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Sinopec Fuel Oil Co. is reported to have reached an agreement with Yantai-Titan Petrochemical Port Development Co. to lease 60,000 cubic metres (cbm) of bonded fuel oil storage from its tank farm in Yantai.

According to local sources, Sinopec began storing 20,000 metric tonnes of Singaporean cracked 180-centistoke (cst) at the Yantai facility in January and February and started supplying bonded bunker fuel at Yantai last month. The lease agreement will last five years, sources said.

Shandong-based Yantai-Titan Petrochemical Port Development Co (Yantai-Titan), a joint venture between Yantai Port Group and Titan Petrochemical, commenced trial operations of its 360,000 cbm tank facility for heavy fuel oil and 50,000 dwt oil jetty in early January. It is Yantai's first oil tank farm and jetty.

Yantai-Titan confirmed in February that it was in talks with Sinopec regarding the lease of tank capacity. China National Offshore Oil Corporation (CNOOC), China's largest producer of offshore crude oil and natural gas, was also said to have contacted Yantai-Titan regarding investing in future tank farm construction.

The Yantai facility comprises 80,000 cbm of bonded storage capacity for crude and fuel oil. Both the tank farm and the jetty are expected to begin formal operation in March.

In addition, 300,000 cbm tanks for heavy oil are under construction, together with two jetties - 50,000 dwt and 100,000 dwt - for petroleum products. They are scheduled to come on line in June 2011.

Yantai-Titan is also understood to be planning to build a 300,000 dwt jetty in the future.

As the only port capable of constructing a 300,000 dwt jetty in northern Shandong, Yantai is considered to be a good prospect for the development of oil storage and logistics in the long term.

Yantai Port Group and Titan Petrochemical hold a 55 percent and 45 percent shareholding in the tank farm joint venture respectively.