Premier Li Keqiang, who is also the head of China’s National Energy Committee, presided over three meetings in Zhongnanhai over the last ten days.
In those meetings, he stressed that an unprecedented energy crunch is sweeping much of the world even before the Northern Hemisphere winter season fully sets in, when more electricity and heat will be needed in homes and in factories.
Li called on relevant departments under the State Council, and government at all levels, to work together to ensure that this winter the supply of electricity, coal, crude oil, and natural gas is fully guaranteed, electricity and heating for people’s livelihoods is guaranteed, and the normal operation of industrial and transportation production is ensured.
He also repeated a warning that should a locality suddenly turn off power or shut off heating to residents without prior notice, the official in charge of the local government will be prosecuted for negligence (see SGH 9/30/21, “China: The Power Shortages”).
With no immediate end in sight to the global energy crunch, the State Council then asked the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) to change their briefings on the coal, power, oil, and gas situations to daily instead of weekly.
The following is a summary of the latest of those joint briefings from the NDRC and NEA to the State Council.
With a caveat that institutional tendencies can be to report good news, there does appear to be some slight signs of easing there — better for oil and gas, less so for coal and electricity, but with those also off their tightest levels:
Oil and Natural Gas in “Good Balance”
Amid the current global energy shortage, China’s supply and demand for crude oil and natural gas, according to the NDRC/NEA briefing to the State Council, is in “good balance.” The country’s crude oil inventories have reached four-and-a-half months of imports, and gasoline and other refined oil products are well stocked.
Natural gas production and supply are also in good shape. As of October 14, there were about 174.4 billion cubic meters of natural gas guaranteed for the heating season (which runs from late October to late March), and that is expected to reach 185 billion cubic meters, about 20 billion cubic meters more than for the same period last year.
That includes 27.2 billion cubic meters of natural gas guaranteed for residential usage, which is expected to reach 29 billion cubic meters, about 8 billion cubic meters more than for the same period last year.
Coal and Electricity in “Tight Balance”
Compared with crude oil and natural gas, the supply and demand situation for coal and electricity is in “tight balance.” But that situation is also improving, and it is expected by this commission will reach “basic balance” by the end of this month.
As to specifics, as of October 14, coal inventory levels for all power plants nationwide had reportedly reached over seven days of usage, with 50% of these having stockpiles of more than two weeks, 28% stockpiles of 10-14 days, and about 22% with tight stockpiles still of 7-10 days. Inventories of power plants nationwide are expected to reach normal levels by the end of the month.
For perspective, as reported the week before, on October 7, about 7% of power plants were facing severe coal storage inventories of less than seven days, and the week before that, on September 28, that number was an alarming 19%.
According to this report, as of October 14, daily coal output nationwide had reached 12 million tons, an increase of 800,000 tons over October 7, and 1.6 million tons over September 30, registering the highest level since February this year. The country, they pointedly note, is expected to produce more than 1 billion tons of coal in Q4, a record high.
No Need for Higher Oil Imports for Now
In the words of a senior official in Beijing, China’s power crunch is not an isolated case — it comes against the backdrop of global power shortages and supply chain disruptions – but it should ease a bit more towards the end of the month.
Another official notes that recent power restrictions are being only applied to certain regions, and its impact on the overall economy is controllable. The electricity and coal distribution situation remains problematic, nevertheless.
A senior NDRC official contrasts the tight electricity and coal dynamics with China’s supply and demand for crude oil, which is more balanced:
“Gasoline, diesel and kerosene are in sufficient supply in all regions of the country and there is no shortage. Conservatively speaking, China’s current total crude oil stockpiles, including the SPR, state-owned commercial crude oil reserves, and private commercial crude oil reserves, have reached about 140 days of net imports. We have stable crude oil suppliers and long-term contracts such as with Russia, Saudi Arabia, and Oman. We do not need and will not temporarily increase crude oil imports in the next few months.”