* China ship exec says strategic oil reserves full up
* First acknowledgement of 100 mln bbls govt inventories
* Urges Beijing to rent floating storage to add to stocks
(Adds more analyst comment, corporate reserve, writes through)
By George Chen and Zhang Shengnan
BEIJING, March 9 China has filled all four of
its state-owned emergency oil reserve tanks to the brim and
should now invest in oil tankers to add more to inventories
while oil prices are low, a senior industry executive said on
Monday in a rare acknowledgement of Beijing's secretive oil
Coupled with data last week showing a one-third rise in
commercial crude oil stockpiles last year, the admission
suggests that a large share of of China's oil import growth
last year was pumped directly into storage, and could be relied
upon quickly to soften any demand recovery or if prices should
It also backs up speculation that the world's No. 2 energy
user has been making good use of oil's $100 price fall to boost
supplies while demand falters in an unfolding economic crisis.
China Shipping (Group) Co President Li Shaode told Reuters
on Monday that he had proposed that the government use some of
its foreign exchange reserves on floating oil storage.
"The four onshore reserve bases have been fully filled, so
we need to invest urgently in floating storage," Li said on the
sidelines of the country's annual parliament.
The first set of China's strategic oil reserves, which can
hold about 100 million barrels, were built over the past two
years, but data on their status is considered a state secret
and information about their operations or tank levels is
China plans to build a second-phase strategic reserve that
will nearly triple the first batch to 280 million barrels by
2011, and industry executives have said the current storage
capacity has already become a hurdle to bringing in more
Crude oil imports rose 9.6 percent last year to 179 million
tonnes or about 3.58 million barrels per day (bpd), while
implied oil demand rose by just 3.8 percent last year to about
7.26 million bpd, according to Reuters calculations.
China is taking the supply security issue more seriously
than the market thought, says Yan Kefeng, Beijing-based senior
oil analyst with Cambridge Energy Research Associates (CERA).
"We expect China's oil stockpiling to reach a peak in 2009,
and continue into the next year," Yan said, but did not give an
estimate on the volume of stockbuild he expected.
Apart from pushing forward plans to add state reserves,
Beijing has also been urging its state oil giants Sinopec Corp
(0386.HK)(SNP.N) and PetroChina (0857.HK)(PTR.N) to stock up
under so-called corporate mandatory reserves, said Yan.
"Apart from reasons of supply security, China also wants to
contain the investment risk of its foreign exchange reserves."
said Yan, adding that China did not stop replenishing crude
reserves last year when global crude topped $147 a barrel in
The remark is consistent with recent comments by government
officials that China should better use its massive foreign
exchange reserve to stock up key commodities from grain to
metals to crude oil, and last week Beijing announced that it
would boost its budget for stockpiling resources by $10
At $40, many believe oil presents a good opportunity to
"China should do everything to take advantage of this
short-term price opportunity; $40 oil is not going to last too
long. I keep telling them (government officials) -- what do you
have to lose?" said Lin Boqiang, director of China Centre for
Energy Economics Research at Xiamen University.
China should act quicker to boost storage capacity as its
import dependence is set to surge in the coming decade.
"Floating storage bases are a good idea because China needs
to do everything to boost reserves," Lin said.
The stockfill was in line with a separate set of data
released by China OGP, a publication run by the official Xinhua
News Agency, which showed China's crude inventories surged by
about 70 million barrels last year to about 34 days of forward
demand, although it did not make clear whether the figure
referred only to commercial stocks or also strategic ones.
Together with record high stocks of gasoline and diesel
accumulated ahead of last summer's Olympics, the stockbuild
also meant Chinese oil demand may have slowed more than it
The International Energy Agency has forecast Chinese oil
demand to rise a mere 1.1 percent in 2009, the lowest growth
rate since 2001, compared with an estimated 4.2 percent growth
last year. Some analysts have already pointed to a contraction
for this year.
"Apart from gasoline, we expect diesel, naphtha and fuel
oil all to show negative growth in demand," said CERA's Yan.
(Additional reporting by Chen Aizhu and David Stanway; Writing
by Chen Aizhu; Editing by Ken Wills and Jonathan Leff)