(China Daily)
Updated: 2007-07-28 09:35

Oil storage by private companies is vital to China's strategic oil reserve system, said a signed article in China Youth Daily. An excerpt follows:

An official with PetroChina was quoted last week as saying that China plans to build four levels of oil reserves made up of government reserves and enterprise storage.

A multi-level oil reserve system is necessary for China to realize its strategic operation of energy resources, and commercial operation is needed to build the system. Private oil companies can play an important role in the system.

World experiences show that private storage has become a major practice of oil reserves. Commercial oil companies and civil organizations are holding large shares of Western countries' strategic oil reserves.

So far China has over 80,000 private oil companies with about 1 million employees, 40,000 gas stations, 30 million tons of storage capacity, 23 million tons of handling capacity and 100 million tons of annual sales. Total assets reached about 1 trillion yuan ($132 billion). The strength of the private sector makes strategic oil reserves possible.

Currently, it remains difficult for private companies to participate in the strategic system. Though China opened its oil market this year, the Measures for Administration of the Market of Processed Oil and the Measures for Administration of the Market of Crude Oil that took effect on January 1, and the Guiding Manual for Enterprises Operating Processed Oil issued in March further lifted the threshold for private companies entering the oil market.

For example, the company's oil bunker must reach 10,000 square meters in volume and the registered capital should be over 30 million yuan ($3.97 million).

These measures have worsened the situation of private oil companies. It was reported last month that some 90 private oil companies were negotiating cooperation agreements with nine transnational oil giants.

The government should overcome obstruction from interest groups, learn from overseas experiences and support the development of private oil companies. This not only conforms with public opinion, but also fits the market rule. More importantly, it can guarantee the long-term stability of China's strategic energy reserves.

(China Daily 07/28/2007 page4)