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September 26, 2009

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Xinjiang oil project under way

CHINA has begun work on a 5.4-million-cubic-meter oil stockpiling project in Xinjiang Autonomous Region as part of the nation's second-phase strategic petroleum reserves.

The reserve base, in Dushanzi, will mainly be filled with crude from Kazakhstan and Russia, Xinhua reported.

It is one of seven energy projects that China began building on Thursday in Xinjiang as part of efforts to boost local economic growth.

The projects, including power plants, a power grid and a liquefied natural gas plant, will together cost 23 billion yuan (US$3.4 billion).

To exploit the year-on-year plunge in crude oil prices, China has planned a total capacity of 26.8 million cubic meters, or 170 million barrels, for the second-phase oil stockpiling program, to be completed by 2012-13.

The four reserve bases under the first phase, completed last December and holding 102 million barrels, are located along the east coast, including two in Zhoushan and Zhenhai, near Shanghai.

The government hasn't revealed all the locations of the second phase, but has said it would choose some inland regions and underground caverns for construction.

Zhang Guobao, head of the National Energy Administration, told a press briefing in Beijing that China will "certainly" build a third phase. Earlier reports have put the capacity of the third stage at 170 million barrels, which will be completed by 2020.

Combined, the three phases will hold 442 million barrels.

That will represent about 105 days of China's net imports at the current rate, and about 100 days of the current spare production capacity by the Organization of the Petroleum Exporting Countries, said Mirae Asset Securities analyst Gordon Kwan.


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