SINOPEC, China’s top oil refiner, won approval from the government for a long-awaited initial public offering (IPO) of the retail unit that runs its vast chain of gas stations and convenience stores, sources with knowledge of the matter said.

The green light from the State Council clears the final regulatory hurdle for the deal and means the IPO arrangers can move forward with detailed work on the listing, the sources said.

Sinopec aims to sell shares of the business in Hong Kong this year, though it hasn’t set a definitive timetable for when preparations will start, the sources said.

The unit, known as Sinopec Marketing Co., may seek to raise about US$5 billion to US$6 billion in the offering, the sources said. The target has been reduced, from the US$10 billion originally mooted in 2016, due to the company’s weakening growth prospects and concerns about market appetite for such a large issuance, according to the sources.

Sinopec’s retail operations include more than 30,600 fuel stations and nearly 27,000 convenience stores, according to its third-quarter report. The oil giant first proposed a listing in 2014, when it sold a stake in the unit to a group of investors including China Life Insurance Co. and billionaire Guo Guangchang’s Fosun International Ltd.

“The opportunity for investors in the IPO is the growth of non-fuel retail which is growing at 25 percent,” said Neil Beveridge, an analyst at Sanford C. Bernstein & Co. “Non-fuel retail is under-penetrated in China. In most major markets, non-fuel retail makes up more than 50 percent of operating profit. For Sinopec, non-fuel retail makes up less than 10 percent.”

Any deal would add to the US$35 billion in IPOs in Hong Kong over the last 12 months. Plans for the potential IPO are still at an early stage, and details including size could change, the sources said.

The firm would still need to seek listing approval from the Hong Kong stock exchange before the transaction goes ahead.

Sinopec has seen growth in its fuel sales slow in recent years, even as it boosted contributions from non-fuel items like bottled drinks, snacks and cigarettes.

Domestic retail sales of refined oil products rose 0.2 percent in the first nine months of 2018 to 90.82 million tons. Operating revenue of the division’s non-fuel business rose 13 percent to 24.25 billion yuan (US$3.59 billion), Sinopec’s third-quarter report showed. (SD-Agencies)