China to stockpile oil in case of crisisgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Nation to stockpile oil in case of crisis (03/16/2001)
China has announced it will establish a strategic oil reserve as its largest petrochemical producer, Sinopec, plans to stockpile more crude oil.
Sinopec's move is regarded as the nation's first step in starting the reserve.
According to Zhang Jiaren, a deputy to the Ninth National People's Congress (NPC) and vice-chairman of the oil company, Sinopec will double its oil stockpiles from the current 5-6 million tons in two or three years.
Attending the Fourth Session of the Ninth NPC which ended yesterday, Zhang said an increasing stockpile will help the company fend off oil price hikes.
Zhang said the central government is discussing details of the oil reserve framework, "but the national reserve will not be used to intervene in the oil market unless an emergency occurs.''
The national strategic oil stockpile, listed in the 10th Five-Year Plan (2001-05), is seen as economically and politically crucial for China, a net oil importer since 1993.
Wang Tao, a member of the Standing Committee of the NPC, said it is the right time to set up a reserve as supply exceeds demand on international markets at present, and China has enough foreign currency to pay for its oil.
Wang, also the senior vice-president of the World Petroleum Congress, suggested that the national oil reserve should be enough to cater for domestic consumption for at least three months if imports were halted.
"That means 15 million tons should be preserved as a national reserve and the amount should grow as imports rise,'' he said.
According to Wang, in the coming ten years domestic demand could rise by 4 per cent annually, while production will increase by only 1.3 per cent a year.
Wang said it will take China 10 years to set up the national strategic oil reserve.
He went on to say that newly discovered large oil pockets should be conserved as part of the national stockpile.
To make up for oil companies losses as a result of preserving these new oilfields, the government should grant subsidies to them.
He said national stockpiles should be mainly placed underground for safety reasons.
Zhang agreed, adding that big docks and refineries along the coastline are not ideal locations for keeping oil reserves.
Li Dadong, an NPC deputy from the Shanxi Province and member of the Chinese Academy of Engineering, said clean coal technology, which can turn coal into oil-like fuel, should also play a role in the oil reserve framework.
Although it is not feasible to commercialize the technology on a large scale due to the high production cost, it can serve as a strategic reserve, Li said.
He revealed that China is expected to launch a US$1.8 billion project to turn coal into oil in Shaanxi Province, which should produce 2.5 million tons of oil annually.
(China Daily by Xie Ye)
-- Martin Thompson (email@example.com), March 16, 2001