An announcement is expected this month on the revamped structure of China National Petroleum Corp (CNPC) and China National Petrochemical Corp (Sinopec), it said.

CNPC, the country's biggest oil-explorer, will be given overall industry responsibility for the North and West. Sinopec, the largest refiner, will take over eastern and coastal areas.

Nineteen Sinopec firms, mostly in the North, have been transferred to CNPC, the paper said. Twelve - mostly southern - firms under CNPC have been moved to Sinopec.

The groups have hammered out agreements on the handling of assets, finance, projects under construction, research and development facilities, production and sales, salaries, insurance and foreign trade, the China Daily said.

The companies aimed to compete internationally by integrating the upstream and downstream sectors of oil exploration,transportation, processing and marketing.

"It is a strategic option for the two petrochemical super-companies to participate in global competition," the paper quoted Li Yongwu, director of the State Petrochemical Industry Bureau, as saying.

In addition, the two firms would absorb about 100,000 petrol stations throughout the country formerly owned by local authorities, and dozens of provincial oil distributors, the bureau said.

"Institutional reform is a must in terms of increasing management efficiency of resources utilisation and reducing duplication of projects, even if the process is difficult and risky," the paper quoted Li as saying.

The bureau will play a major role in industry regulation and planning. It had taken over the administrative functions of the former ministry of chemical industry, CNPC and Sinopec under a government reorganisation earlier this year.

The total industrial output of about 7,500 enterprises which formerly belonged to the three units accounted for 14 per cent of China'sgross domestic product in 1996, the China Daily said.

China's oil industry is facing severe challenges, with refineries suffering from a glut of diesel and stiff competition from Asian countries which have been able to export cheaply because of steep falls in their currencies.