SHANGHAI, Oct. 16 (AP) -- China will begin piping crude oil into tanks at its second oil reserve by the end of the year, reports said Monday, a move likely to raise demand further following record oil imports in September.

The first phase of oil reserve facilities at Zhoushan, an archipelago south of Shanghai, will have storage capacity of 1.2 million cubic meters (about 7.5 million barrels of oil), the state-run newspaper Economic Observer and other reports said.

The reports cited an unnamed official at Zhoushan, one of four strategic national oil reserves under construction. Shipments to the first reserve, at Zhenhai, also south of Shanghai, began in August.

Chinese officials cited by the Economic Observer said the oil reserves would be filled gradually, with the government bearing the costs for construction, operation and stockpiling the reserves, which Beijing views as necessary for the country's economic security.

However, a top central bank official has countered expectations that China might devote some of its fast-growing foreign exchange reserves to buying up oil in international markets.

China's foreign reserves, which reached US$987.9 billion (€788 billion) by the end of September, cannot directly be used to buy energy assets, the official newspaper Securities Times cited People's Bank of China vice governor Wu Xiaoling as saying.

Purchases of such resources have to be made by buying foreign exchange from the central bank in exchange for yuan, she said. China's oil imports surged to a record high 3.29 million barrels a day in September.

When completed, China's four aboveground storage facilities in Zhenhai and Zhoushan in eastern China, in Qingdao in northeastern Shandong province, and at Dalian, further to the northeast in Liaoning province, will have a total capacity of around 16 million cubic meters (100 million barrels) of oil.

Future plans call for building underground tanks at other sites.

According to recent comments from Li Hui, vice-president of state-owned petrochemical company Sinochem International Co., it could cost China 60 billion yuan ($7.6 billion;€6.1 billion) build strategic oil reserves equivalent to a 90-day supply, similar to those of the U.S. and Japan.