China to bolster oil reserves

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It’s not a lot but seems private inventories are low and were probably liquidated in the last 6 months.

China to bolster oil reserves

by Sun Xiaohua

Mar 2 (China Daily) — China is accelerating the build-up of its oil reserves to avoid the economic dislocations the country suffered in 2008 from fluctuations in the world oil price.

China’s National Energy Administration (NEA) recently released a plan to build nine large refining bases in coastal areas over the next three years, sources with the China Petroleum and Chemical Industry Association said last week.

The plan involves building three 30-million-ton refinery bases in three cities (Shanghai, Ningbo and Nanjing) in China’s economically dynamic Yangtze Delta and six 20-million-ton bases in other coastal areas from Tianjin in the north to Guangzhou in the south. It will also facilitate major joint-venture refinery projects between Chinese companies and partners from oil-producing countries such as Venezuela,Qatar and Russia.

The refinery scheme is part of China’s plan to bolster its oil inventories. The NEA announced at a national energy conference in early February that China will, in addition to the current four strategic petroleum reserve (SPR) bases, build eight new ones by 2011. The program will increase China’s strategic crude reserve capacity to 44.6 million cu m, or 281 million barrels.

The country will also increase its refined oil reserve to 10 million tons by 2011, a source familiar with the stockpile plan told China Daily in February.

“China’s attentiveness to its oil reserve capacity has grown in tandem with its rising dependence on imported oil,” said Pan Jiahua, an expert with the Chinese petroleum society.

China, the world’s second largest oil consumer, relies on imports for about half of its oil needs. It imported 178.9 million tons of crude oil in 2008, up 9.6 percent from the previous year, according to the National Development and Reform Commission.

But China cannot simply take advantage of attractive prices and store as much oil as it wants because its current reserve capacity is not commensurate with its energy appetite.

Customs statistics shows China’s crude imports in January even fell 7.99 percent year-on-year. A slowing economy bears most of the blame but analysts said the country’s limited capacity also played a role.

Zhao Youshan, head of the petroleum distribution committee of the China General Chamber of Commerce, an industry group, recently submitted a proposal to oil-related government agencies, calling for using tanks controlled by private companies to store more cheap oil.

Zhou said in his proposal that China’s more than 600 private oil companies have 230 million tons worth of storage tanks, almost ten times the capacity of the eight new SPR tanks combined.

China has massive private oil storage facilities, built up by oil companies since China opened its oil markets to private operators in the mid-1990s. But State companies, mainly China National Petroleum Corp (CNPC) and China PetroChemical Corp (Sinopec), basically control oil-importing licenses and hundreds of private oil distributors and refiners are currently sitting on empty tanks.

Zhou said in his report that the industry slump last year has left many private oil companies broke and that some of the survivors are struggling with the high maintenance cost of empty tanks.


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