High oil prices fuel China to build strategic energy reserves

GLOBAL crude oil prices are hovering around US$70 a barrel, compared with merely about US$20 in 2002, due to increasing global energy demand, geopolitical fears as well as some speculation by international funds.

Oil futures topped US$75.35 on April 21 and 24 on the New York Mercantile Exchange, the highest since the contracts began trading in 1983.

The prices have risen by some 16 percent this year, on concerns that attacks against pipelines and platforms in Nigeria and the Iran nuclear showdown will reduce exports from these oil-rich nations.

The damage done to crude production platforms and oil trading facilities when Hurricane Katrina struck the US Gulf of Mexico last summer also played a part in driving prices above US$70 a barrel for the first time.

China will beef up strategic reserves of energy resources such as oil and uranium in the next few years, the Ministry of Land and Resources said in a statement, citing a five-year development plan by the government.

The country has already announced plans to build up four strategic oil reserves and will start filling the first one by the end of this year. The ministry said China will speed up construction of the facilities.

It also aims to have sufficient reserves of uranium, the principal fuel material used in nuclear reactors, to help meet rising demand and counter possible supply disruptions.

Also, China will start to build stockpiles of minerals such as copper, aluminum, manganese and tungsten to ensure supply, the ministry said.

It didn't give the planned size of these mineral holdings.

The ministry said the government and companies will jointly invest to build up the mineral reserves. China's State Reserve Bureau currently manages the country's strategic reserves of commodities including oil, copper and grains.

Meanwhile, the ministry said China will by 2010 increase its proven reserves of oil by at least 4.5 billion tons; natural gas by at least 2 trillion cubic meters; and coal by 100 billion tons.

The country's proven iron ore reserves will be increased by 5 billion metric tons, copper reserves by 20 million tons and the reserves of bauxite, which is used to make aluminum, by 200 million tons during the period.

Meanwhile, Roc Oil Co has made a "potentially significant oil discovery" in its exploration well in Block 22/12 in the Beibu Gulf off China, the Australian company said yesterday.

"We can safely say that this well has delivered a handsome discovery that certainly merits further appraisal," John Doran, Roc's managing director, said in a statement.

Roc owns 40 percent of the block while other partners include Horizon Oil Ltd, Petsec Energy Ltd and Oil Australia Pty Ltd.

China National Offshore Oil Co is entitled to up to 51 percent funding equity level in any commercial development within Block 22/12.