China Quake Batters Energy Industry

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Unlisted SinoHydro, China's largest hydro company, has announced that close to 100 of its employees have died, 500 have been injured, and 10,000 made homeless following the quake. Estimated property damage: almost $250 million, with $330 million needed for reconstruction, the company says.

Even more alarming is the possibility of one of China's earthquake-weakened dams or reservoirs bursting, says Andrew Mertha, an assistant professor of political science at Washington University in St. Louis, and author of China's Water Warriors: Citizen Action and Policy Change, a recent book looking at local citizens' resistance to new dam construction in China. Even before the quake, Beijing had admitted there are major flaws in many of the country's 87,000 dams. "Roughly 37,000 dams across the country are in a dangerous state," Water Resources deputy minister Jiao Yong said earlier this year, noting that many had been built decades ago.

Recovery Expected

The Zipingpu dam is just one alarming example, says Mertha. It is located just six miles from the quake-devastated city of Dujiangyan. Beijing has admitted the massive dam suffered cracks during the temblor. And although the government has promised the dam is now safe, "When it comes to the actual materials used [in China's dams]—the farther one goes down the food chain, the farther you get from the initial standards that were set," says Mertha. "There is not a whole lot to inspire confidence going forward," he says.

Besides being a center for China's hydropower industry, Sichuan is also an important base for Chinese production of natural gas. The earthquake and its aftermath are also hitting Hong Kong- and New York-listed PetroChina (PTR), which has extensive natural gas operations in Sichuan. Among its 76 natural-gas drilling rigs across Sichuan, 50 have stopped operation. PetroChina has had to cut its daily production from 6 million cubic meters to 4 million cubic meters at one of its biggest natural gas wells in Sichuan.

Still, the hit to the natural gas industry overall longer term is not expected to be too severe, predict analysts. "In the worst case, China's total gas production drops 2.1%," the impact from the loss of the 2 million cubic meters, says Cambridge Energy Research Associates director Yan. "But I don't think they will lose this production for ever," he says, predicting that after a period of reconstruction, China will return to full production.

Roberts is BusinessWeek's Asia News Editor and China bureau chief.