China's largest crude oil storage tanks, located in Shanshan county of Xinjiang Uygur autonomous region, have started operation, said sources with Xinjiang Oilfield Corporation, a subsidiary of China National Petroleum Corporation (CNPC).

China's largest crude oil storage tanks, located in Shanshan county of Xinjiang Uygur autonomous region, started operation on December 24, 2008. [Xinhua]

The first phase of the project includes 10 100,000-cu-m tanks, which will store domestic crude and fuel imported from Kazakhstan, according to a report by Shanghai Securities News, citing Wang Yuehua, a manager of CNPC's Xinjiang Oilfield Corporation.

Covering an area of 32 hectares, the project will have 8 million cu m of storage capacity at a cost of 6.5 billion yuan, once all the planned reserve tanks are ready for use.

Shanshan county, a regional oil transport hub, is located in the east of Xinjiang and 300 km away from Urumqi, capital of the autonomous region.

An official from the CNPC said the Shanshan project will be the company's commercial storage, not part of the country's national strategic oil reserves.

However, Zhou Fengqi, former director of the Energy Research Institute of the National Development and Reform Commission, said in a media report: "Xinjiang has become a cradle of oil and gas and China's oil pipelines, which are used for importing oil overseas, have to go through the place."

He predicted that Shanshan is very likely to be established as a strategic oil reserve base.

China has two categories of oil reserves - strategic and commercial. Beginning in 2004, China started to build its strategic reserve system.

The first batch consists of four reserves, two in Zhejiang, one in Shandong, and the fourth in Liaoning province.

In November 2008, authorities announced that they had completed planning the second phase of strategic oil reserves, with total capacity of 26.8 million cu m.

But they have not disclosed details such as where the tanks would be or whether construction has begun.

Sources said they will include a number of bases in the western regions, including Lanzhou in Gansu province.

(China Daily December 26, 2008)