Nuclear powerhouse | Features | The Australian
This week's China deal may prove to be a watershed in our attitude to uranium exports. Joseph Kerr reports
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April 08, 2006
AUSTRALIA has the world's richest deposits of uranium, the most important ingredient for nuclear power generation as well as for making nuclear weapons.
We're very good at digging it up and sending it overseas for other people to use. But we're not the best in the world, and as the ink dries on the deal stitched this week allowing uranium exports to China, offering the potential for us to double our export volumes, some are saying it's time to stop holding Australia back, raising the question of how safe the whole deal is.

Australia could be pretty much the undisputed leader in exporting uranium. The Uranium Information Centre says it is one of the most common elements, but this country has the most accessible mass deposits of any place in the world, with 30 per cent of the uranium that can be dug up for less than $US80 ($110) a kilogram. Kazakhstan has 17 per cent of the world total, followed by Canada with 12 per cent and South Africa with 8per cent. Of the cheapest uranium - that costing less than $US40 per kilogram to recover - we have 40per cent of the world total.

But we're not the leader. We're second on the uranium export list behind the Canadians. Canada produced 11,597 tonnes in 2004, compared with Australia's 8982 tonnes. The gap has been narrowing, but Canada has held a substantial lead over Australian production for nearly two decades.

Australia exports much more coal than it does uranium. In 2005, we sold 11,215 tonnes of uranium oxide worth $573 million overseas, less than one-twelfth of the $6.96 billion worth of thermal coal we exported. Indeed, uranium is a tiny fraction - only 1per cent - of Australia's vast mineral and energy export sector.

In a sign of how potentially powerful uranium is on the world energy stage, Australia's much smaller export of uranium packs in more energy than the masses of coal we sold overseas. The energy value of all that coal was only 3068 petajoules, but the relatively tiny amount of uranium we exported in 2005 was worth nearly double that: 5300 petajoules.

And its significance to the growing powerhouses of China and India cannot be understated. China plans to install about 40 1000-megawatt nuclear reactors by 2020 as its power demands quadruple and it tries to shift away from its dependence on energy resources blamed for greenhouse gases, such as coal. That could provide about 6 per cent of China's energy needs (1.5 times Australia's total electricity production). If that power were to be produced by greenhouse-polluting methods, it would generate as much CO2 as Australia produces each year.

This week the two governments signed two agreements that together allow Australian uranium to be exported to China. Set alongside Chinese Premier Wen Jiabao's comments calling for significant breakthroughs on a China-Australia free trade agreement, to be reached within two years, the deal sets the scene for a huge increase in exports.

The energy we export through uranium is about 1.5 times Australia's domestic electricity production and supplies about 14 per cent of the power generated internationally from nuclear sources: about 2per cent of the world's electricity production.

We're not the world leader, agrees Geoff Prosser, the chairman of a parliamentary committee looking into further opportunities for Australian uranium exports. "Australia was at the forefront of nuclear technology in the 1950s and '60s [with] world-recognised and respected physicists," Prosser says. "Effectively we have dropped the ball completely, because we don't have an industry now."

There are only three mines in operation - Ranger, Olympic Dam and Beverley - with a fourth, South Australia's Honeymoon, not yet operational despite having government approval since 2001.

Prosser believes the potential for increasing Australian uranium exports to China in coming years as the two countries work on a free trade deal is big: potentially $1 billion a year in extra exports.

He says China has an enormous appetite for power. "We have the opportunity to [service] that market and we're dumb if we don't do it." If we don't grab that opportunity, Prosser says, Canada will.

He says there has been a fundamental shift in the way nuclear energy is viewed. "We've been surprised by the realisation that if you want clean energy with zero emissions, nuclear is the only option. It's time for Australia to awaken from its slumber."

Locally, the key constraint has been the Labor Party's no-new-mines rule, which blocks new mines as long as Labor governs the states. As originally formulated, the policy limits Australia to three operating uranium mines at a time. Now it blocks any new mine from being opened.

Engineer John White, who chairs the Government's uranium industry framework, says the policy has stopped mining exploration despite the industry being profitable.

"It's an industry which we would probably say has been in the doldrums because it has been constrained by the no-new-mines policy imposed by the state governments," White says.

Opposition Leader Kim Beazley has been criticised for refusing to dump the policy ahead of the ALP's next national conference in April 2007, despite waning support from state premiers.

Industry Minister Ian Macfarlane says: "Beazley is really outside the Labor Party tent on this issue, with only the vehemently anti-business Anthony Albanese standing naked in the cold beside him."

Internationally, however, the critical constraint on Australia's ability to sell its uranium is the worldwide desire to stop the spread of nuclear technology and weapons. It is potentially such a dangerous substance, once enriched far beyond its natural state, that its trade and use internationally are bound by special rules.

As a result of a web of multilateral and bilateral deals between the countries that export and use uranium, the International Atomic Energy Agency plays a critical role in monitoring the use of uranium and nuclear technology in the hope of stopping the spread of nuclear weapons even as more countries turn to nuclear power.

Before this week's China deal, Australia had forged 19 bilateral agreements with countries that wanted to import our uranium, although some - including Egypt and The Philippines - have never been fully activated. The agreements place certain requirements on countries importing Australian uranium.

The most important element is that Australian uranium be used only for peaceful purposes, such as power generation and medical applications, and not for warfare, either in bombs or in depleted uranium munitions.

The key mechanisms for ensuring that those agreements are honoured - that Australian uranium is not diverted to China's weapons program, for example - are inspections by the IAEA and accounting rules that require shipments to be monitored and tracked as they are used in the nuclear fuel cycle.

The IAEA's inspection regime has been questioned this week: can it ensure China plays by the rules?

Only a tiny fraction of its inspections budget is applied to the declared nuclear-weapons states (the US, Britain, China, Russia and France), with the rest dedicated to stopping the spread of nuclear materials to non-weapons states.

Only selected Chinese facilities will be open for inspection, with weapons' sites off limits, raising questions about whether China might divert Australian uranium into bomb-making.

However, John Carlson, the director-general of the Australian Safeguards and Non-Proliferation Office, says it isn't in China's economic interests to break the rules and the consensus is it stopped production of fissile material for weapons in 1991.

Only about five tonnes are needed for a warhead, Carlson says, compared with 200 tonnes to run a power plant for a year. "The uranium that weapon states need for their weapons programs is tiny compared with what they need for nuclear power," he says. "China has got plenty of uranium for its weapons program in the past."

And Australia would only conclude an agreement if it was confident China would stick to the rules. "Why would it cheat?" Carlson asks.

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