Tianjin municipality plans to start construction of a state strategic oil reserve to accommodate 3.2 million cubic meters of crude oil, an official from the municipal Commission of Reform and Development said on Monday. The construction, with a total investment of 3.5 billion yuan, part of China's second phase construction of strategic crude oil depots, will begin at Nangang Industrial Zone, Binhai New Area, in the second half of this year by Sinopec Group.

Alongside the state oil reserve, Sinopec Group will also build another depot in Tianjin to hold 3.2 million cubic meters (20.16 million barrels) of commercial crude reserves as well as 2 million cubic meters of refined oil product reserves.

China's State Council has approved the second phase of the country's strategic crude oil reserve plan, which aims to establish reserves capable of meeting between 90 and 100 days of domestic consumption; the second phase will be larger than the first and consist of eight storage tanks with the ability to hold 26.8 million cubic meters (169 million barrels) of crude oil, Zhang Guobao, chairman of China's National Energy Administration (NEA), said at a press conference earlier this year. But he did not disclose the whereabouts, investment or progress of the projects.

 China, the second largest energy producer and consumer in the world, relies on imports for about half of its oil needs. It imported 178.9 million tons of crude oil in 2008, up 9.6 percent from the previous year, according to the National Development and Reform Commission. Compared with its huge imports, China's strategic oil reserves are considered small.Given China's inadequate storage facilities, growing demand, international price fluctuations and geopolitical instability, a strategic reserve was becoming increasingly necessary. The country’s lack of strategic oil reserves became a pressing concern during the steep oil price surge from 2004-07, when the Chinese government and state energy companies were left at a disadvantage compared to other major oil-consuming countries.

The nation produced a three-phase blueprint for building national petroleum reserves to cope with global oil price fluctuations and began building national oil reserve bases in 2004. The first four are located in Zhenhai and Daishan of southeast China's Zhejiang Province, Huangdao in east China's Shandong Province and Dalian in north eastern Liaoning Province. The bases are included in the government's social and economic development plan for the 2006-10 period.

The 11th Five-Year Plan (2006-2010) put forward various energy-related objectives, such as building a "resource-economic society" and reducing 20% of energy consumption in per unit GDP during the period.

China is still a relative newcomer to the concept of strategic oil reserves. The petroleum reserved by China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corporation (Sinopec), two of the country's oil majors, is equal to 30 days of China's crude oil imports after the first phase construction of oil reserves was completed at the end of 2008. Figures show the United States' petroleum strategic reserve is equivalent to 158 days of crude oil imports, Japan 161 and Germany 117.

The Chinese government is taking a series of policies and measures to solve the energy security problem, a strategic issue that will affect national security. It has elevated energy saving and reduction of energy consumption to the level of basic national policy and given them top priority in China's energy strategy.