Chinese energy sector turns crisis into opportunities

by Zhang Guobao

In Chinese, the word "crisis" reflects both "risks" and "opportunities". China's energy sector has successfully turned its adversity into opportunity while resisting the international financial crisis and giving people a profound enlightenment.
When the crisis arrived, China's energy demand was obviously weakened. From June 2006 forward, energy supply in the country was tense for six straight years, but there was negative growth in 2008 that extended to June 2009. Consequently, all refined oil depots were filled, and a portion of the oil wells had to be shut down for the first time in decades. Daily electric power consumption was 8.5 bn kWh in the last quarter of 2008 due to the financial crisis. However, daily electricity use reached 11 bn kWh after November 2009 and, in the first 15 days of this year, daily consumption reached the maximum of 12 bn kWh. This provides strong evidence of rapid economic recovery.

In the past year, China has adopted the following measures to turn adversity into opportunity.
First, the nation envisioned its long-term development and made huge efforts to boost demand for domestic growth. Three nuclear power projects have started over the past two years. A total of 20 nuclear power units are currently under construction. If the average per-kilowatt generating unit is estimated to cost yuan 12,000 ($ 1,760), the direct investment could amount to yuan 250 bn at the least.
The 11.7-bn-yuan of funds arranged under the central budget for nuclear power projects is expected to drive or attract more than yuan 40 bn of social capital. From January to November last year, the fixed asset investment in electric power, coal and oil industries reached a little more than yuan 1.4 tn, a rise of 17 % over 2008.

Second, the nation seized the opportunity to adjust the energy structure and do away with outdated production capacity. By the end of 2009, China had closed small power-generating units with a total of 60.1 mm kW, which could save 64 mm tons of rawcoal and reduce 128 mm tons of carbon dioxide emissions.
With the acceleration of mergers and reorganization of the coal industry, China shut down more than 1,000 small-coal mines in 2009 and, with the hastened development of natural gas, its natural gas pipeline has reached 34,000 km. Moreover, hydropower and wind power account for 32.3 % of China's new energy-generating capacity for the year.

Third, it capitalized on the global energy slowdown in demand in the financial crisis and a declining trend in the demand for energy resources. China vigorously carried out the "going-out" energy strategy. In 2009, it was active with its energy diplomacy and greatly enhanced its right to speak in the international energy realm; it conducted a dialogue on its energy policy with the United States and built good momentum for an overall development of energy cooperation with Russia in various fields.
After more than a decade of arduous negotiations, China's crude oil pipeline project has been settled and it is slated for operation at the end of 2010 with an annual transport volume of 15 mm tons. Furthermore, the Central Asia Natural Gas Pipeline Project is expected to supply 5 bn cm of natural gas this year.

Fourth, scientific and technological work has been strengthened in the energy sector, and has netted gratifying achievements. To date, China has issued 116 new standards and set up 16 testing centres in the energy industry, and substantial results have been attained in its natural gas pipeline and offshore wind power projects.
In a nutshell, China's energy sector responded adequately and satisfactorily in responding to the global financial crisis. The nation's energy industry has now reportedly entered the world's top ranks in terms of both quantity and quality.

The author is head of the National Energy Bureau under China's National Development and Reform Commission.