In May 2009, when global economic recovery was still tentative and oil prices were slowly clambering above $60 (Dh220) a barrel after crashing to $32, in the winter of 2008, some energy experts thought they knew why.

Satellite images showed China was packing away a rising amount of crude in storage tank at its "strategic petroleum reserve" ports. Estimates said China's intake increased by around 400,000 barrels a day since November 2008 and, while tiny in the overall global oil market, the volumes and buying pattern mattered when crude consumption was negative in the US and elsewhere.

Two years on, the same spectre of a weakening global economy is on us, with the likelihood that this may undermine growth in oil demand. But this may not be "fall season" yet given that China has been working on yet another "Plan". A crucial but less spectacular aspect of China's energy security agenda, apart from its overseas oil acquisition sprees, is the building of huge commercial and strategic oil storage facilities at breakneck speed.

Cash-rich China's hunger to fill these storage vaults when oil prices dip low is likely to be an important variable in influencing oil prices in future. In 2004, the government worked out a three-phase plan to build strategic oil reserve bases over a 15-year period with the aim of stockpiling total reserve volume equivalent to 100 days of imports or more than 800 million tonnes.

The first phase, comprising four strategic oil reserve bases in the coastal cities of Dalian, Qingdao, Ningbo and Zhoushan, has been operational since late 2008 with a total designed volume of 140 million tonnes. The second phase, now under way, is being built across eight bases, with two under construction at remote sites in Xinjiang Uygur autonomous region and Qinghai.

By end-2010, China's accumulated strategic oil reserve capacity was 178 million barrels, equivalent to around 36 days of consumption.

Energy security has now extended to natural gas as well. China has no natural gas reserve facility but early this year, it decided to make this a priority for the next five years.

 

The writer is a freelance journalist based in China.