China fuel shortage led by supply, not demand-exec

By Jim Bai

BEIJING, June 3 (Reuters) - China's fuel shortage is caused more by declining supply than by increasing demand, an executive with Sinopec SenMei (Fujian) Petroleum Co said on Tuesday.

Sinopec SenMei, the first fuel selling joint venture in China, is owned by Sinopec (0386.HK), Exxon Mobil (XOM.N) and Saudi Aramco and claims 70 percent of market share in the coastal Fujian province.

Hao Guoqiang, general manager of Sinopec SenMei, said fuel supplies to its 750 gas stations in Fujian were insufficient and on some highways long queues could be seen of vehicles that were thirsty for diesel.

"Many independent refiners shut down operations because they could not afford soaring crude costs when domestic state-set fuel prices were low," Hao said.

In addition, some joint-run fuel importers and smugglers also halted operation.

"The market can not be fully supplied by counting on the two oil majors, Sinopec (600028.SS)(SNP.N) and PetroChina (0857.HK)(601857.SS)(PTR.N)," Hao said.

Sinopec SenMei hopes to expand direct fuel sales to boost its profit margin, according to Hao.

"We would like to increase direct sale, but fuel resources are limited," Hao told reporters on the sidelines of the Asia Oil Distribution and Retail Conference in Beijing.