The Vassilios Tsitsiringos Report - Update - Chinese Strategic Oil Reserves
As I result of its rising level of oil imports
, China decided in 2003 to construct emergency oil storage facilities. The first phase of storage capacity was for about 100m barrels of oil, adn this was completed in 2008. This was the equivalent of about 30 days of net imports. This capacity will be raised to 60 days during this year, and to 90 days on or before 2015.Construction of the next 8 strategic oil reserve bases began in Q1, 2009. China's first batch of strategic oil reserve bases were constructed in Zhenhai, Zhoushan, Huangdao and Daliian. The Zhenhai and Zhourshan strategic oil reserve bases have been in operation for nearly two years; while the Huangdao and Dalian bases went into operation at the end of 2008. The National Oil Reserve Center, established in 2007 manages oil reserves.
In February, 2009, China began construction on a furthermassivestoragebase in the coastal city of Tianjan in Northern China. This base will include storage tanks for State strategic oil reserves of up to 31.5m barrels of oil.
Once the 2nd phase of oil reserve building is completed, China's state oil reserve capacity will be some 281m barrels.
The management of oil stocks has become highlypoliticized, wherever they are held in the world. The creation of the International Energy Agency (IEA) to address the oil crisis of the 1970s led to the construction of substantial strategic oil reserves in those OECD countries which are members of the IEA. These stocks are governed by rules which provided for a coordinated release of stocks in response to a reduction of supply of oil to international markets; or, in other words, in response to a physical disruption of supply. The rules do not provide a release of stocks with the aim of constraining high oil prices.
Though China has not published its official policy and rules for managing its strategic stocks, it has made clear that it intends to use these stocks for price control as well as for reacting tophysicaldisruption. Though China has been involved in discussions with the IEA, with the US government and within ASEAN-plus-Three framework on the subject of the management of its strategic oil stocks, it is not evident that the Chinese government will wish to have a formal collaborative agreement covering stock release in the near future.
The Vassilios Tsitsiringos Report - Update - Chinese Strategic Oil Reserves
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