New Bureau of China's Petroleum Reserves: Rules have not yet established a complete process

As a key implementing body, the National Petroleum Reserve Center must address several critical questions: how it should function, what steps to take first, what actions follow, what capabilities it can offer, how much funding is available, and who will lead the organization. These are essential issues that need resolution in this new phase of development. Last year, after years of anticipation, the National Petroleum Reserve Center was finally established at the end of the year. Meanwhile, the Zhenhai Petroleum Reserve Base, which had been in trial operation for nearly a year, was officially recognized by the state the very next day. The NDRC’s official announcement stated that China’s oil reserve efforts have now entered a new stage. However, there remains an issue: the highly anticipated "Regulations on the Management of State Petroleum Reserves," which were expected to be released last year, have not yet been introduced. Additionally, the draft Energy Law is still under public consultation. While the institutions responsible for managing oil reserves have been set up, the necessary rules and regulations are still pending. With the establishment of the National Petroleum Reserve Center on December 18, 2007, the government announced that this new agency would oversee the construction and management of national oil reserves. According to the NDRC press release, the center serves as the executive body within China's oil reserve system, with the goal of safeguarding national economic security through strategic petroleum reserves. It is tasked with collecting, storing, rotating, and utilizing these reserves while monitoring domestic and international market conditions. According to reports from China News Weekly, the center is likely structured as a bureau-level institution and may operate in the form of a company. An insider from the Development and Reform Commission noted that the center will function similarly to the state grain reserve system, and the Zhenhai base already operates as a limited company. "Essentially, it's like the National Development Bank in the financial sector, but focused on oil," said Han Xuegong, an energy expert. He emphasized that the oil reserve center is not a profit-driven entity. Cao Xiao, deputy chief engineer at Sinopec’s Institute of Economics and Technology, explained that unlike the former National Petroleum Reserve Office, which was a government department, the new center acts as an executive agency. Funding comes directly from the government, and the center can purchase reserve oil from various sources, not just the three major oil companies. Currently, the Zhenhai base is managed by Sinopec under the commission’s oversight, meaning the new center does not directly manage the base. Instead, it collaborates with Sinopec, PetroChina, and other enterprises to handle operations. A Sinopec official mentioned that the government provides financial support for these activities. "There's no need to create another team when we already have the technology and equipment," Han Xuegong added. The timing of the center’s establishment raised questions among many observers. Professor Cha Daojun of Peking University questioned why the initiative came now, noting that strategic reserves also serve as a buffer against supply disruptions. However, the exact nature of such risks remains unclear. According to research, representatives from China and India attended a high-level meeting of the International Energy Agency in Paris, where responses to potential energy crises were a key topic. Some experts suggest that China’s move might align with international expectations. While some believe the announcement could influence global oil prices, Cao Xiao argued that it does not necessarily mean immediate action or market volatility. Despite the center being established and the Zhenhai base accepted, the NDRC has yet to publish formal regulations governing oil reserves. Last year, the "Regulations on the Management of National Petroleum Reserves" were included in the State Council’s legislative plan, but they remain unimplemented. Research conducted by the Development and Reform Commission, including visits to EU countries, highlighted the importance of private-sector involvement in oil reserves. This process takes time, and policy formation is ongoing. In March 2007, Ma Kai, then director of the NDRC, mentioned that China’s oil reserves include both government and corporate reserves. This idea was later reflected in the draft Energy Law, which outlines the responsibilities of the government and private entities in managing oil reserves. Experts like Han Xuegong note that the passage of the Energy Law, along with institutional changes, will shape future oil reserve management. Until then, internal documents may serve as temporary guidelines. Internationally, China’s growing energy needs have drawn attention. With oil consumption reaching around 350-360 million tons annually, and domestic production only covering about half, China relies heavily on imports. According to international standards, a country should maintain at least 90 days of oil reserves, a target China is still working toward. Given the complexity of the system and the slow progress, it’s clear that China’s oil reserve framework is still evolving. The path to full operational readiness remains long, but the foundation has been laid.

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