As in any country, China’s investment in overseas energy resources is fundamentally an investment in the country’s energy security. It is therefore no surprise that China is aggressively expanding another key to a reliable supply of oil and gas: its strategic petroleum reserve (SPR).
At the end of May, Zhang Guobao, the head of the National Energy Administration, said Beijing had approved construction of the SPR’s second phase. The first phase, with a capacity of 103 million barrels of oil, is nearly complete. Phase two will add a further 169 million barrels, and phase three will bring total capacity up to 500 million barrels.
Jennifer Richmond, director of China analysis for Stratfor, a Texas-based global intelligence company, is particularly impressed at the speed with which existing capacity has been filled. Although she believes existing reserves only amount to 87 million barrels, that number represents an increase of 60 million barrels in the last year."It highlights how they’ve taken advantage of the low [crude] prices," she said.
While analysts say that Beijing is hoping to eventually match the size of the US SPR, which currently holds 727 million barrels, it may not use the oil in the same way.
"There’s a question about fungibility of it actually being strategic, or if the state-owned enterprises will use a small degree of the inventory commercially – in other words take it out and put it back in ‘normal times’," said David Hewitt, energy analyst at CLSA.
China’s SPR also differs from that of the US in that much of it is stored above ground in tanks. Richmond calls the natural salt domes in which the US stores its oil a "major advantage" over corrosion-prone steel tanks, which also make easy targets for terrorists or military forces.