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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.