By Wang Zhenghua (China Daily)
Updated: 2008-01-03 09:56

Shanghai's first storage facility for refined oil products will be ready in early 2009 to provide a back-up energy supply.

The foundation was completed late last year at the Shanghai Chemical Industry Park, the Shanghai Securities News reported yesterday.

The project received a 520 million yuan ($71.23 million) investment from the listed arm of Shanghai's leading retailer Bailian Group.

The project will be able to store 200,000 cubic meters of refined oil products, including an emergency reserve of 30,000 tons of diesel - enough to cover a shortage for up to a week.

Experts said the move will help offset oil price fluctuations caused by ups and downs on the international market and will benefit companies in Shanghai and other areas in the Yangtze River Delta.

China is the world's second largest oil consumer after the United States. But many parts of the country are facing severe fuel shortages, with demand outpacing supply from refiners squeezed by soaring crude oil prices.

In Shanghai, fuel supply has been up and down in recent years due to rising global crude oil prices and temporary shutdowns of domestic refineries for maintenance checks.

Bailian Group and the industry park signed agreements in April last year on investment in and land use rights at the storage facility.

The project comprises 18 oil tanks of different sizes, and is backed by the Shanghai Fuel Co. It will include four zones - an oil storage area, deliveries and loading station, subsidiary production area and an administrative zone.

Covering fuel oil, diesel and gasoline, the reserve will circulate 3 to 4 million cubic meters of oil products every year - a steady and reliable supply for companies in the chemical industry park.

The company said the reserve would ease the seasonal fuel supply disruption.

The government started a strategic oil reserve base program in 2004 to offset oil supply risks and reduce the impact of fluctuating global energy prices, which impact the domestic market for refined oil.

The bases are designed to maintain strategic oil reserves equivalent to 30 days of imports, or about 10 million tons.