said the slowdown in annual growth is due to the international economic crisis and the fact that China's marine fuel market has reached maturity following an unprecedented upsurge in demand in previous years.

He pointed out, however, that the growth rate of the Chinese market may still be higher than in other Asian markets during the 2009-2013 period.