State-run Sinochem is set to begin expansion of the nation's largest oil reserve storage site after safety concerns caused a two-year delay.
The new extension at Sinochem Corp's Aoshan facility is part of the second phase of China's plan to increase its strategic petroleum reserves. The country-wide expansion will almost triple the nation's storage capacity from 100 million barrels to 270 million barrels, as China strives to reduce the risk of shortages in the event of short-term disruption to global flows.
Situated off the coast of eastern Zhejiang province, the new Aoshan facility will hold 50 million barrels, equivalent to roughly 10 days of net crude imports into China. Sinochem, the nation's fourth-largest energy firm, laid the foundations for the facility back in May, and expects the project to come online in around 18 months time. The project will begin after two years of delays caused by scrutiny from environmental and safety bodies.
The facility is part of a larger plan to offset the nation's increasing dependence of foreign oil, which the International Energy Agency predicts could rise to as much as 80% by 2030. Crude oil imports reached a record high of 6 million barrels-per-day in May, although most of this is likely to have ended up in storage. Nonetheless, China is still behind OECD standards of stockpiling enough oil to cover 90 days of net imports, and remains vague about the exact locations of second-phase reserve sites.
Stockpiling has contributed to the massive rise in foreign oil imports, especially during 2009 and 2010, when the nation took advantage of the slump in oil prices during the financial crisis, although analysts predict imports will slow in the second half as the nation's reserves meet capacity.