Communications Co, a subsidiary of the State Development and Investment Corporation (SDIC), and Netherlands-based Royal Vopak will invest 7 billion yuan on a commercial oil reserve project in Hainan province, according to a statement on SDIC's website.
Located in Yangpu Economic Development Zone in Hainan, the project will involve the construction of a public oil terminal containing two 300,000-ton berths, two 100,000-ton berths and two 50,000-ton berths for crude and oil products, as well as a commercial oil storage base covering an area of 500 million sq m, the statement said.
Both parties refused to reveal the details of the project timetable or stock-holding information.
One industry insider said the project will help boost downstream businesses such as oil refineries, which matches Yangpu's plan to develop a large-scale petrochemical complex in the area.
"Besides strategic crude oil reserves, China also encourages investment in commercial storage facilities to help leverage demand and supply, especially at a time when the international oil price is rising," said Zhou Dadi, deputy director of China Energy Research Society.
The joint-venture commercial storage facility in Yangpu will help ensure a stable supply of crude oil for further processing, Zhou said.
Luo Baoming, governor of Hainan province, said the long-awaited launch of the commercial oil reserve base will lay a solid foundation for Yangpu to become an industrial base for oil, gas and petrochemicals.
Invested by Sinopec Group, China's largest refiner, an oil-refining project in Yangpu is producing 8 million tons of oil every year, earning an annual sales revenue of 333 billion yuan.
A styrene plant invested by Sinopec-Hainan Oil Refinery & Chemical Co and Shanghai Garson Group is also in operation, producing an annual output of 80,000 tons with an annual sales revenue of 600 million yuan.
In April, Hainan province received approval from the National Development and Reform Commission to build an ethylene plant in Yangpu. Built by Sinopec, the project is expected to produce 1 million tons of ethylene every year when it comes onstream in 2013.
China is building four levels of crude oil reserves. Besides a strategic crude oil reserve base built by both central and local governments, commercial oil reserves by large oil companies as well medium and small ones also constitute an important part of the total reserves.
Royal Vopak, the world's largest independent tank terminal operator, runs storage facilities, mostly of chemicals, in the eastern coastal provinces of Jiangsu, Fujian and Zhejiang and Shandong as well as Tianjin municipality.