OREANDA-NEWS. June 04, 2013. The second phase of China's strategic petroleum reserves will likely be delayed to 2015 from the end of this year because of slow progress, analysts at investment bank China International Capital Corp. said in a report.

The bank attributed the delay to China no longer feeling rushed to expand its emergency oil stockpile because of "an expected end of the oil price super cycle as the US shale oil revolution may signal a structural supply surplus in global markets."

In addition, China lacks the experience and mature technology to build large-scale underground storage facilities, the report said.

China is developing about 500 million barrels of SPR storage in three phases. The first phase held 103 million barrels and was completed in 2009. The second phase will likely hold 169 million barrels, although little is known about the construction progress.

CICC said based on its "channel checks," it has concluded that the next section of the SPR is now expected to have 210 million barrels of capacity.

It added that since the Lanzhou and Dushanzi facilities under the second phase were started to be filled in the first half of last year, "no new projects have been completed or started oil injection in China since."

In January 2012, China National Petroleum Corp. said it had completed construction of both facilities, each with storage capacity of 3 million cubic meters (18.9 million barrels).

This year, the Tianjin project is expected to be completed while most of the other facilities will likely be completed in 2014-15, CICC said.

While the first phase of the SPR used conventional tanks above ground, plans for subsequent phases were for underground storage caverns.

State oil companies are in charge of the construction and operation of the SPR sites. But details about the facilities are considered state secrets, so information has been scarce.

CICC said the third phase of the SPR is still being planned and is estimated to have 190 million barrels of storage. It is slated for completion by 2020.

However, the bank said that given China's rising crude imports, the third phase might expand to 310 million barrels, bringing total SPR capacity to 620 million barrels, or the equivalent of 90 days of China's net imports.