China Oil Reserves
China had 20.4 billion barrels of proven oil reserves and largest oil fields are located in the northeast region of the country
China is the world's second-largest
consumer of oil behind the United States , and for
China consumed an estimated 8.3 million barrels per day (bbl/d) of oil in 2009, up nearly 500 million bbl/d from year earlier levels. During that same year, China produced an estimated 4.0 million bbl/d of total oil liquids, of which 96 percent was crude oil. China's net oil imports reached about 4.3 million bbl/d in 2009, making it the second-largest net oil importer in the world behind the United States and for the first time surpassing Japan's imports.
EIA forecasts that China's oil consumption will continue to grow during 2010 and 2011, with oil demand reaching almost 9.6 million bbl/d in 2011.
This anticipated growth of over 1.2 million bbl/d between 2009 and 2011 represents about 37 percent of projected world oil demand growth during the 2-year period according to the September 2010 Short-Term Energy Outlook. By contrast, China's oil production is forecast to rise by about 150 thousand bbl/d to nearly 4.2 million bbl/d in 2011. In the longer term, EIA's International Energy Outlook projects Chinese demand of liquids fuels to rise to around 17 million bbl/d by 2035. According to Oil & Gas Journal (OGJ), China had 20.4 billion barrels of proven oil reserves as of January 2010, up over 4 billion barrels from the prior year.
The Chinese government's energy policies are dominated by the country's growing demand for oil and its reliance on oil imports. The National Development and Reform Commission (NDRC) is the primary policymaking and regulatory authority in the energy sector, while four other ministries oversee various components of the country's oil policy. The government launched the National Energy Administration (NEA) in July 2008 in order to act as the key energy regulator for the country. The NEA, linked with the NDRC, is charged with approving new energy projects in China, setting domestic wholesale energy prices, and implementing the central government's energy policies, among other duties. The NDRC is a department of China's State Council, the highest organ of executive power in the country. In 2007, China outlined its energy policy goals in the Proposed Energy Law, though the law has yet to be enacted. In January 2010, the government formed a National Energy Commission which attempts to consolidate energy policy among the various agencies under the State Council.
National Oil Companies
China's national oil companies (NOCs) wield a significant amount of influence in China's oil sector. Between 1994 and 1998, the Chinese government reorganized most state-owned oil and gas assets into two vertically integrated firms: the China National Petroleum Corporation (CNPC) and the China Petroleum and Chemical Corporation (Sinopec). These two conglomerates operate a range of local subsidiaries, and together dominate China's upstream and downstream oil markets. CNPC remains the much larger and influential NOC and is the leading upstream player in China. CNPC, along with its publicly-listed arm PetroChina, account for roughly 60 percent and 80 percent of China's total oil and gas output, respectively, though the company's current strategy is to integrate its sectors and capture more downstream market share. Sinopec, on the other hand, has traditionally focused on downstream activities such as refining and distribution with these sectors making up nearly 80 percent of the company's revenues in recent years and is gradually seeking to acquire more upstream assets.
Additional state-owned oil firms have emerged in the competitive landscape in China over the last several years. The China National Offshore Oil Corporation (CNOOC), which is responsible for offshore oil exploration and production, has seen its role expand as a result of growing attention to offshore zones. Also, th company has proven to be a growing competitor to CNPC and Sinopec by not only increasing its E&P expenditures in the South China Sea beut also extending its reach into the downstream sector particularly in the southern Guangdong Province through its recent 300 billion yuan investment plan. The Sinochem Corporation and CITIC Group have also expanded their presence in China's oil sector, although their involvement in the oil sector remains dwarfed by CNPC, Sinopec, and CNOOC. The government intends to use the stimulus plan to enhance energy security and strengthen Chinese NOCs' global position by offering various incentives to invest both upstream and downstream.
The Chinese government launched a fuel tax and reform of the country's product pricing mechanism in December 2008 in order to tie retail oil product prices more closely to international crude oil markets, attract downstream investment, ensure profit margins for refiners, and reduce energy intensity caused by distortions in the market pricing. When international crude oil prices skyrocketed in mid-2008, the capped fuel prices downstream caused some refiners, especially the smaller teapots, to cease production causing supply shortfalls and the major NOCs, particularly Sinopec, to incur substantial profit losses. During the first half of last year, the government issued value added tax rebates on fuel imports and some direct subsidies to stem state-refiners'losses.
China is taking advantage of the economic recession to liberalize its pricing system and encourage more market responsiveness and fuel efficiency. When fuel prices fluctuate more than 4 percent of the average crude oil price of three grades over 22 consecutive working days, the NDRC can alter the ex-refinery price. The government also sets transportation charges, processing costs, and refining margins (5 percent when crude prices are below $80/bbl). Additionally, a consumption tax and value-added tax is added for gasoline and diesel fuels. These taxes are set to replace six transportation fees established by local authorities.
As a result of these reforms, China raised fuel prices five times and lowered prices three times in 2009. Comparatively, in the first half of 2010, there were only two price alterations, an increase of 4 to 5 percent in April for gasoline and diesel and a decrease of 3 percent in June as a result of the substantially higher retail prices compared to international markets. In October 2010, the government reversed course and raised rates by 3 percent. Refinery gate prices for gasoline and diesel are now about 7,420 yuan/ton and 6,680 yuan/ton, respectively.
In July 2010, the government announced it would levy a new 5 percent ad valorem resource tax on hydrocarbons in 13 provinces including Xinjiang in the western region. This tax is to narrow the income gap between the western and coastal provinces though could affect CNPC's and Sinopec's ' earnings as these areas contribute 30 percent and 80 percent, respectively, of China's oil and gas production.
Exploration and Production
China's total oil production reached 4.0 million bbl/d in 2009, similar to production in 2008, but the first half of 2010 saw an increase of over 0.2 million bbl/d from the same period the year prior. This was primarily due to new offshore production growth. China's largest and oldest oil fields are located in the northeast region of the country. CNPC's Daqing field produced about 801,000 bbl/d of crude oil in 2009, according to FACTS Global Energy's most recent estimate. Sinopec's Shengli oil field produced about 558,000 bbl/d of crude oil during 2009, making it China's second-largest oil field. However, Daqing, Shengli, and other ageing fields have been heavily tapped since the 1960s, and output is expected to decline significantly in output in the coming years. Recent exploration and production (E&P) activity has focused on the offshore areas of Bohai Bay and the South China Sea as well as onshore oil and natural gas fields in western interior provinces such as Xinjiang, Sichuan, Gansu, and Inner Mongolia, and China made over 50 oil discoveries in 2009.
Roughly 85 percent of Chinese oil production capacity is located onshore. Although offshore E&P activities have increased substantially in recent years, China's interior provinces, particularly in the northwest's Xinjiang Province, have also received significant attention. Recently, China announced its plan to create Xinjiang into the country's largest oil and gas production and storage base. By 2020, CNPC aims to boost the province's hydrocarbon production capacity to 450 million barrels of oil equivalent (boe), up from 278 million boe in 2009 and spend nearly $30 billion (200 billion yuan) on E&P in this region. The onshore Junggar, Turpan-Hami, and Ordos Basins have all been the site of increasing E&P work, although the Tarim Basin in northwestern China's Xinjiang Uygur Autonomous Region has been the main focus of new onshore oil prospects. Reserve estimates for Tarim vary, though IHS estimates 290 million barrels. Only 12 percent of the basin has been explored. PetroChina reported that reserve additions in 2009 were 3.3 billion barrels of oil equivalent. Crude oil production from Tarim reached 111,000 bbl/d in 2009. Since 2005, hydrocarbon production from Tarim has doubled, and the NOCs are taking advantage of tax breaks and other incentives to develop the region and offset declines in mature basins. PetroChina envisages boosting production in the Junggar Basin, one of Xinjiang's oldest basins, from 250,000 bbl/d in 2008 to 328,000 bbl/d by 2015.
China's NOCs are also investing to increase oil recovery rates at the country's mature oil fields. Increasingly, CNPC is utilizing natural gas supplies from the Daqing field for reinjection purposes to fuel enhanced oil recovery (EOR) projects. CNPC hopes that EOR techniques can help stabilize Daqing's oil output in the years ahead. However, China's domestic demand for natural gas supplies is also increasing, which may put a competing claim on oil output from Daqing. The map below delineates the location of some of the major Chinese oil basins.
About 15 percent of overall Chinese oil production is from offshore reserves, and most of China's net oil production growth will likely come from offshore fields. The offshore volumes will offset some of the declines from the more mature onshore fields in eastern China. Also, China recently announced plans to spend roughly $40 billion to boost offshore oil production as part of the new five-year development plan.
Offshore E&P activities have focused on the Bohai Bay region, Pearl River Delta, South China Sea, and, to a lesser extent, the East China Sea. The Bohai Bay Basin, located in northeastern China offshore from Beijing, is the oldest oil-producing offshore zone and holds the bulk of proven offshore reserves in China. In May 2007, PetroChina announced a reserve assessment of its newest oil field in Bohai Bay, which the company claims could be the largest oil find in three decades once a final reserve estimate is made. The Nanpu field holds proven oil reserves of 3.7 billion barrels. PetroChina initiated phase one development of the Nanpu field in June 2007, and hopes to bring 200,000 bbl/d of crude oil production onstream by 2012.
Offshore areas were expected to account for much of China's growth in oil production. CNOOC made 8 new discoveries in offshore reserves, increasing the company's proven oil reserves to 1.6 billion barrels. CNOOC intends to double oil production in the Bohai Bay where over half of the NOCs production is expected to originate by 2015.
In 2009, CNOOC's total hydrocarbon production in the South China Sea (SCS) was 245, 000 boe/d - 191,000 boe/d in oil and 54,000 boe/d (324 MMcf/d) in natural gas. Also, according to PFC Energy, CNOOC's proven hydrocarbon reserves in 2009 in the SCS were 957 million boe, up 28 percent from a decade ago. CNOOC and ConocoPhillips are developing the Panyu oilfields with output peaking at 60,000 bbl/d. In 2008, CNOOC, along with its partner Husky Energy of Canada, commenced commercial production at the Wenchang oil fields which is expected to produce nearly 19,000 bbl/d. CNOOC also brought on the Xijiang 23-1 field on stream in 2008 and anticipates 40,000 bbl/d of crude oil production. In 2010, CNOOC made another significant discovery of the Enping Trough in the shallow waters of the SCS, and area could generate up to 30,000 bbl/d.
Whereas onshore oil production in China is mostly limited to CNPC and CNOOC, the two major upstream NOCs, international oil companies have been granted much more access to offshore oil prospects mainly through PSC agreements. Aside from ConocoPhillips, other foreign oil majors involved in offshore E&P work in China include: Shell, Chevron, BP, Husky, Anadarko, and Eni, among others. These IOCs leverage their technical expertise in order to partner with a Chinese NOC and make a foray into the Chinese markets. In order to share costs on exploration and gain technical expertise, CNOOC tendered 13 blocks in May 2010 in the South China Sea, all focused on shallow-water areas of the Pearl River, Beibuwan, and Yinggehai basins. BP and Chevron plan to bid for a South China Sea exploration block in 2010.
CNOOC is also involved in exploration activities in the East China Sea, although territorial disputes with its neighbors have so far limited large-scale development of fields in the region. China and Japan's Exclusive Economic Zones (EEZs) overlap in parts of the East China Sea that are believed to hold hydrocarbon reserves. The two countries have held negotiations to resolve the disputes, and in June 2008, the two countries reached an agreement to jointly develop the Chunxiao/Shirakaba and Longjing/Asurao fields. The agreement stipulated that the investors would share profits and risks equally. However, in early 2009, the agreement unraveled when China asserted sovereignty over the fields following Japanese disputes of actual E&P work at the fields, and recent tensions in the second half of 2010 have surfaced between the two countries over the gas fields.
China claims ownership of a portion of the potentially hydrocarbon rich Spratly Islands in the South China Sea, as do the Philippines, Malaysia, Taiwan, and Vietnam. In June 2007, BP abandoned plans to conduct exploration activities near the Spratly Islands, citing ongoing uncertainty over competing ownership claims between China and Vietnam. Also, as a result of the Philippines' passing a legislative bill claiming the islands, China has protested. The Paracel Islands, which China first occupied in 1974, are also claimed by Vietnam.
With China's expectation of growing future dependence on oil imports and the need for diversification of energy supply sources, Chinese NOCs have sought interests in E&P projects overseas. CNPC has been the most active company, while Sinopec, CNOOC, and other smaller NOCs have also expanded their overseas investment profile. China is taking advantage of the economic downturn and lower asset values to step up its global acquisitions and financing of projects in upstream, midstream, and downstream sectors. From October 2008 to December 2009, the major Chinese national oil companies (NOCs) invested nearly $17 billion for direct acquisition of oil and gas assets from other companies, illustrating a significant increase from the prior decade. Also, Chinese NOCs secured bilateral loan-for-oil deals amounting to almost $70 billion with several countries according to PFC Energy.
China can use its vast foreign exchange reserves, estimated at $2 trillion, to help leverage investments. China finalized loan for oil deals recently with Russia, Brazil, Venezuela, Kazakhstan, Ecuador and agreed to a loan of $3 billion to Turkmenistan to assist in developing the South Iolotan gas field project to feed the Central Asia Gas Pipeline. Turkmenistan announced in August 2010 that it is seeking another $4.1 billion for the field development. China agreed to loan Russian companies, Rosneft and Transneft $25 billlion to finance the East Siberia Pacific Ocean oil pipeline in exchange for 300,000 bbl/d of oil shipments. The Chinese Development Bank (CDB) also agreed to loan Petrobras of Brazil $10 billion so that Sinopec can access 200,000 bbl/d of oil for export to China for 10 years. China and Venezuela set up a joint $12 billion development fund to finance various projects to increase oil exports to China. Furthermore, in 2010, CNPC and PDVSA, Venezuela's NOC, set up another joint venture with $16 billion in investments to raise crude production in the Orinoco Belt by 400,000 bbl/d by 2016, and industry sources report that China recently offered another $20 billion in soft loans for oil to the country. CNPC and the China Export-Import Bank intend to lend Kazakhstan $5 billion each in two loans ($10 billion total) allowing CNPC a much larger role in the upstream oil development in the Central Asian country, following the company's acquisition of PetroKazakhstan in 2005. China finalized a $1 billion loan deal with Ecuador in July 2010 in exchange for 36,000 bbl/d of crude oil for 4 years.
China's overseas equity oil production grew significantly this decade from 140,000 bbl/d in 2000 to 900,000 bbl/d in 2008 according to FACTS Global Energy. Overseas equity oil production represented roughly 23 percent of China's total oil production in 2008. CNPC held hydrocarbon assets in 27 countries by the end of 2008 and 612,000 bbl/d of overseas oil equity production, about 70 percent of the total overseas market share from Chinese companies. Also, CNPC plans to spend $60 billion to expand overseas production to 4 million bbl/d by 2020. As China expands its refining capacity to accept sour and high-sulfur crude oil, Chinese NOCs are looking to invest in more Middle Eastern fields.
The Middle East remains the largest source of China's crude oil imports, although African countries also contribute a significant amount to China's crude oil imports. According to FACTS Global Energy, China imported 4 million bbl/d of crude oil in 2009, of which approximately 2 million bbl/d (50 percent) came from the Middle East, 1.2 million bbl/d (30 percent) from Africa, 184,000 bbl/d (5 percent) from the Asia-Pacific region, and 686,000 bbl/d (17 percent) came from other countries. In 2009, Saudi Arabia and Angola were China's two largest sources of oil imports, together accounting for over one-third of China's total crude oil imports. In the first half of 2010, crude oil imports jumped to over 4.7 million bbl/d or a 30 percent year on year increase, resulting from China's increasing demand. Also, Angola has become as significant an exporter of crude to China as Saudi Arabia and in some months has been the largest supplier. As China's refineries become more sophisticated and the country seeks to diversify supply, industry reports forecast that regions outside the Middle East will slightly increase their share in the supply mix in the next year. China imported approximately 0.7 million bbl/d and exported 0.5 million bbl/d of key petroleum products including LPG, gasoline, diesel, jet fuel, fuel oil, and lubricants in 2009, and exports of products are expected to remain high as refining capacity is added in 2010 and beyond.
China has actively sought to improve the integration of the country's domestic oil pipeline network as well as to establish international oil pipeline connections with neighboring countries to diversify oil import routes. In March 2007, CNPC spearheaded the Beijing Oil & Gas Pipeline Control Center that monitors all long-distance.
According to the CNPC, China has about 13,932 miles of total crude oil pipelines (70 percent managed by CNPC) and nearly 8,265 miles of oil products pipelines in its domestic network. Total oil liquids and natural gas pipeline is increasing at about 6 percent per year. At present, the bulk of China's oil pipeline infrastructure serves the more industrialized coastal markets. However, several long-distance pipeline links have been built or are under construction to deliver oil supplies from newer oil-producing regions or from downstream centers to more remote markets. In October 2006, the Western China Refined Oil Pipeline started operations. The 1,150-mile link delivers petroleum products from Urumqi in Xinjiang Province to Lanzhou in Gansu Province. Gradually, this pipeline will connect with other regional spurs to deliver supplies to the eastern coast, as well as accommodate additional oil imports from Kazakhstan. Previously, most oil supplies from Xinjiang were delivered by rail. In addition, the Western Pipeline consists of a crude oil line traversing from Xinjiang to the Lanzhou refinery and which came online in 2007.
In order to push the supply from the Lanzhou refinery to market centers in the east and south, CNPC recently commissioned various oil product pipelines. The company launched the Lanzhou-Chengdu-Chongqing pipeline in 2008 and the 300 thousand bbl/d Lanzhou-Zhengzhou-Changsha pipeline in 2009. The Zhengzhou'Changsha segment is expected to be completed by 2010. PetroChina also has plans to build at least two additional spurs from Zhengzhou, which would help deliver crude oil supplies eastward. One is the Zhengzhou-Jinzhou pipeline, which would deliver oil northeastward to Hubei Province. The other is the Zhengzhou-Changsha link, which would terminate in Hunan Province near the industrial southeast. Parts of these links came online in 2009, and altogether will form the country's largest oil product pipeline network.
China inaugurated its first transnational oil pipeline in May 2006 when it began receiving Kazakh and Russian oil from a pipeline originating in Kazakhstan. The new 200,000 bbl/d pipeline spans 620 miles, connecting Atasu in northern Kazakhstan with Alashankou on the Chinese border in Xinjiang. The pipeline was developed by the Sino-Kazakh Pipeline Company, a joint venture between CNPC and Kazakhstan's KazMunaiGaz (KMG). The pipeline's third leg from Kenkiyak to Atasu and an expansion of the entire pipeline, doubling capacity to 400,000 bbl/d, are to be completed in 2011 by CNPC. Due to financial problems resulting from the recent economic crisis, KMG signed a deal allowing CNPC equity in the upstream oil in return for loans financing several downstream infrastructure projects, including the Kenkiyak to Atasu section. Industry publications suggest that the Atasu to Alashankou line has been running at about 50 percent of capacity, or slightly over 100,000 bbl/d.
Russia's Far East will soon be a source for Chinese crude oil imports. Russian state-owned oil giant Transneft began construction in April 2006 on a pipeline that will span 2,972 miles from the Russian city of Taishet to the Pacific Coast (see Russia Country Analysis Brief). Known as the Eastern Siberia-Pacific Ocean Pipeline (ESPO), the project will be completed in two stages. The first stage of the project includes the construction of a 600,000 bbl/d pipeline from Taishet to Skovorodino. CNPC signed an oil-for-loans agreement with Russian companies Rosneft and Transneft for $25 million and $15 million, respectively, in early 2009 and entails China financing the 43-mile pipeline spur to run from ESPO to the Chinese border in exchange for crude oil deliveries. The first phase of ESPO is expected to deliver 300,000 bbl/d to the Chinese border by the end of 2010. Furthermore, CNPC intends to build a 597-mile pipeline linking the spur with the Daqing oil field in the Northeast.
China has also revived its plans to construct an oil import pipeline from Myanmar through an agreement signed in March 2009. As Myanmar is not a significant oil producer, the pipeline is envisioned as an alternative transport route for crude oil from the Middle East and Africa that would bypass the potential choke point of the Strait of Malacca. The $2.9 billion project includes parallel oil and gas pipelines, and stakeholders are CNPC and Myanmar Oil and Gas Enterprises. The initial capacity is slated for 244,000 bbl/d and ramping up to 400,000 bbl/d.
China is steadily increasing its oil refining capacity in order to meet the robust demand growth in its coastal provinces. Most industry sources estimate China's installed crude refining capacity as over 9 million bbl/d. China's goal is to augment refining capacity by about 3.3 million bbl/d by 2015 if planned projects come online as scheduled, and China commissioned about 850,000 bbl/d capacity in 2009 according to the International Energy Agency. A recent report by Sinopec stated that the national oil capacity would rise to 10 million bbl/d by 2011 and 15 million bbl/d by 2016. According to the BP Statistical Review of World Energy, refinery utilization in China increased from 67 percent in 1998 to 87 percent in 2009.
Sinopec and CNPC are the two dominant players in China's oil refining sector, accounting for 50 percent and 35 percent of the capacity, respectively. However, CNOOC entered the downstream arena and commissioned the company's first refinery, the 240,000 bbl/d Huizhou plant, in March 2009 in order to process the high-sulfur crudes from its Bohai Bay fields. Sinochem has also proposed a number of new refineries, and national oil companies from Kuwait, Saudi Arabia, Russia, Qatar, and Venezuela have also entered into joint-ventures with Chinese companies to build new refining facilities. The NOCs recently expanded their refining portfolios through commissioning two more refineries in 2010, Sinopec's Tianjin and CNPC's Quinzhou, each carrying capacities of 200,000 bbl/d. By end 2009, Sinopec's total processing capacity reached around 4.2 million bbl/d, up by 12.6 percent over the previous year.
Also, the NDRC plans to eliminate refineries smaller than 20,000 bbl/d that are mostly owned by independent companies in efforts to encourage economies of scale and energy efficiency measures. In addition, PetroChina (CNPC) is recently branching out to acquire refinery stakes in other countries in efforts to move downstream and secure more global trading and arbitrage opportunities. The company's purchase of Singapore Petroleum Corporation and a portion of Japan's Osaka refinery are cases where PetroChina is looking for a foothold within the region's refining opportunities.
The expansive refining sector has undergone modernization and consolidation in recent years, with dozens of small refineries (teapots), accounting for about 20 percent of total fuel output, shut down and larger refineries expanding and upgrading their existing systems. Domestic price regulations for finished petroleum products have hurt Chinese refiners, particularly smaller ones, in the past few years when oil prices were high because of the large gulf between international oil prices and China’s relatively low domestic rates. The new pricing scheme guarantees refiners a 5 percent margin when oil is under $80 per barrel in order to encourage refiners to supply products to the market. This pricing system and the anticipation of continued demand growth is expected to boost refining profits for the major companies.
As China diversifies its crude oil import sources and expands oil production domestically, state-owned refiners will have to adjust to the changing crude slate. Traditionally, many of China’s refineries were built to handle relatively light and sweet crude oils, such as Daqing and other domestic sources. In recent years, refiners have built or upgraded facilities to support greater Middle Eastern crude oil imports, which tend to be heavy and sour. However, more recently, China’s refiners have also had to prepare for high-acid and high-sulfur crude oil streams. Much of the country’s planned new oil production in the offshore Bohai Bay is considered high-acid, and China is the largest importer of Sudan’s Dar Blend, a high-acid crude. High-acid crude oil tends to be light and sweet, but refiners must install stainless steel metallurgy or utilize other advanced processes to successfully run the crude streams.
Strategic Oil Reserves
China has used stockpiling through its strategic petroleum reserve (SPR) and commercial storage as one strategy in recent years to ensure oil reserves, and this could increase China’s need for imported oil in the future. Also, China’s growing demand for crude oil and products in recent years spurs the need for greater storage capacity and inventory build-up. In China’s 10th 5-Year Plan (2000-2005), launched in 2001, Chinese officials decided to establish a government-administered strategic oil reserve program to help shield China from potential oil supply disruptions. This system will be built in three stages, and, in 2004, China started construction at four sites that would comprise the first phase of the country’s strategic oil reserve program. Phase 1 has a total storage capacity of 103 million barrels at four sites, and was completed in early 2009. Phase 1 storage capacity will amount to approximately 25 days of net oil imports based on 2008 estimates of Chinese oil demand. Phase 1 sites include: Zhenhai in Zhejiang Province (planned capacity 32 million barrels); Aoshan, also in Zhejiang Province (31 million barrels); Huangdao in Shandong Province (20 million barrels); and Dalian in Liaoning Province (19 million barrels). Thereafter, Phase 2, recently under construction for 8 sites, is expected to more than double capacity to almost 270 million barrels by 2012/13. Ultimately, Phase 3 is expected to bring total strategic oil reserve capacity in China to about 500 million barrels by 2016.
The government ceased filling the SPR in 2007 because of mounting crude oil prices, though, between September 2008 and March 2009 when prices descended, the government injected about 60 million bbl (more than 300 thousand bbl/d). The average cost of Phase I SPR storage was $58/bbl. The NDRC plans to strategically purchase oil for the second phase when the prices are reasonably low, so the fill for each addition will likely depend on crude oil prices.
In addition to the SPR, China has approximately 300 million barrels of commercial crude oil storage capacity according to some industry sources, though this number cannot be verified. Also, the government reported that it plans to create a strategic refined oil stockpile to be operated by a subsidiary of NDRC and aims to boost stocks to 80 million barrels by 2011. According to Chinese researchers, oil product storage capacity in China could reach 500 million barrels, over 60 percent of which would be owned by Sinopec and CNPC, by 2015.