Geoffrey Craig, Senior Product Strategist
Although many countries store crude oil in vast underground caverns, China is uniquely subject to an exceptional level of scrutiny for its storage practices.
Two major questions are being asked about China in this context: how much oil is being kept underground, and what is the status of other similar depots under construction?
The reason for this scrutiny can be boiled down to one word: stockpiling. Indications that China is building up its energy reserves, particularly crude oil, can be interpreted as preparation for military activity, experts say.
Previously, we explored China’s above-ground oil storage. In this article, we examine its underground storage.
China has four underground crude oil storage sites, all located near ports and major demand hubs: Jinzhou, Huangdao, Huizhou, and Zhanjiang. These facilities have a combined capacity of at least 100 million barrels.
Additionally, a new underground storage cavern is under construction in Ningbo.
An important task will be monitoring planned new facilities to know when development begins and track the progress to completion.
The changes are already visible in optical satellite imagery at the Ningbo site (see below), where construction began December 2023.
Another type of satellite imagery is synthetic aperture radar (SAR), an active sensor that, unlike optical sensors, is unaffected by weather conditions such as clouds and works both day and night.
Additionally, algorithms can be applied to SAR imagery to classify the extent and direction of changes over time, which is what we’ve done here.
In the GIF below, the colorized areas highlight the specific locations where construction has occurred. The more intense the color, the more significant the change.
The cavern is expected to be completed by the end of 2026 and is designed to last for 50 years.
Years ago, China identified underground oil storage as a strategic priority. In 2024, that foresight appears prescient as a confluence of factors pushes China further down the same path.
According to Gabriel Collins, a fellow at Rice University’s Baker Institute who testified at a Congressional hearing on the topic, China is likely to continue building more underground storage facilities for several reasons.
Underground storage offers natural advantages over above-ground tanks by using less surface land, which can be repurposed for other uses, especially in densely populated coastal areas, he said.
Additionally, underground storage facilities have lower operational costs, longer lifespans, and require less maintenance, Collins noted.
Moreover, recent events offer powerful lessons for Chinese officials overseeing energy security, summarized as “underground = survivable,” he said.
“Russia’s strike campaign against Ukrainian underground gas storage infrastructure has been far less impactful thus far than attacks on exposed power grid and generation assets,” Collins added.
“Some of China’s already in service underground oil storages sit under as much as 100 meters of earth and rock, placing them below the reach of nearly every strike munition deployed by any military globally including the United States,” Collins concluded.
As noted above, China is not the only country with underground oil storage facilities; others include Canada, France, Germany, Japan, the Netherlands, South Korea, and the United States.
However, the spotlight is on China due to the significant implications for national security.
Next in this series, we’ll shift our focus from oil to methods for monitoring another vital energy resource.
