November 16, 2020 [Reuters] – East China-based private refiner Shandong Hongrun Group plans to further expand its mega crude oil tank farm by another 20% next year to meet growing demand from external parties, a company official told Reuters on Monday.

Commercial stockpiling played a pivotal role in China’s bumper crude oil purchases this year as refineries and traders took advantage of decades-low oil prices to build stocks and as the Chinese economy emerged faster than expected from the coronavirus pandemic.

Based in Weifang in the northeastern part of Shandong province, China’s oil hub for independent refineries, Hongrun, which started investing in crude oil storage a decade ago, plans to build 2.8 million cubic metres of crude oil tankage space next year.

That would bring Hongrun’s total crude storage capacity to 15.8 million cubic metres, or nearly 100 million barrels, which is equivalent to nine days of China’s total crude oil imports, said the Shandong-based official, adding that this is possibly the largest such facility owned by a private Chinese refiner.

“Most of our storage targets third-party commercial use, as our site is kind of a transfer centre for more than 70 refineries in Shandong,” said the official, who declined to be named as he is not authorised to speak to media.

Hongrun operates a 140,000-barrel-per-day refinery in Shandong.

Of the existing 13 million cubic meters of space, three-quarters are bonded tanks. Provincial authorities must approve such facilities that allow for the storage of oil that has not gone through customs clearance, letting refiners and traders store oil without government import quotas.

The 13 million cubic metre storage includes 12.2 million cubic metres in Weifang and 800,000 cubic metres in nearby Qingzhou city, the official said.

Hongrun counts global traders Mercuria, Vitol [VITOLV.UL] and BP among its regular clients under long-term agreements, the official added.

China’s Shanghai International Energy Exchange is another large client which is using 20 million barrels of Hongrun’s tanks as delivery tanks for the Shanghai crude oil futures contract.

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