China unveils state fuel reserve plan

China said on Monday it will boost state reserves of refined fuels, its first official plan to expand beyond its crude reserves, and help cut high inventories held by oil companies.

The world's second-largest oil user would accelerate the formulation of policies for such reserves, according to a post on the central government's website only months after Beijing filled its first four crude reserve bases totalling 100 million barrels.

"(China should) take advantage of the current opportunities to raise government reserves of refined fuels, and accelerate in the formulation of policies for fuel reserves following the model of crude reserve," it said.

The announcement, unveiled as part of Beijing's plans to revitalise its petroleum and petrochemical sectors under the broader economic stimulus package, does not give further details.

An industry official told Reuters last week that China plans to set up 10 million tonnes of state fuel reserves by 2011, or about two weeks' worth of current consumption of gasoline, diesel and kerosene combined. The government would also provide active credit policies to ease corporate cash flows, it said.

State refiner Sinopec Corp <0386.HK> and PetroChina <0857.HK> have in past months been battling to thin swollen fuel stocks amassed through most of last year before the economic crisis hit Chinese fuel demand.

BIGGER PLANTS, CLEANER AIR

The central government's post also said China will implement plans to build six refining and eight ethylene key projects during 2006-2010 with an aim to start them all into operation by 2011. It did not provide names of the plants.

Out of the total, China will have three to four mega ventures each with a crude processing capacity of more than 400,000 barrels per day and ethylene capacity of 2 million tonnes per year (tpy) by 2010.

The plan will bring the number of China's refining bases with capacities over 10 million tonnes to 20 and the number of ethylene bases with capacities over one million tonnes to 11, it said.

It will also bring the average operating capacity of China's refining firms to 6 million tonnes and that for ethylene firms to 600,000 tpy.

It calls for studying the site of a new refinery in southwest China to process oil pumped via a proposed China-Myanmar pipeline.

China will simplify bureaucratic procedures and provide aid in the form of credit, foreign exchange and tax incentives to encourage oil firms to make overseas exploration and production.

Aiming to curb worsening pollution caused in part by the soaring number of vehicles, China plans to move to the third phase of emission standards nationwide -- similar to Euro III standards in Europe -- starting in 2009 for gasoline and 2010 for diesel, the statement said.

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