OIL TRADING INDUSTRY IN CHINA

China is the world's most populous country and has a rapidly growing economy. In 2006, China was the second-largest end user of oil behind the United States and consumed 7.45 million barrels per day. According to Global Economic Prospects 2008 published by the World Bank in January 2008, China's real GDP is expected to continue to grow at very rapid pace, well above the world's average GDP growth rate in 2009 and 2010. This strong economic growth will result in continuing rapid growth in energy demand.

In addition, oil trading in China is characterized by high entry barriers for several reasons, including 1) high capital requirements; 2) difficulty in forging relationships with major PRC oil suppliers and customers; and 3) difficulty in negotiating and managing profitable oil products contracts on a recurring basis.