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Oil Stockpile Target May Be Revised

Signs have shown that China is considering revising its initial target for the long-awaited national oil stockpile to better safeguard its energy supply.

"We are holding dialogue with Chinese officials about how much it is appropriate for them to stockpile. It is possible for China to modify its initial plan,'' said William C. Ramsay, deputy executive director of the International Energy Agency (IEA).

China initially planned to establish an oil stockpile of 8 million cubic metres, or 6 million tons, by 2005.

But the IEA tried to convince them that it should be three times this size, so the stock is big enough to cope with an emergency, Ramsay said.

"Before China changes its thinking, we need to hold talks. Maybe 6 million tons is right, or 18 million tons is right, or it is something in between,'' said Ramsay during a visit to China last week to visit major Chinese power companies and energy chiefs.

The Chinese Government has appeared to loosen its stance on the issue. The State Economic and Trade Commission recently modified its 10th Five-Year Plan (2001-05) for the oil industry on its website in June.

The revised version said it will launch the stockpile, but has cut out the original sentence which stated: "China plans to build up the national strategic oil stockpile of 8 million cubic metres by 2005.''

Ramsay said a larger stockpile is needed because the oil market works on the principle that when 1 million barrels of oil are leaving the market, more should be filled in to ease people's concern about energy supply and keep the price stable.

"We should have an overwhelming ability to say (to consumers): `If one is gone, we are able to replace with four. So just calm down and relax. There is no problem in the market','' said Ramsay.

According to the IEA official, most of China's stockpile is expected to be supplied by imports.

China, a net oil importer since 1993, has regarded the national strategic oil stockpile as an important part of its energy policy for the next five years to cushion the risk of increasing oil imports.

Oil imports take up almost one third of China's domestic oil consumption. By 2010, it is estimated that half of domestic oil consumption could be supplied by imports.

Wang Tao, senior vice-president of the World Petroleum Congress, suggested that the stockpile should amount to 15 million tons.

"That level would allow China to cater for domestic consumption for at least three months if imports were halted,'' Wang said.

Ramsay said IEA, an organization of 26 member countries committed to sharing their oil stockpiles in an emergency, has invited Chinese officials to see how its stockpile system works.

He said China's officials have already started this study, including where to store the inventory and the rules for releasing the stock.

Ramsay urged China to deepen talks with the organization for the mobilization of oil, once it sets up the stockpile.

"If you want to build up the stockpile to ease pressure on the market, we need to hold talks. So if you react here in the market, it has to be consistent with how we react there. Otherwise either of us would have an impact on the market,'' he said.

Chinese officials were not available for comment.

(China Daily 09/03/2001)

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