OREANDA-NEWS. January 28, 2015. Crude oil prices are still on their way down and no one is certain when they will find a bottom. The price of Opec’s basket of crude oils was USD41.50 (Dh152.30) a barrel on January 13, down from an average of USD 107.89 a barrel in June 2014.

While producers are the obvious losers in this game, China is considered among the winners. Not only can China satisfy its domestic consumption at a much lower cost, it is also filling its strategic petroleum reserves (SPR) at a faster rate than earlier and at a much lower cost too.

While China was self-sufficient and, in fact, an exporter of oil until 1993, its domestic production since then hardly saw an increase and it became an importer with increasing volume demand by the year. Latest estimates indicate demand in 2014 was for 10.41 million barrels a day (mbd) while domestic production was 4.24 mbd, which means imports could be around 6.2 mbd. Therefore, China’s dependence on oil imports has risen to a level of almost 60 per cent of demand. It had decided in its 2000–05 development plan to build government-controlled storage facilities as a bulwark against any supply disruptions, emergencies and also to benefit from price swings as many countries had been doing for a long time.

The original plan was for China to build storage capacity to hold 500 million barrels by 2020 in three phases and to cover import demand for 100 days. China is not too open on statistics related to this project. But reports suggest that the first phase was for 100 million barrels, with the capacity built on the eastern shores of the country and which have been more or less been filled up.

The second phase is of 180 million barrels and believed to have been completed in 2013. It is currently being filled and some of these facilities are inland, including close to import entry points from Russia and Kazakhstan. To complete the programme, the third phase is of 220 million barrels and may be under construction.

But the overall SPR storage capacity may be revised since China’s imports have increased beyond 5 mbd and likely to increase further.

Its refining companies also hold reserves estimated between 250-400 million barrels, but China does not yet hold the commercial operators to a specific mandate though this may be coming shortly.