China, the world’s second- biggest energy user, will keep a neutral stance on oil prices after a fuel shortage receded, while it is taking measures to boost coal supplies to ease an electrical crisis, a top official said in August.

China’s top energy regulator, the National Energy Administration head Zhang Guobao says that the tight diesel supply situation has greatly improved, and that petrol- eum suppliers in particular are adequate.

The country had suffered a fuel shortage since July last year, after domestic refineries curtailed output to avoid losses caused by government-controlled fuel prices, as well as soaring crude oil import costs. China was forced to increase oil product prices by as much as 18% in June this year, to persuade refiners to supply more fuel on the domestic market.

Chinese energy use increased by 7,7% last year, above the country’s ten-year average, and the country also accounted for 52% of the world’s energy consumption growth in 2007, driven by economic expansion that reached 10,1% in the second quarter.

To avoid oil supply disruptions, China started construction on four emergency crude oil storage bases in Zhenhai, Zhoushan, and Qingdao on the eastern coast, and in the northern city of Dalian, in 2003. The depots, set to be completed this year, have a total capacity of 16,4-million cubic metres, says Zhang.

Electricity Shortages
The world’s biggest coal producer and consumer says it will take additional steps to boost domestic production of the fuel to help ease the nation’s electricity crisis. China, facing its sixth year of power shortages, relies on coal for almost 80% of its electricity generation.

Coal shortfalls may be reduced when the govern- ment’s measure takes effect, and the trend of rapidly rising prises may also abate, says Zhang.

China capped coal prices in June until the end of this year, to help power producers cope with soaring costs. Four of China’s biggest power companies, including China Datang Corporation and China Guodian Corporation, may have posted combined losses of about $1-billion in the first half of the year.

Government Measures
Fitch’s Asia-Pacific energy and utilities team director Simon Wong stated in August that in order to help power plants, the government could adopt short-term measures, such as granting subsidies through exemption, or rebates of value-added taxes, similar to those granted to State oil companies.

Almost 3% of the country’s coal-fired generation capacity was left to idle in July because of the coal deficit.

Zhang states that the power supply in large metropolises such as Shanghai and Beijing is not affected by the coal shortage, while the government has increased natural gas supplies to power plants in Shanghai.

(miningweekly.com, Sep 5, 2008)