BEIJING, July 13 -- The government is starting preparatory work on building a huge underground oil storage facility in Zhanjiang City, a port in Guangdong Province.

　　It is part of the government's plans to build strategic oil reserves and the Zhanjiang facility is the first of several planned underground storage sites in the country.

　　Government officials say the oil for the strategic reserves will come from domestic fields, foreign fields in which China has stakes, a government-to-government deal now being negotiated with Saudi Arabia, and possibly similar pacts with other producers.

　　The head of China's top economic planning agency has said the country plans to accelerate construction of the strategic oil reserve facilities.

　　"Construction of both the first and the second phases of the reserve facilities will be carried out," Ma Kai, head of the National Development and Reform Commission, China's top energy planning body, said Friday.

　　"We are making preparations for the construction of the underground reserves facility," said an official with the local government of Zhanjiang City.

　　The storage caverns will be designed to hold 7 million cubic meters of oil, and construction will require a total investment of 2.3 billion yuan (US$287.5 million), according to a statement posted on the local government's Web site.

　　The facility will be built to complement four aboveground storage centers that are already being built or planned.

　　Construction work is expected to start later this year and be completed by 2010, which will consist of two phases, the statement said.

　　In the first phase, a storage facility with a capacity of 5 million cubic meters will be built, it said, without saying when these would be completed.

　　An additional capacity of 2 million cubic meters will be added in the second phase.

　　"Zhanjiang is an ideal place for oil reserves, as it has good port facilities and can easily transport oil to two nearby large refineries, Maoming and Dongxing," said an expert from an industry association in Guangdong.

　　Those refineries are run by China Petroleum & Chemical Corp., or Sinopec, the country's largest refiner by capacity.

　　Maoming is Sinopec's second-largest refinery, with a processing capacity of 13.5 million tons a year or 271,000 barrels a day.

　　The Dongxing refinery is being expanded and should be able to process 8 million tons of crude a year in 2010, or 160,600 barrels a day, up from 100,400 barrels a day currently, he said.

　　Sinopec is also building commercial oil reserve facility in Zhanjiang, with a capacity of 10 million tons.

　　The total investment in the planned Sinopec reserves will be 3 billion yuan, and construction is also expected to be completed by 2010, it said.

　　The first four aboveground facilities will be Zhenhai and Zhoushan in Zhejiang Province, Qingdao in Shandong Province and Dalian in Liaoning Province.

　　While some of China's aboveground facilities are almost ready to be filled, oil isn't being poured into them just yet.

　　Last month, China's foreign ministry confirmed it is in talks with the Saudi Government on ways of deepening energy cooperation, including the use of Saudi oil in the strategic reserves.

　　In August, China will complete its first aboveground facility, in Zhenhai, a port city about 160 kilometers south of Shanghai.

　　Industry sources said the Zhenhai base comprises 55 tanks, each expected to store 100,000 cubic meters of oil.

　　The four facilities in the first phase will have a combined storage capacity of 10 million to 12 million tons, while the second phase is planned to have 28 million tons, the Oriental Morning Post said in March.

　　For the second phase, the government is also investigating possible sites near Huizhou, also in Guangdong, and Tangshan, a coastal city in northern Hebei Province.

　　(Source: Shenzhen Daily/Agencies)