PetroChina plans to build a commercial crude oil reserve base in Shanshan County, Northwest China's Xinjiang Uygur Autonomous Region, a company source said on Friday.

The company plans to invest 6.5 billion yuan ($844 million) in the project, which will have a storage capacity of 8.1 million cubic meters, according to the source.

Other top Chinese oil companies, such as Sinopec and Sinochem, have also embarked on the construction of their commercial crude oil reserve bases in order to meet the rising demand, said the source from PetroChina.

"The nation's top oil companies, such as PetroChina, Sinopec and Sinochem have all started to plan for their crude oil bases. The storage capacity of the bases they are planning will have a total capacity of up to 10 million cubic meters," said the PetroChina official, who declined to be named.

The first phase of PetroChina's Xinjiang project will have a storage capacity of 1 million cubic meters, involving an investment of 856 million yuan ($112 million). Construction of the base will begin next month and is expected to be completed late next year.

Shanshan, a regional oil transport hub, is located in the east of Xinjiang and 300 kilometers away from Urumqi, capital of the autonomous region.

PetroChina started to build another commercial crude oil reserve base in late June in Tieling, Northeast China's Liaoning Province.

It will build eight oil reserve tanks, each able to store 100,000 cubic meters. Total investment in the project will reach 1 billion yuan ($130 million), and it is scheduled to be completed in October 2008.

In another development, the PetroChina official said the government has approved the construction of another two commercial crude oil reserve bases, one in Northeast China's Heilongjiang Province and the other one in Northwest China's Gansu Province, but did not identify which company will build the two bases.

The bases are always located either near an oilfield or a large refinery, or an oil pipeline hub, he said.

"China has two categories of oil reserves - strategic and commercial. The construction of the commercial reserves is a concrete step taken to build up the national oil reserve system," said Han Xiaoping, a veteran energy analyst with China5e.com, one of the top energy websites in China.

Beginning in 2004, China started to build its strategic reserve system. In the first batch, it consists of four reserves, two in Zhejiang, one in Shandong, and the fourth in Liaoning provinces.

The two bases in Zhejiang are already operational with a capacity of around 5 million cubic meters each. The other two are expected to start operations between late 2007 and early 2008.