A peek at China’s strategic oil reserve
- Source: Global Times
- [20:46 June 14 2009]
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A security guard stands near large oil tanks at Zhenghai National Oil Reserve Base on June 3, 2009. Photo: CFP
By Wan Di
China’s sensitive national petroleum reserve bases remained largely unknown until recently when the government breached its publicity taboo and allowed media exposure of one of the nation’s most secretive places.
Zhoushan National Oil Reserve Base lies quietly on the small island of Aoshan, administered by Zhoushan, Zhejiang Province. Occasional visitors are seagulls and egrets as the base hasn’t been open to the public since its construction began six years ago.
The Chinese government invested 3.9 billion yuan ($571 million) in the 141-hectare base, which was completed in September 2008.
It contains 50 storage tanks, each capable of holding 100,000 cubic meters of crude oil, equivalent to 629,000 barrels a tank.
The tanks are supposed to cushion the blow for China in the event of a severe disruption of oil supplies.
Zhoushan base is one of the first four petroleum reserve bases built by the Chinese government in 2003. The other three are also located in coastal areas of Zhenhai in Zhejiang Province, Huangdao in Shandong Province, and Dalian in Liaoning Province. Total investment surpassed 100 billion yuan ($14.6 billion).
“A sufficient oil reserve is the most effective weapon to guard our country from a possible oil crunch,” said Tang Zhibin, executive vice general manager of Zhoushan National Oil Reserve Base Co Ltd, the management body.
Situated in the country’s vibrant pan- Yangtze River Delta region, the base is designed to store crude oil when the international price is low and release it during price surges to cushion the economic blow.
“If a major oil crunch shocks the area, crude oil in our base can be immediately transferred to oil-starved manufacturers such as Sinopec Yizheng Chemical Fiber Co and Sinopec Shanghai Gaoqiao Petrochemical Corp,” said Tang.
Tang was reserved when asked if all 50 tanks were now operating in full swing. He simply nodded and indicated that they are “almost” full, and said the stored oil was collected at an average $58 per barrel.
Zeng Yachuan, deputy director general of policies and laws at the National Energy Administration, said the total storage capacity of China’s four bases is 16.4 million cubic meters and they are all full. He said China would not buy more crude oil before new storage tanks are built.
The National Development and Reform Commission (NDRC), China’s top economic planner, is the de facto controller of the base and has the biggest say in disposing of the stored petroleum.
“We strictly follow the NDRC decrees,” said Tang. “But in terms of when and where to buy crude oil, NDRC shifts part of the power to us and requires us to monitor international developments and make the necessary moves in compliance with its orders.”
“Monitoring international developments means importing crude oil when the price is low,” Tang said.