Go-ahead for stage 2 of strategic oil reserve

PUBLISHED : Tuesday, 02 June, 2009, 12:00am
UPDATED : Tuesday, 02 June, 2009, 12:00am

Officials from the mainland's energy administration said yesterday that Beijing had approved construction of a second phase of the nation's strategic petroleum reserve and it would soon announce a stimulus plan for the renewable energy sector.

Zhang Guobao, the head of the National Energy Administration, said the plan was to eventually be able to stockpile enough oil to cover 90 days of net imports. This is a standard set by the Organisation for Economic Co-operation and Development that has so far prevented the mainland from joining the International Energy Agency.

Meanwhile, the central government will soon introduce a stimulus plan for renewable energy, which would help deal with the global financial crisis, said Liu Qi, Mr Zhang's deputy.

Beijing has introduced stimulus programmes for 10 sectors, including petrochemicals, vehicles and textiles, as part of its efforts to weather the crisis. But it has not yet announced a programme for the renewable energy sector.

The plan needs more work before it is submitted to the National Development and Reform Commission and the State Council, Mr Liu said.

Mr Zhang declined to say how large the newly approved second phase of reserve bases would be, but said they would be bigger than the 100 million barrel first phase. Late last year, he said the second phase of the strategic petroleum reserve would have a designed storage capacity of 26.8 million cubic metres, equivalent to 170 million barrels.

Mr Zhang said government agencies paid an average of US$58 a barrel for crude purchased to fill the first four bases on the east coast.

'Following our successful experience with the first tanks, we are going to build the second and third phases and gradually reach the OECD target,' Mr Zhang said. He said global stockpiling of crude oil would probably slow in the second half of the year, as inventories had mostly been filled, despite the new plan.

Mr Zhang said the mainland's power consumption would drop 4 per cent in the first five months of this year, about the same as the 4.03 per cent drop year on year in the first four months.

Mr Zhang also addressed scepticism about the accuracy of the government's economic data, especially the mismatch between power consumption and economic growth. He said increased energy efficiency, slower growth in energy-intensive sectors and destocking by firms were the main reasons for the disparity.

The mainland's gross domestic product grew 6.1 per cent year on year in the first three months, while electricity consumption fell 4 per cent. That has also raised questions about the durability of the mainland's economic recovery, since electricity consumption tends to move in tandem with the economy.

On the issue of climate change, Mr Zhang said he was optimistic a successor to the Kyoto Protocol could be reached at a global energy summit in Copenhagen in December.

He said recent meetings between mainland officials and visiting US counterparts - including House Speaker Nancy Pelosi and Democrat Senator John Kerry, chairman of the Senate Foreign Relations Committee - had made progress. Both countries reached broad consensus on the need for co-operation in the area. Beijing is insisting the US cut its carbon emissions on average by 40 per cent from its 1990 levels. Washington wants Beijing to make a corresponding commitment, even though the world's second-largest energy consumer and gas emitter, as a developing nation, would be subject only to voluntary greenhouse goals under the Kyoto Protocol.

To cut emissions, China has committed to the development of clean energy, such as wind and nuclear power, and the closure of small and obsolete refineries and power plants, Mr Zhang said.

Sun Qin, another of Mr Zhang's deputies, said nuclear power would account for 7 to 8 per cent of total power capacity by 2020.