Top 10 Energy Events in China in 2008 [Selected by: Energy and Environment Council of China Enterprise News]

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This post was last edited by jordan569 on 2013-1-6 22:35. The year 2008 was a challenging one for China’s energy industry. The historically rare ice and snow conditions are putting pressure on China’s power supply ； The volatile oil prices, which are as rollercoaster-like, are having an impact on China’s petroleum and petrochemical industry ； From \"prices rising every day\" to \"prices dropping back to their level from a year ago overnight\", China’s coal industry is facing new pressures. Today, we provide a comprehensive review of the major events that have taken place in the energy sector over the past year, selecting the ten most impactful ones for readers’ reference. 1 Natural disasters put China’s power sector to the test, prompting large enterprises to improve their emergency response mechanisms. Since mid-January, parts of southern China have been hit by historically severe prolonged cold, snow, and ice storms; the thickness of ice covering the power transmission lines **exceeded** the designated design standards, resulting in serious damage to the grid infrastructure in those affected areas. **545 counties (districts) and 27.06 million customers in the operational area of the power grid company, as well as 99 counties and 6.42 million customers in the operational area of the Southern Power Grid, were affected by power outages. Thanks to the efforts of all parties, on March 8, the power grids that had been severely damaged by the rain, snow, and freezing conditions, as well as the Southern Power Grid, resumed normal operation. On May 12, the Wenchuan earthquake caused severe damage to power facilities. According to incomplete statistics, 171 substations with a voltage of 35 kV or higher in Sichuan were out of service, and 2,769 lines with a voltage of 10 kV or higher were also shut down, resulting in a total of 4.0507 million electricity customers losing power supply. **Power grid companies, along with relevant power generation companies and local power enterprises, quickly mobilized their resources to carry out emergency repairs. On August 28, the 220-kilovolt Dakang Substation in Jiangyou was completed, marking the full completion of the reconstruction of the damaged power facilities in Sichuan, and the process is now set to enter the planned reconstruction phase. 2 The second West-East Gas Pipeline project was put into operation, enabling the supply of natural gas from Central Asia to China. On February 22, the inauguration ceremony for the second West-East Gas Pipeline was held in Beijing. The Western Gas Transmission Line 2 starts from the Horgos port in Xinjiang in the west, extends to Guangzhou in the south, and reaches Shanghai in the east; it passes through 14 provinces, municipalities, and autonomous regions. The total length of the main pipeline and its 8 branch lines is 9,102 kilometers. The pipeline is connected to the Central Asian Gas Pipeline in Horgos, with a total length of over 10,000 kilometers. It will transport approximately 30 billion cubic meters of natural gas annually from Central Asia to eastern and southern China. The West-East Gas Pipeline II is another strategically important long-distance gas pipeline, following the West-East Gas Pipeline I project. On the one hand, it is of great significance for optimizing China’s energy structure, ensuring energy security, promoting economic development, and improving people’s lives ； On the other hand, China’s natural gas pipeline network will thus be structured to rely primarily on gas from the west, with a significant portion of that coming from Central Asia. If we consider the issue from the perspective of **energy security**, it becomes necessary for us to explore new pathways for natural gas supply, and the East China Sea and South China Sea, which are richer in oil and gas resources, may deserve our greater attention. 3 **The Energy Bureau was officially established, marking the “first step” in reforming the energy management system. In March 2008, the 11th National People’s Congress held its first session, during which the plan for restructuring state agencies was approved. It was decided to establish an **Energy Committee** and form an **Energy Bureau**, with Zhang Guobao, Deputy Director of the National Development and Reform Commission, serving as the head of the Energy Bureau. On August 8, the **Energy Bureau was officially established and put into operation. Its establishment was the “first step” taken in the reform of China’s energy management system. **The Energy Bureau is a bureau under the jurisdiction of the **Development and Reform Commission**. Its main responsibilities include formulating energy development strategies, plans, and policies, as well as proposing recommendations for relevant institutional reforms ； Implement management of energy sources such as oil, natural gas, coal, and electricity ； Propose policy measures to develop new energy sources and improve energy efficiency in the energy sector ； Carry out international cooperation in energy, etc. The speculation regarding the Ministry of Energy has reached new heights time and again due to the enactment of the fundamental law in the energy sector that has been lacking all along—the Energy Law. On December 3, 2007, the **Energy Office publicly released the draft Energy Law for comments for the first time. The \"Comprehensive Energy Management\" section of this manuscript has been of great concern to the news media as well as experts and scholars. It stipulates that the energy authority under the State Council is responsible for the unified management of national energy affairs. 4 International oil prices experience extreme fluctuations; a fuel tax reform plan is finally introduced. 2008 was the year with the greatest volatility in international crude oil prices. In the first half of the year, international oil prices kept rising, reaching a record high of $147.27 per barrel on July 11 ； In the second half of the year, oil prices dropped rapidly, reaching $35.35 per barrel on December 24, the lowest level in four years. With the sharp drop in international crude oil prices, the long-awaited fuel tax reform plan for our country, which had been in the works for over a decade, was finally introduced. On the international stage, as the global financial crisis deepened and oil speculators such as hedge funds withdrew en masse, international oil prices finally dropped from their peak to a low point, thereby disproving the once-popular theory of a Chinese energy threat. Domestically, the sharp drop in crude oil prices has created an opportunity to implement the fuel tax reform that has been pending for over a decade. The introduction of a fuel tax is undoubtedly of great significance for energy conservation and environmental protection, but no major changes in the pricing system for refined oil products can be seen in its reform proposals. As an important commodity related to the country’s economy and people’s livelihood, the power to set prices for refined oil in our country remains in **’s hands. 5 A severe tailings dam collapse occurred in Xiangfen; the governor of Shanxi Province resigned as a result. On September 8, a dam collapse at the tailings storage facility of Xinta Mining Company in Xiangfen County, Linfen City, Shanxi Province, resulted in 276 deaths, making it the deadliest major accident in China in 2008. The tailings pond involved in the accident belongs to Tashan Iron Mine of Xinta Mining Co., Ltd., located in Xiangfen County, Linfen City, Shanxi Province, and is situated in Taosi Township, Xiangfen County. The total storage capacity of this tailings pond is approximately 300,000 cubic meters, with a dam height of about 50 meters. At around 8 a.m. on September 8, a dam failure occurred at this tailings pond; approximately 200,000 cubic meters of tailings were discharged, carrying along a large amount of sediment. The flow covered a length of 2 kilometers, with a maximum width of about 300 meters, affecting an area of 30.2 hectares. Meng Xuenong, the governor of Shanxi Province, resigned out of responsibility; Zhang Jianmin, the deputy governor, was removed from his position. Xia Zhengui, the secretary of the Linfen Municipal Party Committee, was suspended for investigation. The mayor of Linfen, its deputy mayors, as well as the secretaries of the Xiangfen County Party Committee and the county heads and their deputies were all removed from their positions. Regarding the other persons responsible for this incident, the Shanxi Provincial Party Committee and the provincial authorities will put forward suggestions for handling them ； Those suspected of committing a crime shall be transferred to the judicial authorities for prosecution in accordance with the law. The State Council’s accident investigation team is conducting a more in-depth investigation into the incident, aiming to fully uncover any illegal activities and determine the responsibilities of the relevant entities and individuals in accordance with the law. 6 In the fourth quarter, national electricity consumption showed negative growth, with the economic growth rate declining. According to statistics from the China Electricity Enterprise Federation, national electricity consumption for the whole of October decreased by 2.18% on a year-on-year basis, marking the first time in many years that such negative growth was observed ； In November, the nationwide electricity consumption for the entire economy saw another decline, reaching -8.33% on a year-on-year basis ； It is predicted that electricity consumption will continue to decline in December. This significant transition indicates a risk of a continuous slowdown in the growth rate of our country’s macroeconomy. It is reported that the utilization hours of power generation equipment across the country have already decreased by 200 hours so far this year. The utilization hours of thermal power units have decreased even more. After experiencing rising coal prices at the beginning of the year, power companies are now facing a decrease in the number of hours they can generate electricity, with the extent and volume of their losses continuing to increase. The sharp rise in costs and the rapid decline in electricity consumption are posing unprecedented challenges to the power industry. The Central Economic Work Conference held on December 8 proposed a series of measures, including the implementation of proactive fiscal policies and moderate monetary policies; \"maintaining growth, expanding domestic demand, and adjusting the economic structure\" became the main focus of economic development. The 10 measures introduced by the State Council to boost economic growth, along with a proactive fiscal policy and a moderately loose monetary policy, play a decisive role in stimulating electricity demand. 7 Private oil companies intend to sue the two state-owned giants; antitrust actions here serve more as a symbolic gesture. After the Anti-Monopoly Law came into effect, on October 12, private oil companies that had for years been constrained by those two oil giants in terms of access to oil sources filed lawsuits against CNPC and Sinopec in order to protect their rights through legal means. In the first half of the year, due to the continuous rise in international oil prices and a shortage of oil domestically, private oil companies faced the dilemma of running out of fuel. The National Development and Reform Commission, in conjunction with the Ministry of Commerce, issued notices in March and August respectively, requiring the two oil companies to treat private oil enterprises equally and to sign long-term supply contracts with them. But the two major oil companies did not follow the documents; \"private oil companies went to these oil companies with the documents, but there was no possibility of negotiation.\" Either they refuse to provide it on page 3 of 3, or they offer it to private oil companies at a price higher than the wholesale price, without providing **”. Preliminary survey data from the China Petroleum Trade Commission for 2008 showed that there were 663 private petroleum wholesale enterprises nationwide, two-thirds of which went out of business; there were 45,064 gas stations, one-third of which closed down, and over 10,000 enterprises suffered losses. Representatives of private oil companies said that they demand that the two major oil companies strictly implement the issued documents and sign long-term supply agreements with private enterprises. Legal experts believe that anti-monopoly actions taken by private oil companies are more symbolic in nature. 8 China’s development of new energy sources has attracted worldwide attention, as it represents the most effective and feasible solution to the energy crisis. In 2008, oil prices fluctuated wildly, serving as a vivid lesson for the energy industry. Developing new clean energy sources that can replace traditional fuels such as oil and coal as soon as possible has become an \"urgent task\" to ensure **energy security and support the development of the national economy**. Among the 4 trillion yuan in investment plans that have been announced one after another, there was no surprise in the inclusion of plans to develop new types of clean energy; natural gas, nuclear energy, and hydroelectric power have become priorities for development. At the end of 2008, a number of clean energy projects began construction, such as the three nuclear power plants in Fuqing, Fujian, Fangjiashan, Zhejiang, and Yangjiang, Guangdong, with a total investment of over 130 billion yuan. On December 12, a press conference on the strategic cooperation between Goldman Sachs of the United States, CDH Investment, and Kinglong Group was held in Beijing. Goldman Sachs and CDH Investments invested $100 million to acquire 28% of the shares in Huangming Solar. Zhang Yi, Managing Director of Goldman Sachs (Asia) LLC, stated clearly: “We remain optimistic about investing in China’s renewable energy sector.” ”Renewable energy in China has seen rapid development in recent years. According to the plans of the National Development and Reform Commission, by 2020, the share of renewable energy in China’s total energy consumption is set to rise from 16% to 21%. 9 Energy companies are accelerating their restructuring; large-scale integration within the industry has become an inevitable choice. In 2008, there were continuous discussions regarding the consolidation and restructuring of energy companies in China. On February 28, Daqing Oilfield Co., Ltd. and Daqing Petroleum Administration Bureau were reorganized and integrated. This business integration and professional restructuring represent significant decisions taken in line with the overall reform strategy aimed at integrated, intensive, and specialized development; they are also important strategic steps toward establishing a comprehensive international energy company ； In July, Jizhong Energy Group Co., Ltd., resulting from the integration and restructuring of Jineng Group and Fengfeng Group, was officially established. Its overall strength ranks it among the top 10 coal enterprises in the country ； On December 5, seven large coal and chemical enterprises in Henan Province joined forces and were reorganized to form China Pingmei Shenma Energy Chemical Group Co., Ltd. and Henan Coal and Chemical Industry Group Co., Ltd. A prominent issue in China’s economic development is the excessive fragmentation of its industrial structure. Even large enterprises are relatively small in scale compared to those abroad, and their technology and equipment are relatively backward, putting them at a disadvantage in international competition. From the perspective of the trends in the capital market, large-scale integration within the industry is an inevitable choice for China’s economic development. On December 22, China’s first coal-based synthetic oil demonstration project, the \"Shanxi Lu’an Coal-Based Synthetic Oil Demonstration Project\", which features independent intellectual property rights, began producing oil. This marks a significant achievement and breakthrough in China’s efforts to convert coal into oil on an industrial scale. The main processing units of China’s first demonstration plant for indirect coal liquefaction have now entered the stage of actual operation. The Shanxi Lu’an Coal-based Synthetic Oil Demonstration Plant relies on the \"Industrialized Slurry Bed Technology for the Synthesis of Coal-based Liquid Fuels,\" which was developed independently by the Shanxi Institute of Coal Chemistry under the Chinese Academy of Sciences, as its core technology. It is a continuation project of the \"863\" High-Tech Program and major projects under the Knowledge Innovation Program of the Chinese Academy of Sciences. This pilot plant has an annual production capacity of 160,000 tons, with its main products being diesel, liquefied petroleum gas, naphtha, and a small amount of blended alcohol fuel. Previously, the **National Development and Reform Commission issued another document requiring all regions to strengthen the management of coal-to-oil projects. The document stipulates that, in addition to suspending the approval of other coal-to-oil projects going forward, the existing projects that have been approved (with the exception of two projects owned by Shenhua Group) but yet to be implemented must undergo technical evaluations before they can proceed. Planned by: Li Yuanyou; Written by: Chen Weiying. Reproduced from China Enterprise News. This post was last edited by yangruyiyantai on 2009-4-19 at 14:02. Note: $ # $ $