China plans emergency oil-storage tanks in NE

The tanks are part of phase two of China's oil reserves, Zhang Guobao, the head of the National Energy Administration, told reporters in Beijing today, without elaborating. The country is building its oil stockpiles in three stages.

Chinese oil demand doubled in the last decade to 8 million barrels a day last year, with imports meeting 45 percent of requirements, BP Plc's Statistical Review shows. China will build oil reserves equal to 100 days of net imports before 2020, China Petrochemical Corp., the nation's top refiner, said Sept. 23, citing a plan approved by the State Council, or Cabinet.

“If there's one more region for strategic stockpiling, it'll definitely increase China's crude imports,” Wang Aochao, head of China energy research at UOB-Kay Hian Ltd., said by phone in Shanghai. “Imports may grow 10 to 12 percent a year.”

Construction of the second phase has started with the Dushanzi facility in the western province of Xinjiang, Zhang said last month.

China's industrial northeast includes the provinces of Heilongjiang, where the country's oldest oilfield is located, and Liaoning, a producer of metals and machinery.

Oil Requirements

Chinese oil companies have also acquired energy assets in countries including Kazakhstan, Syria and Singapore since December. At stake is China's ability to secure fuel for the world's third-biggest economy, which expanded 7.9 percent in the second quarter from a year earlier.

“We saw a 5 to 7 percent increase in oil consumption every year in the past few years while domestic production only grew by 1 to 2 percent,” Wang said.

China will need more than 11 million barrels of oil daily in five years, according to Paul Ting, president of New Jersey- based Paul Ting Energy Vision LLC, an oil and gas consultant.

The country aims to take advantage of weakened oil prices amid the global recession to build stockpiles, the National Development and Reform Commission, the top economic planner, said in March.

Crude oil in New York fell to a low of $33.55 on Feb. 12 after reaching a record $147.27 a barrel in July last year. Since then, prices have more than doubled to $80 a barrel on speculation the global economy is recovering and fuel consumption may rise.

“The filling of phase one might have taken place from the fourth quarter of 2008 to the first quarter of 2009, when crude oil prices were still low,” Wang said.

The first phase holds the equivalent of about 16.4 million cubic meters of oil, or about 30 days of net imports, China's energy administration said in June. The stockpiles are located in Zhenhai and Zhoushan in Zhejiang province, Dalian in Liaoning and Huangdao in Shandong.

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