By Chen Aizhu

SINGAPORE, Mar 20 (Reuters) Sinochem Corp. has formed its first fuel marketing firm with top refiner Sinopec Corp., which gives the trader a small foothold in China's tightly controlled domestic oil market, company sources said on Monday.

The 50:50 venture, officially launched in Beijing last week, will sell gasoline and diesel supplied by Sinopec refineries via Sinochem's tiny retail arm, which now has less than 30 petrol stations compared with 80,000 in the country.

Sinopec will limit the supply of oil products to Sinochem at less than 500,000 tonnes a year (10,000 barrels daily), almost negligible compared with China's 6.6 million barrel-per-day (bpd) market.

The marketing firm was a trade-off for Sinochem after the trading firm withdrew its decade-long investment in Unipec, trading vehicle of Sinopec, which has been consolidating its core businesses since its listing in late 2000. Sinochem held a 30 per cent stake in Unipec since 1993 until early 2005.

In return, the trader was guaranteed its existing status as a leading crude oil import agent for Sinopec, Asia's top refiner.

To Sinochem, the venture provides a modest boost to its long-held ambition of growing into an integrated oil firm from a trading house. Sinochem has also in recent years ventured into oil explorations mostly outside China.

''It is tiny foothold, but still it's good for us to prepare for entering the market once it really opens up,'' said a Sinochem source from Beijing.

The international oil industry is keeping a wary eye on Beijing's resolve to open up its oil market, the world's second-largest, following its 2001 accession into the World Trade Organization.

The Chinese market, 90 per cent-controlled by state giants PetroChina and Sinopec, is expected to allow foreign companies and local independents into the wholesale sector, but little concrete progress has been seen so far.

The joint-marketing deal could offer little help to Sinochem's retail alliance with foreign firms as the trader would still not have sufficient oil products to supply the proposed petrol stations.

Sinochem has agreed to open 500 pe trol stations with European major Total SA in China in the next six years. The trader was also in talks with South Korea's largest oil company SK Corp. for similar alliances.

But such co-operation would not materialise until Beijing grants fuel import rights and domestic distribution licenses to players other than Sinopec and PetroChina.

''People will be asking -- so where do you secure the oil?'' said the Sinochem official.

Sinochem is the largest stakeholder in the country's top export refinery WEPEC, but China's largest oil and gas company PetroChina has the final say over the operations and product flows of the 200,000-bpd plant.

REUTERS SD VC1435