Winter woes

Feb. 25, 2008
Extreme weather tests even the richest, most well-managed economies. So, when winter 2007-08 brought cold and suffering to two countries whose hydrocarbon wealth should have softened the blows, the world took note.

Extreme weather tests even the richest, most well-managed economies. So, when winter 2007-08 brought cold and suffering to two countries whose hydrocarbon wealth should have softened the blows, the world took note. Something else must be going on.

China possesses the world’s third largest coal reserves, behind the US and Russia. Yet extraordinary winter snows there in January and February overwhelmed its energy-delivery infrastructure and caused near riots in major southern cities.

Similarly, Iran holds the world’s second largest natural gas reserves behind Russia: at least 974 tcf proved and probable. Contract squabbles with Turkmenistan reduced natural gas for reinjection into major Iranian oil fields, forced power plants to switch to more polluting fuel oil, and cut the country’s ability to honor export contracts, especially with Turkey.

And Iran’s people shivered and many died in winter storms across its north.

Reserves; disasters

China’s 2005 coal reserves, according to the US Energy Information Administration, were nearly 114.5 billion tonnes, comprising 12.6% of world coal reserves. Most are in the country’s west; most recent and rapid demand growth is along the coastal east.

The world’s largest consumer of coal, China produces around 78% of its electricity from it. The country’s infrastructure to move coal to power plants and produced electricity to markets has not kept pace with economic development, according to the Wall Street Journal. China has even had to import coal, especially for markets along its coasts and in large southern cities.

These weaknesses were on display when mid-January storms exposed the thin supply margin for its power-generation industries and the precarious conditions of its straining infrastructure.

The Associated Press reported snow and ice in some areas snapped power lines, cutting power from the 500-kv transmission line linking the Three Gorges Dam hydroelectric project to the national grid. China’s South China State Grid, which operates the electrical grid in southern China, said repairs to the entire network would not finish until the end of March. In the meantime, customers will see intermittent outages.

The AP cited government data for the 4 weeks of snow and ice storms, saying they killed more than 80 people, leveled 300,000 homes, and laid waste to 222 million acres of crops.

Newspapers and television reports around the world showed key transport systems paralyzed just as millions of migrant workers tried to go home for the Lunar New Year holiday.

Similarly, Iran faces major delivery problems despite its abundance of natural gas. For several years, it has dangled before the world market huge LNG projects to bolster its international standing and bring in much needed cash. Despite occasional announcements, however, none has yet proceeded to construction. (See OGJ’s special report on global LNG beginning on p. 20.)

The country uses much of its natural gas along with imports from Turkmenistan for pressure maintenance at several older oil fields. And it also flows gas to households for heating—which is where winter 2007-08 comes in again.

Turkmenistan, in a contract dispute with Iran in late 2007, first reduced then entirely shut off gas supplies. Reports said dozens of people in remote northern areas died from a cold snap at the same time that drove temperatures to near –25° C.

What is wealth for?

These two energy-rich countries are certainly not the only ones ever to suffer from a conjunction of extreme weather and inadequate delivery infrastructure. And no one takes satisfaction in their peoples’ misfortunes.

What is striking about these events, however, is how neither country was able to marshal its huge energy resources early or quickly enough to alleviate citizens’ suffering.

China might well be excused based simply on the size of the population it must manage; with the possible exception of Russia, no other country has such numbers spread over such distances.

Iran, on the other hand, has neither the population nor the distances to hamper its efforts. Its international bluster and Western economic sanctions have hampered development of its natural gas to the detriment of its people.

When winter storms hit both regions, neither country’s huge hydrocarbon reserves were able to alleviate suffering.

So what is wealth for?