May 5, 2007
Australian uranium to fuel Asia
By Andrew Symon
SINGAPORE - Australia is primed to become the major source of uranium used to fuel Asia's growing nuclear power ambitions after last week's decision by the opposition Australian Labor Party (ALP) to remove age-old restrictions on uranium-mining operations.
Australia is home to the world's largest proven uranium-ore reserves and is currently the world's second-largest producer and exporter after Canada. Australia currently produces 23% of the world's uranium supply, and regionally competes mainly with Kazakhstan, the world's third-largest supplier with the second-largest proven reserves, for Asian markets.
Until now, Australian output had been restricted because of 25-year-old ALP policy that restricted uranium-mining operations to just three mines - albeit one of which, Olympic Dam run by Australia's BHP Billiton, is the largest in the world. While Prime Minister John Howard's conservative Liberal/National Coalition government has no opposition to uranium mining, the country's federal system grants control and power over mining activities to state governments, and the ALP has long held sway in those areas with uranium reserves.
Australian miners, meanwhile, are salivating at the prospects for launching new projects - with an eye on China's growing and Southeast Asia's aspiring appetite for uranium oxide. According to one industry projection, Chinese demand will grow from 1,300 tons per year at present to more than 10,000 tons per year - or equal to Australia's current total annual uranium-oxide exports.
Currently Australia does not export uranium to China, partly because Beijing's nuclear demand is only now surging, and partly because Australia requires contractual assurances that uranium exports will not be diverted to weapons programs. The two sides agreed in April 2006 to facilitate the trade as part of negotiations toward a preferential free-trade agreement.
According to the World Nuclear Association, more than 50% of the world's new nuclear power plants expected to come online over the next two decades will be built in Asia, a heady projection based on publicly available statistics for plants now in construction, planned or proposed. If all those plans come to fruition, Asia's total generation capacity is set to rise from its current level of 80,000 megawatts to 190,000MW. Asia's current operating nuclear capacity is just over 20% of the world's total.
It's still too early to tell exactly how fast - or slow - Asian demand for uranium will grow over the medium term, which as an alternative energy source will no doubt be dictated by global fossil-fuel prices. Nuclear power's advocates argue that it is an obvious answer to reducing the growing amount of greenhouse-gas emissions emerging from Asia, while at the same time cost-effectively meeting Asia's burgeoning electricity demand.
Surging nuclear demand
China and India are largely driving the surge in uranium demand, followed by Japan and South Korea, both of which already have substantial nuclear capacity. Taiwan also has significant nuclear plants, with further units under construction. Elsewhere, there are stated ambitions among non-nuclear countries, including Indonesia, Vietnam, Myanmar, Bangladesh (which recently signed a nuclear-cooperation agreement with China) and most recently Thailand.
India, which aims for a major expansion of its nuclear-power capacity, is currently barred from importing Australian uranium because it is not a signatory to the nuclear Non-Proliferation Treaty. The US, however, is prepared to relax its restrictions on fuel and technology exports to India, although final agreement on terms and conditions have not yet been reached with New Delhi.
For Australia, the prospect of a uranium-export bonanza is a relatively recent phenomenon. Until a few years ago, uranium did not spark much interest in the mining industry, with uranium-oxide prices languishing at less than US$10 a pound. Those market prices have recently skyrocketed to $50 a pound, fueled by both real demand and speculative investments by hedge funds and private-equity outfits.
On the Australian Securities Exchange, there is already a boom under way, with share market prices of small exploration companies boasting uranium prospects sharply rising. One investment adviser, Warrick Grigor, recently told a conference in Hong Kong, "It is amazing how many companies are now reporting 'hot rocks' and radioactive anomalies on their licenses." Recent Chinese investments are also driving up mining shares on the Australian bourse.
Australia seems set to add uranium ore to its already strong and growing list of commodity exports to Asia. At the same time, rising global demand growth is already raising fears of possible shortages and heated political competition for uranium resources. Those concerns were underlined last year during a visit to Kazakhstan by then-Japanese prime minister Junichiro Koizumi when Japanese utilities urged him to lock into a long-term uranium-ore supply contract because of concerns China was sniffing around the same supplies.
The actual realization of the many proposals and plans for new nuclear plants is still a wild card. China is quickly advancing its nuclear-power plans, but among the existing nuclear-power states in East Asia - including Japan, South Korea and Taiwan - the outlook is still mixed.
Japan's nuclear capacity is the largest in the world after France's, and it plans a significant expansion to meet its growing energy needs. This will in part also help Tokyo meet its greenhouse-gas reduction commitments under the Kyoto Protocol. Still, the environmental lobby against nuclear power in Japan is strong, drawing strength from several well-publicized cases of negligence in plant safety in recent years. South Korea also has significant expansion plans, which don't face the opposition seen in Japan.
Radioactive economics
For other countries looking to take the nuclear-power plunge, the cost-benefit economics are not clear-cut. While the actual day-to-day operating costs of nuclear power may be low, the initial capital costs are the highest of any other type of power plant. How these startup costs would be financed in less developed countries such as Indonesia, Vietnam and Bangladesh is still a big question mark.
It's still unlikely that the big multilateral lending agencies - including the World Bank and Asian Development Bank - will move into the business of financing the construction of nuclear plants over cheaper, safer options such as hydropower. Finance, construction and operation of nuclear plants in developing Asian countries would almost certainly need to be secured, led and carried out by Western and Japanese companies possibly supported with government export credit schemes. Russia is also a player and in 2002 was scheduled to build a nuclear test reactor in Myanmar, which was later scrapped because of financing problems.
Meanwhile, nuclear-reactor safety is still a major global concern, especially in aspiring Southeast Asian countries prone to natural disasters, poor governance and terrorist attacks. How high-level nuclear waste should best be stored and treated has not been fully resolved in developed countries, which still tend to bury it deep in rocky geological structures despite the fact it will remain radioactive for tens of thousands of years.
This already looms as a major problem in Europe and North America, where waste is steadily building up from nuclear plants commissioned in the 1960s and '70s. So far, interim measures have sufficed, where for an initial 30-40-year period waste is left to cool off and decay on the plant site or other dedicated sites where special containers are placed in concrete bunkers. As densely populated Asia explores the nuclear option, waste-disposal issues will grow in importance.
Finally, of course, there is the specter of nuclear-weapons proliferation. Once a country has the capability to enrich uranium to levels adequate for nuclear power generation, regional history shows it can often quickly move further to enrich enough uranium to make nuclear weapons. Countries can also gain the capacity to develop weapons through the plutonium produced in the initial uranium-fission process in the power-generation plant. (The North Koreans are believed to have used plutonium harvested from their small research reactors for their controversial nuclear-bomb test last year.)
One modern reactor that uses natural rather than enriched uranium technology is the CANDU (Canada Deuterium Uranium) design. Clumsier to operate, it has not yet won commercial favor in Asian countries that already generate nuclear power, and the Canadian design nonetheless still produces plutonium during its energy-production cycle.
One possible way to balance Asia's nuclear-energy ambitions and the West's concerns about nuclear-weapons proliferation would be the international regulation and control of the movement, processing and disposal of enriched fuels - thereby eliminating the need for now non-nuclear countries to develop their own enrichment facilities. This would also arguably represent a more economic option for developing Asian countries and one favored by the US government and the United Nations' Geneva-based International Atomic Energy Agency.
Such a proposal was first broached in the 1970s, when there was a sprint toward nuclear power due to oil-price shocks. Support for the idea receded in the 1980s and 1990s as fossil-fuel prices stabilized and interest in nuclear power waned. That coincided with rising political opposition to nuclear power in the wake of the 1979 Three Mile Island plant meltdown in the US and the 1986 Chernobyl plant accident in northern Ukraine.
Now, surging Asian energy demand is pushing nuclear power generation into a new age - one that presents big new regulatory challenges. At the Group of Eight meeting in St Petersburg last July, the US and Russia proposed that enrichment be limited to a small set of countries that already possess the technology and facilities. This built on a US initiative called the Global Nuclear Energy Partnership, under which existing major Western and Japanese producers of nuclear fuel and reactor technology would undertake to provide other countries with reactors and fuel for the life of plants with the provision to take back spent fuel.
For Australia, more uranium exports all point toward more complex commercial relations with Asia. Expanded uranium exports will almost certainly be complemented by wider responsibilities and obligations required by the international and regional communities to avoid the risks of nuclear accidents and weapons proliferation.
It's one thing for Australia to expand its exports of uranium oxide to Asia; it's quite another for Canberra to assume a leading regional and international role in dealing with the potential risks and waste those shipments will create in their wake.
Andrew Symon, an Australian, is a Singapore-based journalist and analyst specializing in energy and natural resources.
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