CGN and Kazatomprom extend nuclear fuel collaboration2 February 2015 by Steve Kidd
It is a comprehensive agreement, covering strategic co-operation in uranium resources development, nuclear fuel production, peaceful uses of nuclear power, and transporting uranium products through China and Kazakhstan.
One aspect of the agreement that has received wider attention is that it also envisages the establishment of a joint venture to produce fuel assemblies in Kazakhstan for Chinese nuclear power plants. Fuel assembly manufacturing output is expected to reach at least 200 tonnes of heavy metal annually (sufficient for the annual reloads for 10 reactors, each 1000MW capacity) with further expansion of production possible later (particularly if it can reach the market of third countries).
The deal ought to be mutually beneficial. For CGN, it diversifies its sources of fuel fabrication, particularly as it has long been frustrated in its quest for a stake in China's domestic fuel cycle industry, where China National Nuclear Corporation (CNNC) holds a virtual monopoly. The wider cooperation deal may also provide an entry point for long-mooted reactor projects in Kazakhstan. For Kazakhstan, it strengthens its ties to China's otherwise essentially closed (apart from uranium supply) nuclear fuel market. The agreement is another attempt at developing domestic fuel fabrication capacity, as previous efforts with France (AREVA) and Russia, or with CNNC, have been frustrated for one reason or another.
The deal builds on agreements struck six years ago between Kazatomprom and both CGN and CNNC, envisaging Kazatomprom selling fuel pellets from its Ulba facility into the Chinese market in exchange for granting CNNC and CGN equity stakes in various Kazakh uranium mines. CGN took a 49% stake in the Semizbai-U joint venture with Kazatomprom to develop two Kazakh uranium projects, namely Semizbai in the north of the country and Irkol in the south. The joint venture with CGN has gone well, and both mines are producing at planned rates.
CGN also buys a much larger quantity of uranium from Kazakhstan (as indeed does CNNC) on long-term contracts, both from Kazatomprom but also from the other highly successful mining joint ventures there. In mid-2014 Kazatomprom said that 55% of Kazakh uranium production was exported to China, but in 2014 as a whole, China imported 21,294tU and Kazakhstan led the way with 14,295tU, or 67% of the total. There is therefore already a very close relationship between China and Kazakhstan, which appears ripe for further development.
In exchange for the uranium investment, CGN has purchased UO2 fuel pellets from Ulba, which lost its major customer in 2008 when Russia stopped purchasing pellets. In 2010, CNNC subsidiary China Jianzhong Nuclear Fuel (CJNF), which operates the company's Sichuan-based fabrication plant, certified the Ulba fuel pellets, allowing them to be supplied to fuel assemblies bound for CGN reactors. The uranium produced by Semizbay-U LLP is converted and enriched in China, then transported back to Kazakhstan to be pelletised, before being delivered to CJNF for fabrication into fuel rods.
The new agreement builds on that arrangement, presumably by taking CJNF out of the equation - and assuming fuel fabrication capacity in Kazakhstan is actually built. It is currently unclear whether the new capacity will be built at Ulba and whether it will provide fuel for CGN's CPR1000 or Hualong One designs (or potentially even the Westinghouse AP1000 design which CGN plans eventually to build). It is also not clear what role (if any) third countries might play, particularly the original reactor vendors.
CGN, with the cash and confidence from its very successful initial public offering in Hong Kong, is seemingly more than ready to invest in the fuel cycle. Following reactor operators in other countries, fuel fabrication is an obvious area. The Kazakh deal can be regarded as a major step after years of frustrated fuel cycle ambitions, as for years the company has been trying to push back against CNNC's domestic fuel cycle monopoly.
CGN's previous plan to get further into the domestic fuel cycle was the planned joint venture with CNNC to build a massive fuel cycle complex that would include new conversion, enrichment and fabrication capacity. This China Nuclear Fuel Element Co (CNFEC) plant at Daying Industrial Park in Heshan and Jiangmen city, Guangdong province, would have had capacity of 1000tHM by 2020. Construction was due to start in 2013, but in July the plan to use this location was abruptly cancelled. This was apparently due to local protests, although there have been some claims that they provided CNNC with a convenient excuse to abandon a project in which it had little interest, as it would have allowed a local competitor into this valuable business.
One further possibility covered in the cooperation agreement is for CGN to get involved in Kazakhstan's planned reactor programme. Given the good relations between both sides, this is an area of expertise where CGN can definitely help Kazakhstan. The country has no operating reactors, but the BN-350 fast reactor at Aktau operated on the shore of the Caspian Sea until 1999. Since then, there have been various plans to establish a reactor programme, but until now they have come to little.
As new nuclear energy legislation was being negotiated in January 2015, the Kazakh Energy Minister announced that a reactor would be built at an established site at Kurchatov, and a second one would be built at Balkhash if energy demand justified it. A Westinghouse design was being considered for both and negotiations with Toshiba for supply of a Westinghouse AP1000 reactor have been reported.
Originally the Kurchatov site was earmarked for a Russian reactor, but this project seems to have gone cold.
It is often forgotten that Kazatomprom is a 10% shareholder in Westinghouse, alongside the majority owner Toshiba. The Kazatomprom link has strengthened the company's upstream links for fuel supplies, and has also brought Kazatomprom more fully into the industry mainstream, with fuel fabrication in particular. It would seem logical that if the CGN-Kazatomprom fuel fabrication facility is built, it would supply any AP1000s built in Kazakhstan. And by then, CGN should have experience of the AP1000 and would be able to help with project management and also reactor operations.