Sino Aviation Oil Transportation is also aiming to chalk up a turnover of more than $100 million in its first trading year, managing director, Chen Jiulin told Reuters in an interview.

"Our master plan this year is for Sino Aviation sales to be more than $100 million. The second step is to do other fuel business such as diesel, gasoline and paper trading," he said.

Paper trading refers to trading in derivatives products, or swaps, used mainly to hedge physical positions.

Chen said the company had since February procured 628,000 tonnes of jet fuel worth $85 million for CAOSC, making up about 90 per cent of CAOSC's imports.

He said the Singapore government is to confer Sino Aviation with approved oil trader status in September, which allows the company to enjoy a concessionary rate of tax on its income from international oil trading activities.

Chen said CAOSC, which exclusively supplies jet fuel used in China's 139 airports, had established Sino Aviation as a wholly-owned subsidiary in Singapore in order to be closer to Asia's main oil products market and to be able to procure fuel at more competitive prices.

CAOSC returned a turnover in 1997 of eight billion yuan ($960 million) and plans to raise turnover this year to nine billion yuan.

China's jet fuel consumption grew at an annualised rate of 20 per cent in the past 10 years to reach 3.5 million tonnes in 1997, of which 1.38 million tonnes were imported.

However, demand growth in 1998 is expected to slow to 10 per cent due to the economic crisis to 3.85 million tonnes with imports falling to around 1.0 million, he said.

The reduction in imports, Chen said, was due to an increase in domestic refining capacity.

Jet-kerosene production in the first six months of the year grew by 17.9 per cent to 3.1155 million tonnes compared with a year earlier, State Statistical Bureau figures show.

"With such a big volume...it is necessary to have a company here so as to look at the market. In the past we were not very familiar with the market," he said.

Being close to the market, he said, has enabled Sino Aviation to buy fuel at historically low prices.

Chen said the Singapore office had diversified China's jet fuel supply base to include producers from South Korea, Thailand, Singapore and the Middle East.

"We have much more suppliers than in the past. We can buy much cheaper, it's more competitive," he said.

Chen said Sino Aviation has also managed to do away with lengthy trading intermediaries and is now able to buy directly from refiners.

"We can save a lot of costs which were shared by trading houses in the past," he said.

Despite tough trading conditions, Chen said, Sino Aviation should be able to supply about 90 per cent of CAOSC's import requirement.