Sinopec takes over management of two SPR sites

BEIJING, July 14 (Reuters) - China has officially transferred management of two of its four strategic oil reserve bases to Sinopec Corp (0386.HK)(600028.SS)(SNP.N), the oil company's in-house newspaper reported, after Beijing filled its first batch of reserve tanks.

Sinopec Corp's pipeline and storage unit took over management of the oil tanks at Zhenhai and Huangdao, on the east coast, in late June following an order from the National Energy Administration and the Ministry of Finance, China Petrochemical News said.

The two sites have a combined storage capacity of about 52 million barrels, or half of China's first-phase reserves that were fully filled around end of 2008 and early 2009.

The report did not say how Sinopec would manage the tanks, but analysts have said Beijing, by allowing oil companies to manage the tanks, provided them with opportunities to operate the reserves more in a commercial manner.

Sinopec Corp, Asia's largest refiner, imports nearly 70 percent of the crude it processes and runs two major refineries next to the Zhenhai and Huangdao sites.

"It's how China manages the reserves. The government foots the bill and companies manage them," said a state oil trader. "But I believe the government gives the order when to fill."

(For a related analysis on China's SPR, click [nPEK281875])

China set up a state oil reserve centre in 2007 to manage its fledgling stockpiles, but it did not disclose when it took over management of the reserve bases, nor did it publish specific rules on how to govern the operations of the facilities.

China, which imports more than half of the crude it consumes, filled the first phase of the strategic oil reserve tanks, totalling around 102 million barrels, at an average cost of $58 per barrel, the government said in June.

It is building storage facilities for the second phase that will hold up to 170 million barrels. (Reporting by Chen Aizhu and Jim Bai; Editing by Chris Lewis)