CHINA DESIGNATES FOUR STRATEGIC OIL RESERVE BASES

June 10, 2003, Southcn.com (Guangdong, China)

Information from China Petroleum and Gas Corporation indicates that our central government has designated four strategic oil reserve bases. They are located in Zhenghai (Zhejiang), near Hangzhou Bay, Huangdao (Shangdong), and Dayawan Bay (Guangdong). These reserve bases will be non-profit by nature and are under the supervision of the State Council’s Development and Reform Commission. To utilize the oil at these reserve facilities, permission must be obtained from the State Council.

Last year (2002), China imported about 70 million tons of oil. It is estimated that by 2005, the oil import will reach 100 million tons annually, and by 2020, China’s oil import will reach Japan’s current level of 250 million tons per year, becoming the world’s number one oil import country. The Iraq War has further added urgency to the issue of establishing oil reserves.

Experts have suggested that in the next few years, our government should combine the state-operated reserves with the non-state industrial reserves, the former playing the primary role, under an overall plan, to establish a series of national oil reserve bases in stages. The goal is to reach the reserve capacity of 8 million cubic meters by 2005, or equivalent to 30 days’ oil import amount, and to make the oil reserve capacity to be equivalent to 70 to 75 days’ oil import amount by 2010.

According to sources, the central government will provide the major financial sources for establishing the oil reserve facilities. The government will designate China Petroleum and Chemical and China Petroleum to accomplish this task. Eventually, the government will have to spend more than 10 billion yuan for this. The oil reserve tanks themselves are not costly, most of the cost will be the cost of the oil to be purchased. Sources also indicate that the construction of the reserve base at Zhenghai is already under way.

Of the four large oil reserves, two of them, Zhenghai and Hangzhou Bay, are located in Zhejiang Province, which has caught much attention. A senior official from the Chinese Five Minerals and Chemical Import and Export Association states that the Zhenghai Reserve Base will be the largest, although specifics about this base remain unclear. China Petroleum and Chemical Corporation already has oil tanks there, which would lower the cost of building the reserve base. Furthermore, it is supported by the Yangtze River Delta with Shanghai the leading economic powerhouse. In this area are located the mammoth enterprises such as Shanghai Petroleum and Chemical Co., the Yangtze Petroleum and Chemical, Co., Yizheng Chemical and Fabrics, Co., all need oil to operate, thus providing enormous market demand. Therefore it is not hard to understand why Zhejiang was chosen to house the largest oil reserve.

After the large Nanhai Petroleum and Chemical project, Guangdong’s Dayawan Bay is once again gaining attention because of it being newly designated as the oil reserve site. But one source in Guangdong familiar with the situation cautions that “at present no information confirming Dayawan Bay as the oil reserve site has arrived yet, but it is understood that there should not be any big problem.”

It is also known that as a subsidiary of China Petroleum and Chemical Corp. the Guangzhou Petroleum and Chemical Co. owns oil tanks at Dayawan Bay already, serving as relaying stations for imported oil. After the $4 billion project to build Nanhai Petroleum and Chemical, Co. began, Dayawan Bay again shows its prominence. Analysts believe that the fact that the port facilities at Dayawan Bay are complete, coupled with the bright future for the Pearl River Delta, will help facilitate the construction of the oil reserve base there.

[http://www.southcn.com/news/china/china04/zgsynyzl/zgsynyzlfx/200306130040.htm]