Crude oil reserve bases slated for operation this year

With a 16-tank facility in Zhenhai city of east China's Zhejiang Province to be established by September, China's national reserve bases for crude oil will hopefully be put to use by the year's end, the First Finance Daily reported in Beijing Tuesday.

Construction of the Zhenhai Reserve Base has been the fastest compared with that of all other three situated in Daishan of Zhejiang, Huangdao of Shandong and Xingang of Liaoning, vice chairman Wang Jiming on Sinopec's board of directors was quoted as saying.

"Its first phase project will be concluded this year while that of the Huangdao Reserve base will have to wait till 2007," Wang said.

Anonymous sources with Platt's Corporation told the Beijing- based newspaper that China would probably start its crude oil reserve in the forth quarter if the 16-tank facility was established as scheduled.

"The sooner China has its own oil reserve, the earlier will China acquire the capability of handling a sudden stoppage of oil supply," he said.

Although oil prices for the fourth quarter tend to hit the highest level of a year and thus increase a country's expenses in establishing oil reserves, the expert said that the fourth quarter also stands as the most crucial period of a year for a country's energy safety.

"When governments have to balance energy safety with expense saving, I am pretty sure they prefer the former," he said.

Liu Tao, chief analyst of the Shanghai-based Yuanfu Enterprise Management Consulting Corporation, echoed that business proceeds wouldn't be the focus of the Chinese government because the reserve bases were established to safeguard China's oil supply safety.

Calling developing oil reserves "a common practice of many industrialized countries", Liu said that such efforts wouldn't intensify the price-rising pressure because the largest impetus for the global oil market stems from the demand of the United States.

"On the contrary", he said, "China is a major victim of hovering oil prices."

"With its crude oil imports accounting for only six to seven percent of the world's crude oil trade, China has very limited clout in the global oil market," Liang Shuhe, deputy director of the Foreign Trade Department of the Ministry of Commerce, said.

Statistics from China's Customs revealed that a total of 120 million tons of crude oil were imported last year, up 34.8 percent over 2003. Its combined import value stood around 33.91 billion US dollars, up 71.4 percent over 2003. As the oil prices kept rocketing to new highs, the per-ton import price has grown 59.9 US dollars, causing China an extra payment of 7.068 billion US dollars.

Due to the lack of a strategic reserve for crude oil, China couldn't cushion the drastic price fluctuations and was often disadvantaged when in talks with oil sellers for long-term purchase contracts, said the article.

China started its construction of national oil reserves bases in 2003.

Source: Xinhua