China hopes to complete its second phase strategic oil storage tanks in two years, a senior energy official said on Monday, a pace up to twice as quick as local media have reported. The readiness of some 170 million barrels of new tanks by late 2011 would mean fresh incremental demand from China, already importing crude at record rates in recent months to feed new refineries.
Liu Qi, deputy head of the National Energy Administration, said the government was pushing for an immediate start-up of construction of its second phase strategic petroleum reserve tanks at eight sites. "The sites for the second phase are under construction at the same time, and are proceeding with similar speed. Hopefully it will take two years to finish the construction," Liu told Reuters on the sidelines of a US-China energy forum.
China last week officially kicked off construction of an SPR site in Dushanzi in the remote Xinjiang region that borders Kazakhstan, after filling its first phase tanks at four coastal sites that total some 100 million barrels of crude by early 2009. Caijing Magazine reported last week that completion of the second-phase tanks was expected in 3 to 4 years.
China, now importing more than half its crude needs and ahead of Japan as the world's No 2 crude buyer, also plans to build third phase strategic sites that will bring crude oil reserves to 440 million barrels by 2020, or roughly 105 days of net imports at current rates, Caijing has reported. Industrialised economies are required to keep 90 days of forward consumption by the International Energy Agency. China is not an IEA member but aspires to meet the same standard.
Liu said China will pick a good time to fill the new SPR crude tanks once they are ready. China has proven a smart and opportunistic oil reserve operator, having filled its first 100 million barrels of reserves secretively over a stretch of 30 months started in late 2006 that coincided with much of the market slump in late 2008. "Once construction is finished, they are ready for filling oil. But we have to choose a suitable time when the global oil price is attractive," said NEA's Liu.
The government has not published the sites for the second or third phase tanks, except saying that landlocked inland regions and underground sites will be preferred. Liu said the eight sites include some that are expansions of first-phase tanks, but didn't elaborate.
Last week, state media reported China started building a 5.4 million cubic metre SPR site in Dushanzi, close to the Kazakhstan-China crude pipeline, with a first-stage of 3 million cubic metres, or 18.9 million barrels, by July 2011. Beijing had approved the expansion of the Aoshan reserve base off east China's Zhejiang province, part of the government's second-phase scheme, an industry source told Reuters in July.
Apart from crude oil reserves, China has also begun adding refined fuels to its state reserves as part of a larger plan to enhance the country's energy security, Zhang Guobao, the country's top energy official, said on Sunday. Zhang didn't say how much fuel has been stocked up, but an industry official told Reuters in May that China plans to stockpile 10 million tonnes, or roughly two weeks of current consumption of gasoline, diesel and kerosene combined, by 2011.