According to the China Earthquake Networks Center, the earthquake struck at 12:52 p.m. on Sept. 5, with an epicenter of 226 kilometers (about 140 miles) from the provincial capital city Chengdu, including County of Sichuan province.

Sichuan has abundant natural gas and hydro power resources, as well as being a main production base for lithium, aluminum, and silicon, but has struggled with severe summer drought-induced power shortages that have ripple effects on energy-hungry industries, along with a COVID-19 resurgence since August.

From an oil product perspective, analysts predicted the demand for gasoline and gasoil for the rescue works to outweigh the decrease in consumption from COVID-related lockdowns in the province. The government imposed a lockdown in Chengdu on Sept. 1 that was scheduled to run until Sept. 4 but was extended to Sept. 7.

Sichuan's gasoline demand is about 210,000 b/d in general, with gasoil demand at around 195,000 b/d, according to Analytics, constituting a mere fraction of China's gasoline demand of around 3.5 million b/d and gasoil demand of 3.9 million b/d.

Still, according to a refinery source, the quake did not affect the province's only large integrated refining asset, PetroChina's 200,000 b/d Sichuan Petrochemical, in the city of Pengzhou. The source also said the refinery, which has been running with locked-in staff at the site since the start of this month due to COVID controls, was scheduled to work at 85% of capacity in September, compared with 88% in August, against fairly high stocks and weak demand.

Gas and oil production

In the upstream oil and gas sector, both PetroChina and Sinopec said they did not see any interruption in either production at or transmission from their assets in the area.

Sichuan is a large gas producer, with output at 27.84 Bcm in H1 accounting for one quarter of China's total production, according to the National Bureau of Statistics.

However, the province's crude output is relatively small, only at 59,000 mt (or 2,400 b/d) in H1, as compared to that of China of 102.88 million mt (or 4.17 million b/d).

Sinopec’s Southwest Petroleum Bureau said on WeChat Sept. 5 that the epicenter of the quake was approximately 180-300 kilometers away from its main gas fields and working areas, and that no casualties or property loss had been caused.

“Gas production and transmission in the region are currently stable,” it said.

PetroChina has yet to make a public comment, but its oil and gas fields in Sichuan province and neighboring Chongqing city are already farther away and probably suffered no impact.

State-owned oil and gas infrastructure operator PipeChina said on WeChat Sept. 6 that its Lancheng-Chongqing oil products pipeline was operating normally and transporting 20,000 mt/day, and that its natural gas pipeline in the region was operating normally at close to 10 million cu m/day to the Sichuan-Chongqing area.

Power generation

No disruption was reported at the four large hydropower plants located in the epicenter region, local media reported, citing local government officials.

Hydropower represents 85% of Sichuan’s generation mix, and the province is generally an exporter to developed coastal regions such as Shanghai, Zhejiang, and Jiangsu. But production this summer has been badly hit by drought, with power rationing for energy-intensive industrial users announced in August.

Huadian, the state-owned generation utility that owns the 3.78 TWh/year Luding hydropower station in Sichuan, said the facility was operating normally, although at under 50% of installed capacity.

But concerns remain over the impact of a secondary disaster such as mudflow on local hydropower supplies following the quake.

According to State Grid Sichuan Electric Power Company, part of the power supply was affected by the quake, with 43,158 electricity users cut off due to transformers forcefully shutting down and transmission lines tripped. Power supply recovered to 21,922 customers as of Sept. 6.

Aluminum, lithium, silicon

Its production for local primary aluminum smelters and lithium chemicals producers has remained unaffected, with resumption from power shortages still slow due to COVID controls.

Power shortages led most primary aluminum smelters to curtail production in August. Some are gradually resuming the curtailed capacity, but this will take some time due to the technical factors and currently thin margins.

Youngy Co. Ltd, which runs a lithium mine in Ganzi prefecture, said operations had not been affected by the earthquake and that there were no reports of disruption from other operators.

However, lithium chemicals have been relatively more affected by transportation disruption from COVID movement controls, although the key producers have come back online following the power crisis.

Limited impact on silicon production in Sichuan from the earthquake on top of the existing negative factors, albeit it may boost sentiment for a further price uptrend, market sources said.