urg::: CHINA ENERGY WATCH: Energy Search Puts Uranium Into Play

Wed Sep 14 17:09:06 EST 2005

Dow Jones

Wednesday September 14, 12:45 PM
CHINA ENERGY WATCH: Energy Search Puts Uranium Into Play

By Denis McMahon

A Dow Jones Newswires Column

SHANGHAI (Dow Jones)--As China moves to line up uranium supplies to 
feed its planned massive nuclear power expansion, it's facing 
surprisingly little resistance, and is sparking a lot of interest 
from countries with deposits of the mineral.

In the next 15 years, China plans to build as many as 40 nuclear 
plants to supplement the nine it has now.

That's part of a grand plan to become less dependent on crude oil and 
develop a wider range of energy sources - a plan that could have 
China bumping up against the strategic interests of the U.S. and its 
neighbors.

China's search for oil and gas in nearby waters, and as far afield as 
North and South America, has already provoked jostling and political 
tension.

China isn't alone in adopting a long-term nuclear energy strategy, 
although for now its ambitions haven't provoked the hostility from 
the U.S. that similar ambitions in countries like Iran and North 
Korea have.

Japan already has 55 reactors, supplying 30% of the country's total 
energy demand. This should rise to as much as 40% within 25 years, 
under current government planning.

The U.S. aims to generate an extra 50 gigawatts of nuclear power by 
2020, increasing its current capacity by more than 50%. China's 40 
new plants will provide 40 GW.

Russia and India also have ambitious nuclear expansion plans, and 
given soaring oil prices, concerns about the long-term security of 
oil and gas supplies, and worries about greenhouse gas emissions, 
other countries may follow suit.

This renewed interest in nuclear power comes at a time when uranium 
production from mines satisfies just 60% of global demand.

The rest comes from a finite supply of secondary sources, such as 
reprocessed uranium from nuclear weapons.

For now there isn't any serious competition for uranium that might 
pit China against existing and would-be nuclear powers, but going 
ahead, the situation could change.

Australia, Canada, and Kazakhstan, the holders of much of the world's 
readily-extracted low cost uranium have been making positive noises 
about selling uranium to China.

This is despite the politically sensitive nature of the ore, and, in 
the case of Australia, historical barriers against exporting it to 
China.

"China will be the main source of rising demand for the next 10 to 15 
years. U.S demand is less certain. China is already happening," said 
Steve Kidd, Director of Strategy and Research at the World Nuclear 
Association, a not-for-profit nuclear power advocacy group.

While the Bush administration has been strongly supportive of the use 
of nuclear energy back home, it still needs to convince private 
utility companies to make the big investments needed to expand the 
sector.

By contrast, China's central government is able to execute its long 
term plans with little resistance, said Kidd.

     Supply Deals Already Being Done

China's known uranium reserves stand at 70,000 metric tons. Now it 
consumes 1,500 metric tons a year, and by 2020 this could soar 
fivefold.

Domestic uranium production now provides about half of China's annual 
needs, according to data by the World Nuclear Association.

China National Nuclear Corporation, a state-owned firm responsible 
for all aspects of China's civilian and military nuclear programs, 
has been successfully shoring up the country's future uranium 
supplies.

KazAtomProm, Kazakhstan's national atomic company which already had 
been supplying China with uranium, last November signed a long term 
agreement with China's CNNC to produce and process uranium.

In addition, KazAtomProm's President, Mukhtar Dzhakishev, said in an 
e-mail to Dow Jones Newswires that CNNC would take a 30% stake in 
Kyzylkum, a unit of KazAtomProm which has the rights to develop the 
Kharasan field in the south of Kazakhstan. The field has an estimated 
55,000 metric tons of uranium.

Kazahkstan, which shares China's northwest border, sits on 17% of the 
world's uranium reserves.

CNNC declined to comment for this article.

Canada, which built two reactors for China in the 1990s, is a 
potential source as well.

Last week, Atomic Energy of Canada Ltd. and CNNC agreed to cooperate 
on the further development of the Canadian-designed CANDU reactor.

The agreement was signed in the presence of President Hu Jintao 
during a visit to Canada, and Canadian premier Paul Martin.

While the agreement doesn't include sales of uranium by Canada, which 
has 14% of the world's uranium reserves, it certainly fosters closer 
nuclear cooperation.

In July, David Emerson, the Canadian Minister for Industry, told 
reporters in Beijing that "the two countries can cooperate in uranium 
fuels field".

The size of the China market has also spurred interest in Australia, 
which has strict rules requiring safeguards that exported ore won't 
be used for weapons.

Sitting on an estimated 30% of the world's uranium reserves and with 
a vibrant resources trade with China, uranium would seem an obvious 
next export item for Australia.

With Australia pioneering its way to a free-trade agreement with 
China, and its economy rides high on Chinese commodity demand, that 
security concern is being reassessed.

Australia announced last month that the two trading partners had 
formally begun negotiations on an agreement that would ensure 
Australian uranium sold to China would only be used for energy 
generation.

"As the holder of the world's largest uranium reserves, we have a 
responsibility to supply clean energy to other countries - even if, 
so far, we have chosen not to use nuclear energy ourselves," said 
Foreign Minister Alexander Downer in a speech this month.

Downer, one of a number of federal ministers openly supportive of 
uranium sales, said a supply deal with China would enable Australia 
to promote its nuclear safeguard standards throughout the region.

It already has supply deals with Japan and South Korea. Australia 
produces 21% of the world's uranium.

"Business is business.. and if Australia doesn't sell to China then 
somebody else will," said Kidd.