UK-based oil and gas contractors looking to get a foothold in China will be happy to learn that the country is in the process of making changes to the way oil reserves are handled. It will allow private oil and gas companies to build and operate strategic reserves, and companies will also have to keep mandatory inventories with the aim to boost future imports.
Besides building and operating strategic oil reserves, the draft rules by the National Energy Administration (NEA) indicate that companies would have to maintain compulsory oil reserves. These petroleum stockpiles will be segregated from the commercial stock, and the reserves will be used at the behest of the cabinet or state council. The Chinese Government will determine the size of the compulsory reserves, which will be fixed based on domestic consumption.
The NEA has not specified the date when this new policy will be implemented, and it has not mentioned the petroleum volumes that will have to be stockpiled. However, traders are optimistic that when the Government decides to implement the new rules, it will boost China’s oil imports even further.
Strong Petroleum Managing Director for Crude Oystein Berentsen stated that the draft rules by China lend support to the oil markets as they will help increase imports while decreasing exports. However, he also mentioned that firms such as Strong Petroleum need a clear picture of the figures before the rules can yield results.
After the US, China is the second-biggest importer of crude in the world. The country imports about 32.58 million tonnes of crude a month, or 8 million barrels a day. It is anticipated that China will add about 70 to 90 million barrels to its strategic reserves in 2016 as the country will take advantage of the prevailing crude prices.
Currently, petroleum stockpiles in the country are mostly maintained by public sector companies Sinopec and CNPC. However, ChemChina recently signed a deal with CEFC China Energy, which is a private company, to lease oil tanks in Hainan island province.