The company will control China's strategic oil reserve bases as well as the oil reserve stored by Chinese companies. The company will govern all of the state-owned petroleum companies on how much to reserve, how to reserve and when to reserve.

It will be a solely state-owned company under the management of the central government, the newspaper said.

This indicates that China is attempting to improve its petroleum reserve system by implementing two sets of reserves; the compulsory commercial reserve and the governmental reserve.

China has kicked off construction on its reserve bases in 2004 and plans to start filling its oil reserves this year.

The construction of Zhenhai, China's first base, is almost complete. It will be capable of holding 5.2 million cubic meters of petroleum.

Xu Dingming, director general of the Energy Bureau of the National Development and Reform Commission, said the construction of the other three bases is on schedule. Xu told the ongoing "2006 International Strategic Development and Investment on Energy Summit" that the Zhenhai base still needs a government inspection and approval to begin operating, but he gave no dates.

Authorities are now selecting sites for the second phase of bases, with reserve capacities of 200 million barrels.