Dec. 29 (Bloomberg) -- China, the world's second-biggest energy consumer, will take advantage of lower prices to boost imports of oil and natural gas as reserves are being built, the head of the National Energy Administration said.

Companies will be encouraged to utilize their spare oil- storage capacity while state and commercial reserves of other ``strategic resources'' will be set up, Zhang Guobao, also the vice chairman of the National Development and Reform Commission, wrote in an article in the official People's Daily today.

China is seeking to expand its emergency oil stockpiles at a time when global energy prices have declined and domestic fuel demand is being well met. Crude prices in New York have fallen more than 70 percent from a record $147.27 a barrel in July.

China Petrochemical Corp., also known as Sinopec Group, has completed building its largest oil-storage tanks, according to a company newsletter today. The project in Zhenhai city in eastern Zhejiang province comprises 38 tanks with a total capacity of 3.8 million cubic meters.

The Chinese government, pursuing a ``diversified'' global energy development strategy, will support companies planning to increase investment in oil and gas assets overseas, Zhang wrote, without giving details.

``The current financial crisis, global recession and sluggish energy market offer a favorable opportunity for China to expand cooperation with energy-producing nations and neighboring countries,'' Zhang said.

China will ``actively'' advance the construction schedule of a pipeline to import gas from Myanmar, he said.

Fuel Prices

Domestic oil consumption has declined ``noticeably'' since the global credit crunch, according to Zhang. China cut fuel prices 10 days ago for the first time in almost two years to reflect declining global oil prices and demand.

``A shortage witnessed in the first half has turned into a surplus, with some regions having excessive stocks,'' Zhang said.

Coal consumption in China may increase 4.5 percent to 2.74 billion metric tons this year, down 5 percentage points from the previous year's growth rate, Zhang said. Stockpiles reached a record high at the beginning of this month.

The five biggest state power producers led by China Huaneng Group rejected a 10 percent price increase sought by domestic suppliers of thermal coal for next year as slowing energy demand undermines profitability, Xie Juchen, a fuel purchasing director at China Electricity Council, an industry group, said today.

The country's top five generators lost 26.8 billion yuan ($3.9 billion) in the first 10 months after raw-material costs rose and a slowing economy curbed demand, a company official said on Dec. 5.

Price Adjustments

Easing inflation and lower global commodity prices give China a chance to adjust its coal and power prices to help the nation's power producers, Zhang said, without elaborating.

China plans to shut 15 gigawatts of small coal-fired power generating units next year to boost energy efficiency and reduce pollution, Zhang said.

The nation will start building four nuclear power plants in the coastal provinces of Shandong, Zhejiang and Guangdong next year while aiming to increase its wind-power capacity by nine times to 100 gigawatts by 2020, Zhang wrote in the article.

To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net.

Last Updated: December 29, 2008 03:18 EST