Sinopec to Open Zhanjiang Oil Tanks; SPR Site Delayed

Commercial crude storage of 8.5 mln bbls due start by June; Sinopec also building a rock cavern strategic reserve base nearby.

Sinopec Corp is expected to start operating by June a new commercial crude oil tank farm in the southern Chinese city of Zhanjiang, where a large strategic reserve site is also under construction, three industry sources said this week.

The new commercial tanks will store 8.5 million barrels, equivalent to over four supertankers.

The tank farm consists of twelve tanks of 100,000 cubic metres each and three tanks of 50,000 cubic metres in Zhanjiang in Guangdong province, according to three industry sources with knowledge of the facility.

Sinopec is applying with customs authorities to qualify the facility as a tax-bond site before the start of operations, said one of the sources.

Meanwhile, in the mountainous outskirts of Zhanjiang, Chinese engineers are digging the rock caverns to build a national strategic reserve site able to store about 31.5 million barrels of crude oil, two of the sources said.

The reserve project, located in Lianjiang county of Zhanjiang city is expected to start operating in early 2018, the sources said, nearly two years behind an earlier timeline estimated by market analysts.

This would be China's second rock cavern oil reserve after one started up in eastern Shandong province before mid-2015.

Sinopec engineers are the builders and the state refiner was expected also to manage it on behalf of the government when it comes on line, industry officials have said.

"For the rock caverns, you'll need more time for geological survey and designs, and more safety measures," said one of the sources.

The sources declined to be named as they are not authorized to speak to press.

A Sinopec spokesperson said the company does not comment on operational matters.

Sinopec currently operates the Dongxing refinery of 100,000 barrels per day (bpd) in Zhanjiang and a 360,000 bpd refinery in nearby Maoming city. Both plants will be connected with the new commercial storage by pipelines, the sources with knowledge of the commercial storage site said.

The refiner has also started in December building a large greenfield plant at Donghai Island, about 10 km from the port of Zhanjiang, that includes a 200,000 bpd refinery and an 800,000 tonne-per-year ethylene complex.

As part of the new investment, Sinopec is expected to add a new crude tank farm and a crude import terminal that can handle vessels up to 300,000 deadweight tonnes (dwt).

Sinopec currently operates two terminals with the Zhanjiang port authority that can receive 300,000-dwt crude oil tankers, the sources said.

Reporting by Chen Aizhu