Chinese Government Stockpiling to Slow as Commercial Stocks are High

The last three projects of China's second phase of strategic petroleum reserve development will potentially add 90,000 b/d to government stocking in 2018 and 2019. Combined with an addtional 20,000 b/d of leased commercial storage for the SPR, it will bring strategic stocking to 110,000 b/d, according to ESAI Energy's recently published China Watch: Government Stockpiling to Slow as Commercial Stocks are High. A change of policy to focus on commercial stocks, however, suggests that China may not launch the third phase of government stocking until after 2020.

The China Watch captures the most important developments that shape China's next steps of crude stockpiling. After a successful Phase I with 103 million barrels of strategic petroleum reserve (SPR) depots filled by early 2009, the 177-million-barrel Phase II has been delayed. According to official data, there were still three SPR sites planned for Phase II with a total capacity of 82 million barrels that were not launched as of mid-2017. ESAI Energy's research on relevant policy evolution and industry trends concludes that China is diverging from the focus on government stockpiling to more reliance on industry-held stocks.

“Since 2015, multiple policies have tried to enforce a minimum stockholding obligation on the industry,” points out Yao Wu at ESAI Energy, “ESAI Energy's modeling for China's crude stocks shows that stocks held by the industry and the nine announced SPR sites have already surpassed 500 million barrels. This number, which coincides with the total storage target of China's three phase plan, may have left Beijing less concerned about its oil reserve and slowed down the push for new SPR sites.”

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