February 1, 2008

National Development and Reform Commission

1. The production and supply of coal, power and oil products maintains steady growth

(1) Coal

Industry statistics indicates that during January 1-20 national coal production amounted to 119 million tons, representing a year-on-year growth of 3.4 percent, among which the production of key state-owned coalmines rose by 4.4 percent to reach 63.43 million tons. Coal transportation by train, 46.7 percent of the total, remained normal operation. During January 1-30, coal for power generation transported by train reached 106.26 million tons, growing by 9 percent year-on-year; among which the production of coal for power generation amounted to 66.3 million tons, representing a year-on-year growth of 19.5 percent.

(2) Power

Statistics of the State Grid Corporation Newsletter shows that national power generation in January grew by 13.6 percent year-on-year, a 1.3 percentage points drop compared with the growth in last December. In the first twenty days of January, there was continuous and rapid growth of power load nationwide. Affected by disasters in the latter part of January, power consumption growth declined to some extent.

(3) Oil products

CNPC and Sinopec have made great efforts in increasing refined oil production and keeping their refinery facilities in full-load operation. According to statistics by the dispatching departments, the refined oil production of the two companies rose by 9.5 percent year-on-year in January. The stock of refined oil products stood at 9.06 million tons on January 28, up by 430,000 tons over the end of last year, and the stock has basically returned to the normal level.

2. The Impact of disastrous weather of rain, snow and ice on supply of coal, power and oil and the transportation capacity

Large-scale lasting extreme weather of low temperature, rain, snow and ice has made severe impact on the production and transportation of power, coal and oil products.

(1) Power grids have been destructed badly in the disaster-stricken areas. Due to severe ice coating of the transmission lines, multiple lines in China's southern, central and eastern grids suffered tower crashes and line cuts. The three provincial power grids in Guizhou, Hunan and Jiangxi operated in disconnection with the larger grid and led to blackouts in parts of three provinces. With over 40 percent of power grids destructed, Hunan and Guizhou have initiated Level I Response Program on Large-scale Blackout. The structure of the Hunan provincial power grid has undergone severe destruction. Guizhou's 500kv grid is generally out of order and the province is now operating its 220kv grids in five disconnected sections. Jiangxi's 500kv grid has almost suspended operation and now the province is largely relying on its 220kv grids for power transmission.

(2) The supply of coal for power generation faces severe challenge. With such multiple factors as declining hydropower generation in the low-water season, rising consumption of coal and power in winter, transportation peak during the Spring Festival holidays, ahead-of-schedule holiday arrangement by some local coalmines and etc., the coal stock for direct supply to power plants has dropped from the normal volume of over fifteen days' consumption to about eight days'. On January 29, the generation capacity idle due to coal supply shortage totaled 41.71 GW. Power cuts for restricted use occurred in 19 provinces (regions and municipalities), including Beijing, Tianjin and Tangshan, Shanxi, Shanghai, Zhejiang, Anhui, Fujian, Jiangxi, Shandong, Henan, Hubei, Hunan, Guangdong, Guangxi, Sichuan, Chongqing, Guizhou, Yunnan, Tibet, and Shaanxi. Thanks to the stepped-up efforts on coal transportation by railway departments, the coal stock for direct supply to power plants has seen recovery in small margin for four consecutive days. However, the stock of coal for power generation in central China is still decreasing.

(3) Pressure is mounting on the supply of oil products. The disastrous weather has made a significant impact on the dispatch and transportation of oil products and liquefied gas, especially those via highway in disaster-stricken areas, and there are rising potentials for accidents in some of oil facilities and pipelines. The large-scale blackout in Guizhou has affected the operation of the Southwestern Oil Products Pipeline, posing threats on the supply of oil products for Guizhou and Yunnan markets. The supply of natural gas is tightening in some localities, with restricted or suspended supply of natural gas for production.

(4) The pressure on transportation is also mounting. With the collapse of grids in some areas and the consequent power disruption, the electro- trains running along the Shanghai-Kunming line and Hunan-Guizhou line stopped operation for certain time. Trains missed schedules extensively and a large number of passengers were stranded along the railway lines and in stations. Key expressways were closed in the disaster-hit areas and severe traffic jams took place on some national trunk-line highways and provincial trunk-lines. Fourteen airports had to be shut down temporarily due to heavy snow and ice in middle and downstream areas of the Yangtze River.

The National Meteorological Center forecasts that most of south China will experience a new round of rainy and snowy weather in early February, which is going to bring about great impacts on the transportation, energy supply as well as people's life in these areas. First, currently the supply of coal for power generation is tight and the coal stock of many power plants is below the alarm line. Moreover, the ahead-of-schedule holiday arrangement before the Spring Festival by some coalmines added pressure to the work of ensuring the supply of coal for power generation. Second, the just-normalized supply of oil products is confronted with greater pressure, as people respond to the idle or reduced power generation of thermal units due to lack of coal by turning to the emergent operation of oil-fired units in some areas. Third, along with the new round of rainy and snowy weather, transportation conditions in some southern areas will further deteriorate. The evacuation of stranded passengers, disaster fighting and the transportation of other important commodities, vegetables, meat as well as other fresh products will be greatly influenced.

3. Measures to ensure the supply of coal, power and oil and the transportation capacity

The CPC Central Committee and the State Council pay great attention to the large-scale disastrous weather of rain, snow and ice. Secretary-General Hu Jintao, Premier Wen Jiabao as well as other state leaders made important oral and written instructions on multiple occasions. Recently the Politburo of the CPC Central Committee held a special meeting on the disasters and made arrangements on the work of safeguarding the production and living conditions of the people. In addition, the State Council convened a national videoconference on ensuring coal, power, oil supply and transportation capacity, and made concrete arrangements on relevant work. To further improve the situation and achieve good coordination of relevant work, the State Council decided to set up a commanding center for emergence response related to coal, power, oil and transportation and fighting disasters.

Seriously implementing the arrangement made by the CPC Central Committee and the State Council, relevant local governments and departments took swift actions in a concerted manner, overcome various difficulties and adopted a series of measures to fight disasters actively.

First, coal production is well organized to increase coal supply. The local governments of all coal-producing provinces are actively organizing state-owned national and local coalmines to maintain normal production and ensure basic coal output during the Spring Festival. In addition, these provinces are also organizing other qualified safe coalmines to continue production. All these efforts are made to increase the supply of coal for power generation. Major coal enterprises, including Shenhua Group, China Coal Energy Group and Datong Coalmine Group, have taken the initiative to adjust their Spring Festival vacation schedule and maintain coal production during the Spring Festival holidays. Supervision and inspection on safe production are strengthened to prevent major production accidents.

Second, transportation coordination is strengthened to ensure smooth traffic. While dealing with emergency and fighting with disasters, relevant railway departments control the traffic scientifically, distribute traffic flow in a roundabout way, grasp every minute to transport coal for power generation and disaster relief materials, and evacuate and dissuade staying passengers. Public security and transportation departments make all efforts to open up roads closed down due to disastrous weather. They have also launched the transportation mechanism on fresh agricultural products according to the instruction of the State Council, so as to ensure the transportation of daily necessities such as vegetables, grain and meat.

Third, power generation is deployed rationally to ensure the stable operation of power grids. All power plants are making efforts to increase their coal stock, strengthen equipment maintenance and production management, and ensure stable power generation and normal supply of residential heating. The State Grid Company and the China Southern Power Grid Company have mobilized over 100,000 employees to fight with ice and respond to emergency, providing support to the disaster-stricken areas and turning equipments out of order back into normal operation as soon as possible. Meanwhile, the two companies have made efforts to optimize the operation of power grids, increase cross-region dispatching and ensure the safe and stable operation of power grids.

Fourthly, demand side management is strengthened to ensure orderly power consumption. Plans of orderly power consumption have been implemented for areas with power shortage. According the principle of categorized treatment, top priority is given to meeting the power demand of residential areas, hospitals, schools, railway hubs, telecommunication facilities, financial institutions, agricultural production and other demands concerning public interest and national security. Efforts have been made to promote rational power consumption, power conservation and off-peak power use. Comprehensive measures have been taken to control power consumption by enterprises with heavy energy consumption and emission and by industries with surplus production capacity.

Fifth, production dispatching is strengthened to ensure oil and gas supply. Sinopec and CNPC have further implemented measures decided by the State Council to safeguard the supply of oil products and ensure the production, transportation and marketing of oil products and natural gas. Convenient measures are adopted such as “green channel” and mobile oil refueling tankers. All gas stations of these two companies are open to the public without fueling caps and supply disruption. Priority for fueling is given to trucks that transport vegetables and fresh agricultural products.

Sixth, coordination and dispatching is strengthened to safeguard priorities. In cooperation with other ministries and agencies, the National Development and Reform Commission (NDRC) has launched the Coordinating Mechanism for Economic Operation and put in place a system of daily report on monitoring and information for intensified dynamic surveillance on key areas and sectors. Efforts have been made to strengthen comprehensive coordination among production, transportation and demand of coal for power generation, and priority of coal supply is given to the backbone power plants of the grid. Meanwhile, emergence plans have been further drafted and revised.

Seventh, efforts are taken to fight disasters and organize disaster relief so as to safeguard the people's basic living. All stakeholders have been mobilized in the disaster-stricken areas to repair damaged roads and power, telecommunication and water supply facilities in joints efforts with departments of the State Council. Efforts are made for arrangements of people's living in disaster-stricken areas and minimize losses.

Now progress is being made in all the work of ensuring the supply of coal, power and oil and transportation capacity, responding to emergency and fighting disasters. We are determined to win this uphill battle against the disasters, and will make every effort to minimize losses caused by the disasters, safeguard people's life and property, ensure the stable and normal operation of the economy and maintain the society's harmony and stability.

(China Development Gateway February 1, 2008)