CEFC Energy has entered a preliminary agreement with an undisclosed State energy firm to provide oil storage to hold about 12.6 million barrels of commercial State crude reserves, two sources at the private energy firm said Tuesday.

    The new tanks, being built in Yangpu port on China’s Hainan island, are due to have a total capacity to hold 17.6 million barrels and to open at the end of 2015 after an adjacent crude oil terminal is ready for use, the sources said.

    Under a heads of agreement signed for the deal, the storage would be leased for a maximum of six years, said the sources, who declined to name the State firm involved.

    A final contract was due to be signed after the State firm received government approval to lease the storage, they said.

    China has been taking advantage of low crude prices to build up reserves and in April this year overtook the United States as the world’s biggest crude buyer.

    The country’s State reserves are split in two categories: strategic petroleum reserves for which the State builds tanks and pays the full cost of storage and oil, and commercial State reserves whereby the State leases tanks and shares the cost of buying oil with companies.

    The CEFC’s new Hainan tanks are part of 42 million barrels of commercial storage expected to open this year in China.

    (SD-Agencies)