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Given the fact that the international oil price has been rising
steadily recently, scaling new heights in the past 10 years,
the prospect of another world wide oil crisis looms large.
To ward off fluctuations and risks in the oil market, China
should set up a strategic oil reserve framework during the 10th
Five-Year Plan period (2001-05), said Zhou Hongchun of the Development
and Research Center of the State Council in Economic Daily.
Meanwhile, as a prerequisite to the establishment of a strategic
oil reserve framework, a nationwide investigation should be
done to find out what China's actual oil reserve volume and
real reserve capacity are, Zhou said.
In the absence of a national oil reserve system, oil reserves
are mainly stockpiled by enterprises, which usually preserve
oil for 20 days' use in advance. Hence, an indepth investigation
of the real picture of the country's oil reserves is instrumental
to the determination of its reserve volume.
For the framework to be put into operation in five years, feasibility
studies should also be undertaken to solve the problems such
as how to preserve oil and what technology and location should
be used. To draw experience from foreign countries, studies
should also cover international practices in oil conservation
in terms of legislation, policy-making and technology, said
Zhou.
The founding of a national oil reserve framework is a systematic
and complicated project, which cannot be completed in a short
period. It will naturally involve departments in such areas
as planning, finance, economic performance, energy and national
security. It should also incorporate such aspects of work like
the choice of technology, the selection of location, infrastructure
construction and environmental protection.
The State should involve the State Economic and Trade Commission,
the Ministry of Finance, the Ministry of National Defence and
the major petrochemical companies in the planning and coordination
of the project, Zhou suggests.
Zhou stressed that the establishment of national oil reserves
should be conducted in conformity with the law. It is international
practice that legislation should come first followed by the
implementation of concrete tasks. Countries like the United
States and Japan all made laws first before they started taking
steps to build an oil reserve system. China should enact laws
and regulations to ensure and delineate the role of a national
oil reserve framework, in adjusting the oil market and safeguarding
national security.
As the project will also be a business operation, the government
should formulate policies to regulate investment and fund-raising,
clearly define the relationship between strategic reserves and
commercial reserves, state investment rules and outline the
proportion of funds the State, businesses and society can contribute.
These laws and policies should also cover the management of
a national oil reserve. Negative effects will crop up if the
division of work among different departments is not clear enough.
Thus, departmental duties and responsibilities should be clearly
defined by law, according to Zhou. These stipulations are supposed
to improve efficiency, reduce fund squandering and prevent corruption.
As the oil price fluctuates in the international market, China
can hardly secure a stable oil supply by imports alone. Meanwhile,
domestic reserves are far below the increasing oil demand. A
practical way to get out of the dilemma and guarantee oil supply
is to explore various channels of international cooperation,
Zhou pointed out.
The strategies include: jointly run refineries or liquefied
natural gas plants in major oil-producing countries, taking
an active part in overseas oil and natural gas exploration and
setting up our own oil-producing bases abroad.
Zhou also emphasized that establishing a national oil reserve
cannot happen without rational use of oil resources. In particular,
the efficiency of oil utilization should be improved.
Last but not least, an incentive system should be set up to
promote the commercialization of renewable energy resources
and raise the use of renewable energy in energy production and
consumption.
(China Daily 09/08/2000)
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