Ranking second in the world in the reserves of natural uranium, produced by using the most up-to-date underground leaching technology, and by production of certain components of nuclear fuel, Kazakhstan is likely to potentially become a key player on the world’s nuclear energy market. Realizing that, the government of Kazakhstan implemented the task to set up a complete vertically integrated complex of the nuclear fuel cycle – from U-mine to nuclear power plant.
Increased oil and gas prices and environmental limitations related to the use of organic fuel pushed the world’s economy to seek alternative energy sources. However, according to experts, only nuclear power engineering can become a real competitor here, since the other energy sources were found to be not so efficient nowadays. 17% of all electric power in the world is generated by nuclear power plants. In some countries, the share of atomic power in the energy sector of the country exceeds 50%, while for example in France it reaches 77%.
At the present time, there are 439 nuclear power reactors in operation in the world, 53 more are under construction, and 136 more are at the stage of design. The USA has the largest number of nuclear power reactors – 104, which provide 20% of the total country’s demand for electric power. Moreover, the Americans are planning to build 32 new ones, not taking into account those which are going to be built on the basis of the nuclear power plants in operation. In general, it is expected that by the mid of the current century about 50 countries will have their own nuclear power plants. China, India and Japan have the most extensive programs of nuclear power plants construction.
In connection with the above-said, it is not surprising that uranium becomes the commodity in most demand in the global economy. The cost of the uranium oxide concentrate, the intermediate product of natural uranium processing into nuclear fuel, following the price fall that had started in June 2007 after the price had hit the record of $138 per pound, again rose by 40% in 2010 to $62.5 per pound (one pound is 0.453kg). Moreover, with the beginning of mass commencement into operation of new atomic power facilities one can expect that the uranium price will go up sharply. Today, the demand for uranium due to the current mining rates is met by less than 60%, while the rest 40% are met due to the stocked resources that were left after the arms race from the past. It is supposed that by the year 2015 these stocked resources will finish, and simultaneously, according to the Morgan Stanley analysts, the world’s demand for uranium is likely to increase by 24%.
Following the dissolution of the USSR, the nuclear sector of Kazakhstan was in full decay. However, the reorganization of it in July of 1997 through the setting up of the national atomic company Kazatomprom allowed overcoming the consequences of the recession. As a new operator of uranium exports, the company began actively operating in the external market. In 1999 the antidumping case had been won in the USA. This allowed starting supplies of uranium to the said country. The National Atomic Company Kazatompom entered the China’s uranium market in 2001 and South Korea’s one in 2002. By mining of natural uranium the company ranked fifth in the world in 2002.
In parallel, the recovery of high-tech productions at the Ulbinsk metalworks in East Kazakhstan Oblast began. In 1999 they launched the production of natural uranium oxide concentrate from the chemical concentrate produced at the Kazakhstan mines. In 2000 the company became an official certified supplier of uranium dioxide powder for General Electric. The company also launched the production of fuel pellets for the RBMK-1000 reactors. Within the next few years the company specialists, having managed to overcome the 20-year technological lag, launched beryllium, tantalum and columbium products production.
In 2003 Kazatomprom initiated a program of large-scale increase in uranium mining from 3,000 tons in 2003 to 15,000 by the year 2010. Owing to this, the company managed not only to restore its previous position in the nuclear market, but bring Kazakhstan into ranking first by uranium mining, reaching 14,000 tons, in December 2009. Moreover, Kazakhstan outstripped heavily its competitors – Canada (more than 9,900 tons) and Australia (8,000 tons). Regarding the 2010 year indicators, according to the preliminary estimate of the company, uranium mining had risen even more by 30% to 17,803 tons. In general, over the past two years uranium mining in Kazakhstan doubled (Chart 1). This was also due to the rich raw material base – our country has 19% of all the explored world’s uranium reserves.
At present, natural uranium mining in the republic is being carried out at 21 mines. They together have the total design capacity of 22,000 tons a year. It is worthy to note that Kazatomprom itself provides directly only one third of all mining in the republic, while the remaining part is provided by joint ventures with Kazatomprom’s participation. The increase in mining is achieved both at the expense of the old mines development and introduction of new mines into commercial operation.
Taking into consideration the estimates of the International Atomic Energy Agency, which forecasts a 51% increase in global demand for energy by the year 2030, the main issue for Kazakhstan, in prospect, will become rather the choosing among numerous customers than the seeking of contracts for uranium sale. So, as of the end of 2010, the portfolio of orders of JSC NAC Kazatomprom was about $17 billion.
Despite that Kazakhstan seems to be now adding greatly to the offer in the world’s uranium market, the matter as to what amount of this energy raw material is needed to be produce is still open. Of the 6,609 tons of uranium production sold by Kazatomprom in 2009, 6,537 tons were sold in the form of the raw material – uranium dioxide concentrate. This is in spite of that fact that the Kazakhstan uranium industry is capable of supplying for export products of a higher added value in the value chain instead of the raw material produce.
Development through cooperation
Of that entire structure of the nuclear military and industrial complex that operated in the times of the USSR, which involved the full nuclear fuel cycle, namely the mining of uranium ore and production of uranium concentrate, conversion, uranium enrichment, re-conversion, and production of uranium dioxide, as well as the production of fuel pellets and fuel assembly used as the energy raw material for nuclear power plants, now only part of that remained on the territory of Kazakhstan. This is the mining of natural uranium, refining (primary treatment), and production of fuel pellets. All the other stages of fuel assembly are carried out outside the republic – in Russia. Meanwhile, in the structure of the fuel assembly cost (at about $1 million), the share of uranium oxide concentrate is just 35%.
Along with that, at present, Kazatomprom is implementing projects aimed at the entire recovery of that cycle. Kazakhstan maneuvers in the uranium sector, and striving to reduce its independence from Russia tries to actively re-orient its uranium supplies to the markets of Europe, USA and China. The republic carries out diversification of markets and partners, actively cooperating with the key players of the nuclear market. With this, the same as in the petroleum sector, the republic actively raises foreign investments.
As of the given moment, among the foreign companies that have invested in the uranium industry of Kazakhstan are Canadian SXR Uranium One Inc., Japanese Marubeni Corp., Chinese Guangdong Nuclear Power Group, British New Power Systems Ltd., and the American trading company Nukem. The points of cooperation are not only uranium mining, but products of a higher added value in the value chain. Kazatomprom strives to become a vertically integrated company, not only a natural uranium supplier.
The company builds up the missing links of the nuclear fuel cycle both through the creation of its own facilities and buying such abroad. In the framework of an integrated program of the Russian-Kazakhstan cooperation approved in 2006, three joint ventures were set up, including the International Center for Uranium Enrichment, supposed to operate on the base of the Angarsky electrolysis chemical plant, where Kazakhstan held a 10% stake. Besides, a separate Russian-Kazakhstan JV with a similar name – the Center for Uranium Enrichment – was set up.
However, those plans remained just plans, and later on an alternative option was proposed for the project of the Center for Uranium Enrichment. So, in July of last year Rosatom entered into a new agreement with Kazatomprom. Instead of the construction of new uranium enrichment facilities in Angarsk as it was supposed earlier, Kazakhstan is being given a certain stake (according to Interfax, a stake at the level of 30% is under discussion) in the most prosperous enterprise of the four uranium enrichment enterprises of Russia – the Uralsk electrochemical plant (UECP). Thus, already this year Kazakhstan will get one more missing link of the nuclear fuel cycle.
Furthermore, the intergovernmental bundle "uranium mining in Kazakhstan – enrichment in Russia" gives not only the possibility to Kazatomprom of becoming a player in the external uranium enrichment services market, but opens ways of cooperation for the two states in the other fields as well. Among them are the setting up of a joint company for selling of natural and reduced-enrichment uranium in the external market, construction of nuclear power plants in Central Asia, etc.
The nuclear energy complexes of Russia and Kazakhstan supplement each other within the entire business chain of the nuclear fuel cycle: Uranium mining in Kazakhstan – Uranium enrichment in Russia – Kazakhstani fuel pellets – Russian fuel elements. Kazatomprom in strategic cooperation with Rosatomprom is developing a project of construction of a nuclear power plant of a new kind, the so-called reactor of mean and low power. The result of this cooperation will become the creation of a nuclear power reactor with energy blocks of the VBER-300 type. This given type of reactor proved its efficiency on the submarines of the 949А Antei project, which the nuclear powered submarine Kursk was a part of. The reactor has the highest international safety grade – “3+”. Following decision-making by the government of Kazakhstan as to the construction of a nuclear power plant in the city of Aktau (instead of the outdated BN-350), now the technical possibilities of implementation of this project are under consideration. It is planned that the construction of the nuclear power plant will be accomplished by the year 2020. Since there is not any industrial kind of 300 megawatt nuclear power plants in the world, this gives the Russian-Kazakhstan reactor real prospects of advancement at a global level, especially in the markets of the countries which have relatively large territories and low density of population. This joint development logically ends the vertical nuclear cycle chain. Simultaneously, the government of Kazakhstan is discussing with the Japan Nuclear Power Company (JNPC) an option of construction of a second nuclear power plant in an East Kazakhstan Oblast.
The possibility of construction of its own nuclear power plant as an option of creation of extra power generation facilities for an economy that faces the problem of power shortage has been discussed in Kazakhstan for more than 10 years. The plans about the term of construction of the nuclear power plant and its location have been changed a few times. Despite the availability of all necessary conditions, atomic energy in Kazakhstan is still not used. Apparently, the matter is that affected by the rapidly growing uranium mining, the selling of which earns considerable income to Kazakhstan, the question of development of its own nuclear power sector in the country receded into the background.
For comparison: In neighboring China, which mines uranium in the volume of almost 20 times less than in Kazakhstan, the first nuclear power plant that was built under China’s own technology in the city of Tsin-chiang generated industrial electrical power as early as 1991. In August 2007, the construction of another nuclear power plant near the seaport of Dalian designed by China’s technology started. The first block of the plant will commenced into operation in 2012. Last year China announced that it would increase the aggregate capacity of its nuclear power plants by 7-8 times by the year 2020. This matches the annual putting into operation of 6-7 new blocks of the nuclear power plant within the next decade.
Returning to the interaction of Kazatomprom with the international players, it is worth noting that the strategy here is based on the principle "raw material in exchange of technologies". In 2008 Kazatomprom agreed with one of the world’s leaders in the nuclear power sector – French Areva, on the setting up of JV KATCO, where Kazatomprom has a 49% stake, and Areva 51%, which will be mining 4,000 tons of uranium a year till the year 2039. Having received access to the Kazakhstani raw material, the French promised technical support in setting up of a fuel assembly production with capacity of 1,200 tons a year at the Ulbinsk metalworks. In response, Kazatomprom started manufacturing fuel pellets for the reactors of French design. In October 2010 the Kazakhstan party managed to achieve new arrangements with Areva; the latter will build a fuel assembly manufacturing plant in the republic.
The Japanese and Chinese companies, also involved into Kazakhstani uranium mining projects, undertook to provide certification of the UO2 powder and fuel pellets manufactured at the Ulbinsk metalworks with the purpose to further sell them in the domestic markets of their countries.
Thus, in the condition of the growing worldwide demand for uranium, Kazatomprom focuses its attention on three major directions: An increase in the raw material base domestically, expansion to other markets, and getting access to uranium enrichment technologies. The company is making a transition from the largest raw material uranium company to a production holding company that provides the entire range of services in the nuclear fuel cycle and manufactures products of a high added value.
That fact that the uranium sector of the republic develops mainly due to foreign investments can be a hindrance to implementation of the atomic ambitions of Kazakhstan. The National Atomic Company Kazatomprom controls just 42% of the uranium resources and some 50% of their mining in the country. This leads to both technological and marketing dependence on the partners to the nuclear fuel cycle projects, and even probability of conflicts between them.
It is clear that foreign companies are interested above all in the access to the raw material base of Kazakhstan, while the obligation by them to provide their technological know-how to Kazakhstan is sometimes secondary, although an unavoidable contract clause. A simple example of that is that at the times when Mukhtar Dzhakishev was President of Kazatomprom, he announced that the feasibility study for the setting up of a joint conversion venture between Kazakhstan and Canadian Cameco would be accomplished by the end of 2007. However, judging by data of the Kazatomprom’s investment memorandum published in 2010, the feasibility study of the JV Ulba-Conversion’s project (a 51% interest by Kazatomprom and a 49% interest by Cameco) with capacity of 12 thousand tons of uranium hexafluoride a year is still not agreed, and the enterprise will start operating at its full capacity not earlier than 2018.
There are other aspects as well. For sustainable development of the nuclear power industry it is necessary to develop not only energy technologies, but other science intensive nuclear technologies also. Here a question arises as to the shortage of human resources in the nuclear power sector. So, the current situation looks sad. The average wages of the scientists within the sector considerably lags the wages of the leading managers at the NAC Kazatomprom or of the relevant level scientists in the advanced countries. All this does not practically give the possibility in a full extent to engage in research and seek advanced solutions related to new materials and technologies.
The training of personnel should go ahead of the programs of development and advancement of technologies, construction of nuclear power facilities and putting them into operation. It requires about ten years of knowledge acquisition and getting competence for a person to become a skilled professional: five years at the university and five years of practice. Considering the plans of Kazatomprom in a long run, it is necessary now to liven up work on the creation of a domestic system of training of new engineers and technicians, including specialists in design and construction of the nuclear power sector facilities, engineers and technicians to work for the nuclear power plants, specialists in radiation material science, nuclear and hydrogen power engineering, controlled thermonuclear fusion, radio ecology, and nuclear medicine.
Structure and assets of the NAC Kazatomprom
JSC The NAC Kazatomprom is the national operator of Kazakhstan on export of uranium, nuclear fuel for nuclear power plants and dual purpose materials. This state-run company, the only shareholder of which is the National Welfare Fund Samruk-Kazyna, is a vertically integrated company. It comprises the below subdivisions: JSC Volkovgeologia, LLC The Gornorudnaya Company (The Mining Company), JSC Ulbinsky Metalworks, LLC MAEK Kazatomprom, LLC Kazatomprom-Demeu, LLC The Kazakhstan Nuclear University, training and methodical centre Geotechnologiya (Kyrgyzstan), Stepnogorskiy integrated mining and chemical plant (in management), and a rolled stock producing plant in China – Ulba China Company Ltd, that uses beryllium bronze as the raw material.
The areas of activity of the company are geological exploration, uranium mining, production of the nuclear fuel cycle products, reactor construction, nuclear power plant construction, non-ferrous metallurgy, production of structural material, power engineering, science, social welfare and personnel training.
The NAC Kazatomprom engages in mining operations, carried out by the company on its own, at seven deposits with the aggregate reserves of 117 thousand tons. Moreover, there are a few joint ventures set up on the territory of Kazakhstan that operate in the field of uranium mining. They are KATCO with the French company Areva and Inkai with Canadian Сamесо. JV Akbastau is set up with Russia to operate at the Budyenovskoye deposit and JV Zarechnoye for development of a deposit with same name. Japanese companies participate in development of the uranium deposits at Mynkuduk, Kharasan-1 and Kharasan-2.
Almost 26,000 people work at the NAC Kazatomprom. Its assets in January-September 2010 increased by 23%, reaching 476.9 billion Tenge ($3.2 billion). The capital of the company rose by 12.5% to 273.96 billion Tenge ($1.8 billion), while net profit by 17% to 33.74 billion Tenge ($228 million).