Following reports from the National Development and Reform Commission, three candidate sites have been chosen as potential phase two strategic oil reserves. A source at the NDRC has revealed that the candidate sites are Caofeidian in Tangshan City, Hebei Province, Nansha of Guangzhou City and Bao'an of Shenzhen City.

"We are now devoted to becoming one of the phase two oil reserve bases. It will mainly store imported crude oil, with planned capacity of over 15 million cubic meters," an official with Caofeidian Industrial Zone told 21st Century Business Herald on January 29.

Last October marked the beginning of construction on three oil reserve bases in Zhenhai of Ningbo City, Huangdao of Qingdao City, Daishan of Zhoushan City, and Dalian. Zhenhai oil base near Ningbo was completed last August and was fully operational by last October. The other three oil bases are expected to be completed in 2008.

A notable gap in the strategic oil reserve network is the absence of any such installation in the region of north China encompassing Beijing and Tianjin.

To remedy this, the Caofeidian Industrial Zone has signed a deal with China National Petroleum Corporation (CNPC) to build a dock able to handle up to 300,000 tons of crude oil. It is ready to be constructed pending government approval.
 
"The deep-water dock will be the precondition of strategic oil bases," the official said.

For Nansha near Guangzhou, the petrochemical industry is one of the town's pillar industries. In 2006, Sinopec and Kuwait Petroleum Corporation set up a joint venture there involving over US$5 billion in investment and encompassing an oil refinery and an ethylene plant. Both of these are firing on all cylinders with the oil refinery generating an annual production capacity of 12 million tons while the ethylene plant's production stands at 1 million tons annually. Nansha also hosts oil storage facilities for Sinopec, Titan Petrochemical Group Ltd. and BP.

"Titan Petrochemical has 28 oil tanks and a combined storage capacity of over 1 million tons, while Sinopec, whose project will be finished in the latter part of this year, is expected to store over 600,000 cubic meters," according to a source with Nansha Development Zone.

Last August, the local government built a petrochemical dock, the largest such in the Pearl River region. The capacities of its 13 berths range from 1,000 to 50,000 tons for a combined handling capacity of 12.36 million tons.

Shenzhen, another booming city in Guangdong Province, is the final candidate for the phase two plan. The city seems well-prepared, earmarking an area in Bao'an District to gather processed oil storage. Reports state that the planned zone will cover 800,000 cubic meters, dividing this capacity into 600,000 cubic meters for government buildings and 200,000 cubic meters for enterprises. The main construction on the storage zone is set to take place in 2008.

Last year, the Guangdong provincial government applied to both the NDRC and the National Oil Reserve Office to establish national oil reserve bases in Huizhou, Maoming, Zhanjiang, Shenzhen and Zhuhai.

According to the NDRC's plan, the construction of oil bases will undergo three separate phases. The phase one capacity will involve 10 to 12 million tons, with the capacity set to rise to 28 million tons for both the second and third phases.

Editor: Yan