BEIJING, Jan. 6 -- China has started building the Lanzhou strategic oil reserve base in northwestern Gansu province after kicking off construction on Dushanzi state oil tanks in Xinjiang in September, part of China's second phase of its strategic oil stockpiling plan.

Officials from the National Development and Reform Commission (NDRC), the National Energy Administration, top oil firm CNPC and local governments attended a groundbreaking ceremony on Dec 29, CNPC said in a report on its website on Tuesday.

The Lanzhou base, with storage capacity of 3 million cubic meters or around 18.9 million barrels, is expected to cost 2.38 billion yuan ($348.6 million) and be ready for use in the first half of 2011, the report said.

CNPC, parent of PetroChina, will also build production and operation oil reserve tanks as a supplementary facility to the state oil reserve base that occupies 88.5 hectares of land, the report added.

It did not specify the capacity of the supplementary facility.

China's NDRC, China's top economic planner, approved the project in November 2009, the report said.

The first phase of Dushanzi state oil reserve tanks in Xinjiang, with capacity of 3 million cubic meters, will cost 2.65 billion yuan and is due to be finished by July 2011.

China has said it will build the second-phase of a strategic crude oil reserve with a capacity of 26.8 million cubic meters, or nearly 170 million barrels, after filling its first four reserve bases that have total capacity of 100 million barrels.