Thursday, September 15, 2005

China's Uranium Search Attracts Interested Sellers

September 15, 2005

SHANGHAI -- As China moves to line up uranium supplies to feed its planned nuclear-power expansion, it is facing little resistance, sparking 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 is part of a plan to become less dependent on crude oil and to 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, though 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 gigawatts.

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

This renewed interest in nuclear power comes as uranium production from mines satisfies just 60% of global demand. The rest comes from 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 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 noise 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," said Steve Kidd, director of strategy and research at the World Nuclear Association, a not-for-profit advocacy group. "U.S demand is less certain. China is already happening."

And while the administration of U.S. President George W. Bush has been strongly supportive of the use of nuclear energy in America, it still needs to persuade 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, Mr. Kidd said.

China's known uranium reserves stand at 70,000 metric tons. It now consumes 1,500 metric tons a year, and by 2020 this could soar fivefold. Domestic uranium production provides about half of China's annual needs, according to the World Nuclear Association.

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

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

In addition, KazAtomProm President Mukhtar Dzhakishev said in an email to Dow Jones Newswires that China National Nuclear would take a 30% stake in Kyzylkum, a KazAtomProm unit that has the rights to develop the Kharasan field in the south of Kazakhstan. The field has an estimated 55,000 metric tons of uranium.

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

China National Nuclear declined to comment for this article.


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