Asia's top refiner is busy building up China's first commercial oil reserve company as the country focuses more on securing vital energy supplies.
Sinopec spokesman Huang Wensheng revealed to China Daily exclusively on Friday that the refiner had set up its own corporate oil reserves, spreading under subsidiaries of the group company.
"A unified administration can trim the operation cost and manage the reserves in an efficient and integrated approach," he said.
Huang did not elaborate on details when the firm will be established and how large the reserve will be under its operation. But he stressed that Sinopec's tanks throughout China can accommodate enough commercial reserves.
A senior press official from Sinopec Group confirmed the move, saying Sinopec had realized the necessity of streamlining the administration and operation of corporate oil reserves.
"It is an internationally recognized tendency for a country to build up oil reserves at both State and corporate levels," the press official said.
"That is why we are taking the lead to set up the company taking care of our commercial reserves. It is easier and more effective for an independent company to operate and manage those reserves."
China is investigating every means to secure fuel supply, as demand increases.
In addition to State strategic oil reserves, China is pinning hopes on corporate reserves to leverage demand and supply. The proposed first Energy Law of the country will regulate the necessity of setting commercial oil reserves at corporate level, according to key drafters.
The law under drafting may require State-owned large and medium-sized oil companies to establish corporate reserves to maintain effective oil supplies, Wu Zhonghu, one of the core law drafters, said.
Sinopec, as Asia's largest refiner, imported 70 percent of crude it needed for oil refining business last year. Corporate reserves will play an extremely important role for the firm to fend off additional risks brought by fluctuations in global oil prices, Han Xuegong, a senior consultant with China National Petroleum Corporation (CNPC), said.
A source from PetroChina, CNPC's listed arm, revealed to China Daily that his company is also working on corporate reserves, but no details are available at this time.
Shanghai Securities News reported on Friday that Sinochem Corporation had purchased 250,000 tons of crude from the Middle East and will store them in Daishan as corporate reserves this month. Sinochem refused to make any comment on the report on Friday.
The government can give some incentives to encourage large companies setting corporate reserves. But it is also oil companies' responsibility to leverage oil supply and demand - a common practice in market-oriented countries, according to Jiang Xinmin, an analyst with the Energy Research Institute under the National Development and Reform Commission, China's top economic planner.
The Chinese government approved four national strategic oil reserve sites in 2004. They are Ningbo and Daishan of Zhejiang Province, Huangdao of east China's Shandong Province and Dalian in Liaoning Province.
The NDRC announced that the country's first strategic oil reserve base in Ningbo had been put into operation. Insiders revealed that the Daishan site has also been in operation.
(China Daily May 19, 2007)