Wednesday, February 3, 2010

China turns financial crisis into energy sector opportunities

Two variables tend to explain almost 100 percent of what causes growth in gross national product in nations worldwide. The variables are energy consumption per capita and education per capita. While there may be peaks and valleys in charting GNP for a given nation, when both of the causal variables are increasing, the trendline for GNP will also be growing. For that reason, it's worth taking note of what China has been doing during the current worldwide recession - and asking what the United States has been doing at the same time.
China's energy sector has successfully used the international financial crisis to advance its energy sector.
From June 2006 forward, energy supply in China was tight for six straight years, but there was negative growth in 2008 that extended to June 2009. Consequently, all refined oil storage was filled, and a portion of the nation’s oil wells had to shut down for the first time in decades.
Daily electric power consumption was 8.5 billion kilowatt-hours in the last quarter of 2008 due to the financial crisis. However, daily electricity use reached 11 billion kWh after November 2009 and, in the first 15 days of 2010, daily consumption reached the maximum of 12 billion kWh.
In 2009, China adopted the following measures to turn adversity into opportunity.
First, the nation envisioned its long-term development and made huge efforts to advance domestic growth. Three nuclear power projects were 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 12,000 yuan ($1,760), the direct investment could amount to 250 billion yuan at the least.
The 11.7-billion-yuan of funds arranged under the central budget for nuclear power projects is expected to drive or attract more than 40 billion yuan of social capital. From January to November 2009, the fixed asset investment in electric power, coal and oil industries reached a little more than 1.4 trillion yuan, a rise of 17 percent 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Second, the nation seized the opportunity to adjust the energy structure and do away with outdated production capacity.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 million kilowatts, which could save 64 million tons of raw coal and reduce 128 million 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 system has reached 34,000 km. Moreover, hydropower and wind power account for 32.3 percent of China's new energy-generating capacity for the year.
Third, it capitalized on the global energy slowdown in demand during 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, development of China's crude oil pipeline system has been settled and it is slated for operation at the end of 2010 with an annual transport volume of 15 million tons. Furthermore, the Central Asia Natural Gas Pipeline Project is expected to supply five billion cu m 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 centers 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. (Source: Zhang Guobao, head of the National Energy Bureau under China's National Development and Reform Commission, in China Daily, Jan. 28, 2010)

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