China will complete construction of its first strategic oil reserve facility
in Zhenhai, East China's Zhejiang Province, in August, a top energy official
said in Beijing on Friday.
"Three other sites in Dalian (Liaoning), Huangdao (Shandong) and Daishan
(Zhejiang) are also under development," said Xu Dingming, director of the Energy
Bureau under the National Development and Reform Commission (NDRC).
But he refused to comment on when the pumping of crude oil into the Zhenhai
reserve would begin.
"Anyway, we would not let them (the oil storage facilities) remain unused,"
he said, adding he would not disclose whether the country would use imported or
domestically produced oil.
The Zhenhai facility will be able to hold 5.2 million cubic metres of oil.
"A lot of people ask what China should do (with these tanks) as global crude
prices are soaring We have our own solutions, but I won't disclose them," Xu
told an energy forum.
Minister Ma Kai of the NDRC said in March that China expected to start
filling the Zhenhai storage facility by the end of this year.
The three others would be filled "in due course" once their construction is
completed in 2007 and 2008, Ma was quoted as saying in an AP report.
Building strategic oil reserves is part of China's efforts to ensure energy
safety while cushioning China against possible interruptions of foreign
supplies, but some experts are concerned that the move might trigger a spike in
an already volatile oil market if China imports oil to fill its reserves.
Crude oil reached a record US$75.35 a barrel on the New York Mercantile
Exchange in April, the highest since trading began in 1983.
Chinese Government officials have said the country will not use imported oil
to fill its reserves at the current high prices.
"As world oil prices remain high, China will not import oil to fill the
strategic reserves since that would involve great risks," Zhang Guobao,
vice-minister of the NDRC was quoted as saying in a Chinese-language newspaper
based in Beijing.
An oil expert who declined to be named said that China would use two sources
to fill the reserve tanks to avoid paying high prices: the country's domestic
oil fields and overseas oil assets in which Chinese firms own stakes.
Zhou Fengqi, former director-general of the NDRC's Energy Research Institute,
earlier told China Daily that China's planned strategic oil reserves ultimately
aimed at 90 days of imports in the previous year, or a fourth of the total oil
import for one year.
China last year imported 127 million tons of crude oil, more than 40 per cent
of its total oil consumption.
The country has begun looking for new sites to build a second batch of
strategic oil reserves in addition to the four under way in Zhejiang, Shandong
and Liaoning provinces, the State Council Energy Leading Group said earlier,
Media sources said the new locations might include Tangshan, in northern
Hebei Province and Guangdong's Maoming and Zhanjiang in the south.
(China Daily 06/17/2006 page5)