Interesting numbers
1. (China has more than half of the world's 40,000 large dams-defined
as being more than 15 meters high.)
2. Beijing had admitted there are major flaws in many of the
country's 87,000 dams. "Roughly 37,000 dams across the country are in
a dangerous state,"
===============
China Quake Batters Energy Industry
The mainland's rapid growth is sup****ted by its power grid, but the
May 12 temblor damaged turbine, natural gas, and hydroelectric
producers
Chinese soldiers stand in a dry riverbed, blocked by a landslide
caused by the Sichuan earthquake. Chinese across the country observed
a three-minute vigil on Monday in memory of the quake's victims. MARK
RALSTON/AFP/Getty Images
by Dexter Roberts
May 19, 2008-05-20
http://www.businessweek.com/globalbiz/content/may2008/gb20080519_901796.htm?chan=search
The horrendous scale of the human tragedy from China's massive May 12
earthquake continues to mount. On Monday, sirens sounded across the
nation as Chinese stopped to observe a three-minute period of mourning
in memory of the quake's victims. The death toll may top 70,000, and
the government is preparing to provide food to millions of refugees.
Initially economists were hopeful that the disaster would at least not
have a major impact on China's economic growth (BusinessWeek.com,
5/13/08) since Sichuan province, site of the temblor, is largely
agricultural. However, as the extent of the quake's destruction
becomes more apparent, some are starting to worry about damage
inflicted on the economy. Today Deputy Industry Minister Xi Guohua
said companies had suffered $9.5 billion in damage from the
earthquake.
Hardest hit by has been Dongfang Electrical Corp., whose Mianzhu
(Sichuan)-based subsidiary Dongfang Turbine, China's largest turbine
producer, was virtually wiped out. In a statement released on May 16,
the company said Dongfang Turbine has "suffered severe damage" from
the quake, causing "a serious impact on the manufacturing and selling
of turbines." One-fifth of total revenues of more than $24 billion
last year came from the turbine business. Dongfang, which produces 30%
of China's locally made turbines, estimates direct losses from the
earthquake will reach $1 billion.
Investors have fled: Dongfang's Hong Kong-listed stock has dropped 17%
since the earthquake and its Shanghai-listed shares plunged 10% (the
daily limit) on Monday, the first day of trading after a four-day
suspension. The company "is basically gone. I don't see how they can
resume operation in the next couple of months," says K.F. Yan,
Beijing-based director at Cambridge Energy Research Associates.
"Taking them out will have a major impact [on China's energy
industry]. China will have to buy more [turbines] from abroad."
Power Stations Shuttered
Other companies in the energy sector are also vulnerable, because
Sichuan is a major onshore gas producer and the country's largest
hydropower generating region. The quake's destruction has affected
natural-gas exploration and production and has hit hydropower
operations hard. Sichuan's electricity grid is running at 76% of
pre-earthquake levels, with 27 power stations shuttered, China's State
Power Grip announced on its Web site on May 19.
China can ill-afford severe disruptions to the gas and hydro
industries, which are vital to fueling the country's double-digit GDP
growth. Sichuan supplied some 27% of the country's national gas
production in 2007. While natural gas still only accounts for 3% of
the national energy mix, Beijing plans to raise that pro****tion to 10%
by 2020, with Sichuan's rich reserves playing a key role in that
expansion.
Even as rescue efforts continue, the government has ordered a massive
inspection of oil and gas operations in the earthquake region. On
Sunday, the Water Resources Ministry announced it has sent 25 teams to
begin inspecting hundreds of dams and reservoirs in Sichuan that it
earlier warned were in "dangerous condition."
Heavy Damage to Hydropower
The hydropower sector is likely to suffer the longest-lasting damage.
China depends on hydropower to provide more than 20% of the country's
total installed energy capacity of 722 gigawatts, with national goals
to more than double that by 2020. (China has more than half of the
world's 40,000 large dams-defined as being more than 15 meters high.)
On May 14, the Water Resources Ministry announced that 391 dams were
believed badly damaged. "There are major safety issues right now with
the reservoirs, hydropower stations, and lakes in the earthquake
zone," Minister Chen Lei said in a statement released on the
ministry's Web site. "The area has numerous reservoirs and lots of
damage, and the extent of the danger is unknown."
Unlisted SinoHydro, China's largest hydro company, has announced that
close to 100 of its employees have died, 500 have been injured, and
10,000 made homeless following the quake. Estimated property damage:
almost $250 million, with $330 million needed for reconstruction, the
company says.
Even more alarming is the possibility of one of China's
earthquake-weakened dams or reservoirs bursting, says Andrew Mertha,
an assistant professor of political science at Wa****ngton University
in St. Louis, and author of China's Water Warriors: Citizen Action and
Policy Change, a recent book looking at local citizens' resistance to
new dam construction in China. Even before the quake, Beijing had
admitted there are major flaws in many of the country's 87,000 dams.
"Roughly 37,000 dams across the country are in a dangerous state,"
Water Resources deputy minister Jiao Yong said earlier this year,
noting that many had been built decades ago.
Recovery Expected
The Zipingpu dam is just one alarming example, says Mertha. It is
located just six miles from the quake-devastated city of Dujiangyan.
Beijing has admitted the massive dam suffered cracks during the
temblor. And although the government has promised the dam is now safe,
"When it comes to the actual materials used [in China's dams]-the
farther one goes down the food chain, the farther you get from the
initial standards that were set," says Mertha. "There is not a whole
lot to inspire confidence going forward," he says.
Besides being a center for China's hydropower industry, Sichuan is
also an im****tant base for Chinese production of natural gas. The
earthquake and its aftermath are also hitting Hong Kong- and New
York-listed PetroChina (PTR), which has extensive natural gas
operations in Sichuan. Among its 76 natural-gas drilling rigs across
Sichuan, 50 have stopped operation. PetroChina has had to cut its
daily production from 6 million cubic meters to 4 million cubic meters
at one of its biggest natural gas wells in Sichuan.
Still, the hit to the natural gas industry overall longer term is not
expected to be too severe, predict analysts. "In the worst case,
China's total gas production drops 2.1%," the impact from the loss of
the 2 million cubic meters, says Cambridge Energy Research Associates
director Yan. "But I don't think they will lose this production for
ever," he says, predicting that after a period of reconstruction,
China will return to full production.
Roberts is BusinessWeek's Asia News Editor and China bureau chief.
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