The proposed Energy Law will focus on fuel security by regulating commercial
oil reserves at the corporate level, China Daily has learned.
The law is being drafted as the country's energy demand, and dependency on
imports, are increasing.
"We are seriously weighing the option of constituting national oil reserves,
both at the strategic and commercial level," said Wu Zhonghu, one of the core
The law will require State-owned large and medium-sized oil companies to
establish corporate reserves to maintain effective oil supplies, he said.
Wu said he hoped the State Council would review the draft law by year's end.
According to figures released by the Ministry of Commerce, China imported
138.84 million tons of crude oil in 2006, up 16.9 percent over the previous
Industry observers warn that more than 50 percent of the crude oil the
country uses will come from imports "in just one or two years".
Since oil reserves are crucial for strategic and commercial purposes, oil
reserves should be set up both at the State and corporate level, just as in some
foreign countries, Wu said.
He said companies that build reserves may expect to get State subsidies to
cover operating and management expenses.
Wang Xiaochuan, deputy director of the Department of Commercial Reform and
Development, affiliated to the Ministry of Commerce, said recently that along
with the gradual opening-up of the oil wholesale sector, commercial oil reserves
at company level should be established to cope with emergencies and to stabilize
Jiang Xinmin, an analyst with the Energy Research Institute under the
National Development and Reform Commission (NDRC), the top economic planner,
also said that as oil wholesale sector is dominated by State-owned giants, such
as Sinopec and China National Petroleum Corporation (CNPC), it is natural for
them to shoulder the responsibility of setting up commercial oil reserves.
"The government can give some incentives. But it is also the oil companies'
duty to help the government leverage oil supply and demand. It is a common
practice in market-oriented countries," said Jiang, also an advisor to the draft
Han Xuegong, a veteran analyst with CNPC, agreed.
"Chinese oil giants are all State-owned and are supposed to shoulder both
economic and social responsibilities. Therefore, they should take the lead role
in setting up commercial reserves," Han said.
The experiences of industrialized countries prove that commercial oil
reserves at company level are effective in balancing supply and demand, said
Zhao Yumin, with the Chinese Academy of International Trade and Economic
Cooperation, a ministry think-tank.
The NDRC announced recently that the country's first strategic oil reserve
base in Ningbo, East China's Zhejiang Province, had been put into operation.
The government approved four national strategic oil reserve sites in 2004.
The other three are in Daishan, also in Zhejiang; Huangdao, in East China's
Shandong Province; and Dalian, in Northeast China's Liaoning Province.
Han said that compared with State-level reserves, commercial ones operated by
oil companies could be more reasonably allocated.
"CNPC's oil fields are spread all over the country, and commercial reserves
can be set up at those sites to meet needs in different places," he said.
(China Daily 02/15/2007 page1)