China will complete the construction of its first four strategic oil reserves by the end of this year, a senior government official said on Monday.

"The progress has been smooth and all the four bases will be completed by the year end," Zhang Guobao, administrator of the National Energy Administration (NEA), said after a press conference in Beijing. "Their total capacity will amount to 16.4 million cu m."

Zhang made the comments at his first public appearance since the NEA's inauguration on August 8.

The administration came into being as part of the reshuffle of government agencies in March. Zhang now also holds the position of vice-minister of the National Planning and Reform Commission (NDRC), the nation's top economic planner.

China started to build its strategic oil reserves in 2004, in order to fend off the risk of oil shortages and reduce the impact of oil price fluctuations. The government plans to build strategic oil reserves in three phases over 15 years, involving an estimated investment of 100 billion yuan (US$14.6 billion).

The first four reserves, located in Dalian, Qingdao, Ningbo and Zhoushan, are expected to maintain strategic oil reserves equivalent to 30 days of imports in 2010.

The reserve in Ningbo, a coastal city in Zhejiang Province, was put into operation in late 2006. It is the largest of the first four reserves, with a total storage capacity of 5.2 million cu m.

The central government is now reportedly selecting locations for the second batch of strategic oil reserves.

Cities including Tangshan and Guangzhou are understood to be vying for the projects, but Zhang declined to comment on this.

The newly established energy administration oversees the nation's oil reserves and monitors the domestic and overseas energy markets. It is also responsible for mapping out China's energy development strategy and formulating rules and regulations for the energy sector.

Renewable energy

Zhang also said yesterday that the installed capacity of wind power in the nation is expected to exceed 10 million kW by the end of this year, compared with 4.03 million kW in 2007.

The drastic increase came as the government has being promoting the use of renewable energy in the face of rising oil prices.

In recent years, the government has rolled out a host of fiscal and tax incentives to boost the development of the alternative energy sector, including a 50-percent cut in value-added tax for wind power plants.

Last year, renewable energy such as wind power, biomass and hydropower accounted for 8.5 percent of the nation's total energy use. That figure is set to increase to 10 percent in 2010 and 15 percent in 2020.

The newly established energy administration will set up more renewable energy projects to further spur the development of the sector, according to Zhang.

(China Daily August 19, 2008)