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Asian Petroleum Review : Jan-March 2011
Floods and explosions also make China's mines the deadliest in the world. Despite talk of limiting production and tougher environmental standards, coal output is surging and China is spending heavily on new explora- tion projects. While investment in renewable energy is set to hit record levels, coal will fuel most of the country's economy for the foresee- able future and policymakers are figuring out how to make better use of it. Coal has supplied more than 70 percent of China's energy for the past 50 years and con- sumption has increased around 10 percent a year since 2000. Routine disruptions in supplies regularly wreak havoc on the country's economy -- power cuts hit large parts of China last month after freezing weather slowed coal deliveries, and worse is ex- pected in January if temperatures plunge. The U.S. Energy Information Administration pre- dicted China will need to add 736 gigawatts of coal-fired capacity by 2035 to meet the require- ments of economic growth and replace retired plants. With each gigawatt of coal-fired generation re- quiring some 2.9 million tonnes of coal per year, those forecasts mean China would not only re- quire massive investment in new plants but also an additional 2.13 billion tonnes a year of coal -- total output last year was an estimated 3.2 bil- lion. That would be a 60 percent jump in coal usage, ruining Beijing's plans to reduce coal's share of total generation to 70 percent by 2020 from 80 percent now. "We don't have a lot of gas. Nor we do have a lot of oil. The only resource that is cheap and we have in abundance is coal, so our economy will have to rely on coal for a long time to come," said Ren Guangxi, President of Hangzhou Haoy- ang Energy Co Ltd. SINKING CITY The Haizhou open-cast coalmine began opera- tions in 1953 and supplied half of Fuxin's coal requirements in the decades that followed, feeding a huge Soviet-built power plant that dominates the city's low-lying, ramshackle sky- line. With miners digging ever deeper for dwin- dling supplies, the mine was finally declared bankrupt in 2005. Satellite photographs of the Haizhou site show a massive crater resembling nothing so much as an asteroid hit. Five decades of intensive exca- vation left an abyss 4 km wide (2.4 miles) and 300 metres deep, along with a legacy of pollu- tion and land subsidence the local government is only beginning to address. The foundations of the city were literally under- mined. Around 100 square km of the city, with 27,000 build- ings and around 78,000 residents, was on the verge of caving in, earning Fuxin the title of "sinking city". While a catastrophic landslide has been averted, much work needs to be done to shore up the mine's embank- ments, said Li Zhao, an official with the local land and resources bureau. "We are still trying to solve the problem. We have to sink big supports into the earth, 10-20 metres deep, and it is a difficult process," Li said. With consumption cuts not yet an option, China aims to burn coal without causing the sort of devastation in Fuxin and other major producing regions. But as older mines like Haizhou reach the end of their lives, produc- tion has inevitably moved elsewhere - - the Fuxin Min- ing Group has already invested in a mine in neighbour- ing Inner Mongolia - - and the curse of king coal spreads wider. Other coal-producing provinces such as Liaoning, Heilongjiang, Shandong and Hubei have faced declin- ing production despite efforts to dig deeper under- ground. As a result, many of these provinces have had to bring in coal from elsewhere in recent years. Developed cities and provinces such as Beijing, Shang- hai, Jiangsu and Guangdong have shut down their own mines, but their coal consumption continues to rise. That has shifted the burden of production to other re- gions such as Shanxi, Shaanxi and Shandong. "Provinces in the east have evolved from coal exporters to importers, and growth of coal production is concen- trated in two western provinces: Inner Mongolia and Shanxi, " said Citigroup's resources analyst Scarlett Chen. As production moves north and west, the strain on China's transportation infrastructure has also in- creased, and the developed east and southern coasts have been forced to rely more on imports, something unthinkable a decade ago. China has relied on its own coal production since the revolution in 1949. Back then, Beijing had no foreign currency and was under an international embargo. It had no choice but to depend on its own coal reserves to fuel growth. Big discoveries of crude oil in the north- east helped restrain coal demand for a while, but total output still reached around 618 million tonnes in 1978, behind only the United States and the Soviet Union. Then came China's "reform and opening up" period, and demand exploded. Chinese government analysts expect annual coal de- mand to reach at least 4 billion tonnes by 2020, 25 percent higher than 2009, even after taking into ac- count unprecedented levels of investment in nuclear, wind, solar, and hydro that the country is likely to see over the period. "You can still smell the soot in the air but believe me, it is now a lot better than before" - Eric Zhang