The proposed legislation on energy focuses on fuel security by
regulating commercial oil reserves at the corporate level,
China Daily has learned.
The law is being drafted as the country's energy demand, and
dependency on imports are increasing.
"We are seriously weighing the option of constituting national
oil reserves, both at the strategic and commercial level," said Wu
Zhonghu, one of the core law drafters.
The law will require state-owned large and medium-sized oil
companies to establish corporate reserves to maintain effective oil
supplies, he said.
Wu said he hoped the State Council would review the draft law by
year's end.
According to figures released by the Ministry of Commerce, China
imported 138.84 million tons of crude oil in 2006, up 16.9 percent
over the previous year.
Industry observers warn that more than 50 percent of the crude
oil the country uses will come from imports "in just one or two
years".
Since oil reserves are crucial for strategic and commercial
purposes, oil reserves should be set up both at the state and
corporate level, just as in some foreign countries, Wu said.
He said companies that build reserves may expect to get state
subsidies to cover operating and management expenses.
Wang Xiaochuan, deputy director of the Department of Commercial
Reform and Development, affiliated to the Ministry of Commerce,
said recently that along with the gradual opening-up of the oil
wholesale sector, commercial oil reserves at company level should
be established to cope with emergencies and to stabilize
supply.
Jiang Xinmin, an analyst with the Energy Research Institute
under the National Development and Reform Commission (NDRC), the
top economic planner, also said that as oil wholesale sector is
dominated by state-owned giants, such as Sinopec and China National
Petroleum Corporation (CNPC), it is natural for them to shoulder
the responsibility of setting up commercial oil reserves.
"The government can give some incentives. But it is also the oil
companies' duty to help the government leverage oil supply and
demand. It is a common practice in market-oriented countries," said
Jiang, also an advisor to the draft energy law.
Han Xuegong, a veteran analyst with CNPC, agreed.
"Chinese oil giants are all state-owned and are supposed to
shoulder both economic and social responsibilities. Therefore, they
should take the lead role in setting up commercial reserves," Han
said.
The experiences of industrialized countries prove that
commercial oil reserves at company level are effective in balancing
supply and demand, said Zhao Yumin, with the Chinese Academy of
International Trade and Economic Cooperation, a ministry
think-tank.
The NDRC announced recently that the country's first strategic
oil reserve base in Ningbo, east China's Zhejiang Province, had been put into
operation.
The government approved four national strategic oil reserve
sites in 2004. The other three are in Daishan, also in Zhejiang;
Huangdao, in east China's Shandong Province; and Dalian, in northeast
China's Liaoning Province.
Han said that compared with state-level reserves, commercial
ones operated by oil companies could be more reasonably
allocated.
"CNPC's oil fields are spread all over the country, and
commercial reserves can be set up at those sites to meet needs in
different places," he said.
(China Daily February 15, 2007)