China's strategic oil reserve project launched last month is now facing disputes as experts argue the government should change its plan to build open oil depots to save capital and land, said a Chinese Business Post report.

According to the plan, the Chinese government will build up a strategic oil reserve equivalent to 35 days of crude oil imports by the end of 2005 in a bid to secure the country's resource security in the future.

At the initial stage of the project, four oil depots will be built in four provinces.

But according to the report, the government's plan to build the oil tanks above ground has caused disputes among experts, who say that capital and land will be saved if such tanks are built underground.

30 billion yuan (3.6 billion US dollars) will be needed in building a depot with a total oil reserve of 16 million cubic meters at the initial stage, said an expert, whose name is not given in the report.

Of the total investment, 9.6 billion yuan (1.2 billion US dollars) will go to building up open oil depots and the rest for importing oil at an average 25 US dollars per barrel.

The capital investment will probably go about 20 percent higher,said the report, since the prices of steel and cement has been on the rise recently.

Only one 500-cubic-meter above ground oil depot would take up 1,700 mu (113 hectares) of land, the report said.

"If all the four are built underground," the report quoted an academician with the Chinese Academy of Sciences as saying, "we'llsave at least 3 billion yuan (361 million US dollars), let alone land to be spared."

The academician compared the construction cost of open and above ground depots, saying underground construction would save 30percent of the capital and occupy only 5 percent of the land needed for open construction.

Underground oil depots were accredited with less pollution, fewer working staff and lower operation cost.

But the government insisted on pushing forward with above ground construction as some officials, according to the report, said "a document on the issue has been formally issued."

Reasons for the decision are not clear, but cost must be a major issue.

China is now rushing to build its strategic oil reserve as its annual oil imports would rise from 91 million tons in 2003 to 140 million tons by 2010. It is expected the oil reserves would be raised to 50 days by then.

Source: Xinhua