Measures to enhance competition in the fuel market and incentives for setting up LPG filling facilities

The Executive Council today (July 11) approved the Government's proposals to tender out petrol filling station (PFS) sites upon expiry of their leases, to remove the present tender restrictions for PFS sites with a view to facilitating new entrants and enhance competition in the fuel market in Hong Kong, and to provide incentives for operators of existing PFSs to retrofit their stations with liquefied petroleum gas (LPG) filling facilities.

The present tender restriction for PFS sites whereby tenders for PFS sites may be accepted only from companies either holding special importer's licences for hydrocarbon oils or are able to adduce evidence of a guaranteed supply of oil products from a licensed supplier was approved by the Executive Council in 1981 to avoid speculative tenders.

A Government spokesman said, "To facilitate new entrants to the fuel market, this restriction is now removed."

"To address the concern about speculative tenders, the successful tenderer will be required under the lease to operate a PFS on the site within a stipulated period of time," the spokesman said, adding that breach of this clause may lead to re-entry of the site by Government.

In addition, with immediate effect, all PFS sites under a 21-year PFS lease will be tendered out upon expiry of their lease term.

The present practice whereby new leases may be granted to the existing lessees of PFS sites upon expiry of their leases on payment of a premium is discontinued.

The spokesman explained that this new arrangement will facilitate competition in the fuel market and will be welcome by the general public.

"In fact, in its study of Motor Gasoline, Diesel and LPG Markets in Hong Kong published in January 2000, the Consumer Council has recommended a number of measures to bring about changes in the structure of the market. The present proposals to lift the PFS tender restriction and to tender out PFS sites when their PFS leases expire are in line with these recommendations," he added.

"However, the new policy to tender out PFS sites when their PFS leases expire will not be applied immediately to certain existing PFSs," the spokesman explained.

"Under an incentive package approved by the Executive Council today, operators of existing PFSs that are under a PFS lease and suitable for retrofitting of LPG filling facilities will be offered lease extensions at nominal premium. The new tendering policy will only be applied to such PFSs when their extended leases expire," he said.

Operators will be offered the incentive package subject to their undertaking to provide a specified number of LPG dispensers by a date specified by Government, and to provide uninterrupted supply of LPG at the PFSs concerned.

Under the same incentive package, operators of existing PFSs on a short-term tenancy will be offered tenancy extensions at nominal premium subject to similar terms as for those PFSs on a PFS lease.

Where it is necessary to facilitate the LPG installations, additional land adjacent to the relevant PFSs will also be granted at nominal premium.

"The aim of the incentive package is to encourage more LPG filling points to be set up to supplement the programme of building large, dedicated LPG filling stations in meeting the demand from LPG taxis," the spokesman added.

"Our target is to provide adequate LPG filling capacity for the entire fleet of 18,000 taxis by the end of 2001. The incentive package will help us to achieve our target and improve the network of LPG filling points," he said.

End/Tuesday, July 11, 2000