China Building Strategic Petroleum Reserve - Zhang
Sunday, May 23, 2004 08:45 AM ET Printer-friendly version
AMSTERDAM -(Dow Jones)- China's energy tzar, Zhang Guobao, said Sunday his country has started building the facilities for a strategic petroleum reserve.
Speaking to reporters on the fringes of the International Energy Forum consumer-producer meeting in Amsterdam, Zhang also said that China hadn't yet started filling the reserve. He added that China had not yet decided on a size for the reserve.
Zhang, who is vice-minister of the National Development and Reform Commission, added that some people had suggested 90 days forward cover would be appropriate, saying China still produces two thirds of the 6 million barrels a day of oil the country consumes. China is the world's third largest oil consuming country and the second largest importer. "The construction (of the reserve) will be gradual and the oil will be added gradually. But you can't add it all at once," Zhang said.
He added: "You mustn't forget that China is the world's second biggest energy producer," including coal production.
Higher-than-expected Chinese economic growth, sparking a rise in oil demand, is cited as one of the reasons behind current high oil prices "The (oil) market situation isn't all caused by China," Zhang said.
He forecast that oil imports this year would be 100 million metric tons, up from 91 million tons in 2003.
He added that while China's economy wouldn't slow down much in the second half of the year, government policy would ease the tightness in the supply of raw materials, including oil. Drawing a parallel to iron ore and steel, he pointed to sharp drops in prices.
"If economic growth is put back to some appropriate level, then oil imports will also be kept at an appropriate level," Zhang said.
Asked whether he had received any guarantees from Saudi Arabia on oil supplies, Zhang said: "We have a very good relationship with producers, including Saudi Arabia, but we don't have that kind of agreement (on oil supplies)."
China has emerged as one of fastest growing oil consumers in the world, due to a car-buying spree as well as the widespread use of diesel generators among other factors.
Once a net exporter, China now needs about 2 million b/d of oil imports to support its fast rising needs, mostly from the Middle East, led by Saudi Arabia.
Saudi Arabia and China have been strengthening their political and commercial ties. Saudi state-oil company Saudi Arabian Oil Co., or Aramco, is working on a joint venture refinery in China.
The Chinese have also signed a deal to explore for gas in Saudi Arabia, among a handful of foreign companies including Royal Dutch/Shell (RD, news) Group (RD, news) allowed back into upstream hydrocarbon production.
Worried about securing energy supplies, China has aggressively pursued overseas oil deals, even venturing to countries abandoned by major oil companies such as Sudan.
The same fears are behind its decision to start construction of strategic energy reserves.
-By Shai Oster, Dow Jones Newswires; +44-20-7842-9357; shai.oster@dowjones.com
Dow Jones Newswires
05-23-04 0845ET
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