Tuesday, August 17, 2010

China's Ticking Time Bomb

Sometimes statistics collide at just the right time to paint a picture. China’s growing energy needs are resulting in a surge of industrial incidents, and there is little chance that the country’s string of environmental catastrophes are likely to ebb anytime soon.

It’s been one month since the People’s Republic suffered its worst ever oil spill. The disaster on July 16 came at a sensitive time for Beijing, as news emerged that China has surpassed the United States in energy consumption.

The spill happened after two pipelines exploded at an oil storage depot at the port of Dalian run by the China National Petroleum Corp., parent of the world’s most valuable company by market capitalization, PetroChina. As early as 2006, the accident site had been deemed an environmental risk by local authorities.

The incident triggered a spectacular blaze that burned for three days, sending an acrid stench across the northeastern metropolis, a regular winner in polls for China’s most livable city.

Just days after the explosion the International Energy Agency said China was now the world’s largest energy consumer, not the United States. The historic shift comes years ahead of forecasts, as China’s energy use has more than doubled in less than a decade.

The I.E.A. said China’s 2009 consumption of energy from oil and coal to wind and solar power was equal to 2.265 billion tons of oil. The United States used 2.169 billion tons last year. Per capita, though, the Americans still consume five times more energy.

Last year China became the world’s largest car market. In August 2009 alone Beijingers bought more new cars than the whole American population. And yet China has just one-twentieth as many cars per person as the United States, with Mckinsey, the management consulting firm, estimating the number of automobiles on China’s roads will more than triple by 2020.

Beijing quibbled over the I.E.A. numbers. Nevertheless, the statistical haze was brought into sharp clarity days later with figures from China’s own environmental protection ministry.

The number of environmental accidents rose 98 percent in the first six months of the year, according to the ministry, as demand for energy and minerals lead to poisoned rivers and oil spills in the country that is now the world’s largest polluter.
“Fast economic development is leading to increasing conflicts with the capacity of the environment to absorb” demands, the ministry said in a statement late last month. It added that air quality deteriorated for the first time in five years in the first six months of this year.

The last two decades have seen oil supplies become a top national security priority. In January 2009, China’s dependence on imported foreign oil reached 50 percent for the first time. This dependency will only grow — neither China, nor India for that matter, have significant untapped oil reserves to call upon; their economic growth will continue to vastly outstrip their ability to increase domestic oil production. Importing the bulk of their energy requirements is now a fact of life for the world’s two most populous nations.

Between 2004 and 2009 China accounted for fully 40 percent of the total increase in world oil consumption, a key factor in the rising oil prices seen during that period. Beijing knows that any long-term interruption to oil supplies would leave the country hostage to foreign interests, cause chaos in its manufacturing industry and throw millions out of work.

Thus, China has embarked on an effort to build up its shipyards and merchant fleet, and is increasing strategic investment in certain port areas, predominantly in the Indian Ocean. Beijing wants China to be the world’s largest shipbuilder by 2015, and to have 40 percent of all the country’s oil imports carried on Chinese vessels by that date.

A decade ago there was just one shipyard in China capable of building the largest tankers. Now, the country has a dozen yards easily capable of building mammoth ships.

In the year 2000, China’s fleet carried only 6.7 percent of the country’s crude oil imports; that share surged to 20 percent in 2005. The 40 percent goal is likely to be reached in 2011, four years ahead of schedule, as almost fortnightly deliveries of new tankers currently are made to Chinese owners. Yet quality remains an issue — shoddy workmanship makes many Chinese-built ships environmental time bombs.

China also has dramatically sped up the construction of large oil terminals above 200,000 dead weight tons. In the year 2000, there were still only three large oil terminals for the entire country. By the end of 2009, China had built 13 oil terminals of 200,000 dead weight tons and above, with a capacity to handle 282 million tons of oil.

In the space of decade China has built up an incredible array of infrastructure to handle its seaborne oil trade. No one has ever assembled a tanker fleet or string of terminals of such scale in a similar time frame. But such speed does bring problems — as the Dalian disaster shows.

By Sam Chambers co-author of “Oil On Water,” a study of how China is shifting global oil trading patterns. From the International Herald Tribune

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