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Australia, China sign uranium deal

By Geoff Hiscock
CNN

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Wen and Howard share a lighter moment in Canberra Monday.

SPECIAL REPORT

CHINA AND ENERGY

• In 2004 China consumed 2.17 trillion kilowatt hours (kWh) of electricity, with consumption projected to rise 4.3 percent per year until 2025.

• China became the second-largest petroleum consumer in 2003. In 2004 it had a total demand of 6.5 million barrels per day (bpd). The U.S. Energy Information Administration (EIA) predicts consumption will reach 14.2 million bpd by 2025.

• Coal comprises 65 percent of China's primary energy consumption. In 2003, 1.53 billion short tons, or 28 percent of the world total, was consumed by China. The EIA predicts growth in consumption will average 6.2 percent per year from 2002- 2005.

• Natural gas currently accounts for only around 3 percent of total energy being consumed in China, but consumption is expected to nearly double by 2010.

Source: Energy Information Administration, CIA World Factbook.

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SYDNEY, Australia (CNN) -- Australia has agreed to sell uranium to China for power generation as part of what Australian Prime Minister John Howard called a "remarkable transformation" of bilateral ties during the past decade.

The uranium deal was concluded Monday in Canberra during a visit by Chinese Premier Wen Jiabao.

Two agreements -- one on uranium transfer and one on nuclear cooperation -- were signed by Australian Foreign Minister Alexander Downer and his Chinese counterpart, Li Zhaoxing.

Downer said the agreements were consistent with Australia's long-term policy of applying safeguards and restrictions on uranium exports.

China wants to use more nuclear energy to power its fast-growing economy and to reduce its energy dependence on coal and oil.

The signing was witnessed by Howard and Wen, who earlier took a walk together to discuss the way the relationship between the two countries is developing.

Howard told a news conference in Canberra that relations between Australia and China had been "transformed" in the past decade.

China is Australia's second biggest trade partner, and already is a major buyer of commodities such as iron ore, coal and copper.

Australia holds about 40 percent of the world's known low-cost uranium deposits and agreed in principle during a visit by Howard to China in April last year to work on a nuclear safeguards agreement that would permit sales of uranium to China for peaceful purposes.

Plans to negotiate the nuclear cooperation agreement with China were confirmed by Downer last August (Full story).

The two agreements signed Monday augment a broader Australia-China free trade agreement that is now under negotiation.

Exploration move

Under a nuclear safeguards agreement, Australia will need to accept Chinese assurances that any uranium exported from Australia would be used for peaceful purposes only, and that it would comply with the international nuclear Non-Proliferation Treaty (NPT).

Howard said Monday he was satisfied the safeguards will be enforced.

China is a signatory to the NPT, while India -- another suitor for Australian uranium -- is not.

But following the historic nuclear agreement between India and the United States reached during the visit to New Delhi earlier this month by U.S. President George W. Bush, there have been renewed calls for Australia to end its ban on uranium sales to India (Full story).

Australia has said it would adhere to its present policy of no sales unless New Delhi signs the NPT. But Howard has left open the door for a later review of that position.

Before any Australian uranium can be exported to China, it will need approval from individual state and territory governments, which are responsible for mining licenses and exploration.

Three mines

There are now three uranium mines operating in Australia -- two in South Australia (BHP Billiton's Olympic Dam and Heathgate Resources' Beverley) and one in the Northern Territory (Rio Tinto's Ranger). Heathgate is owned by the U.S. company General Atomics.

A fourth mine, Honeymoon, also in South Australia, already has approval and could be operating within a relatively short lead time of 18 months, according to the mine's owner, Toronto-based SXR Uranium One..

Olympic Dam, acquired by BHP Billiton as part of its $6.5 billion takeover of WMC Resources in 2005, was visited by China's ambassador in Canberra, Fu Ying, in April of last year, 10 days before Howard's visit to China to announce the start of negotiations on a free trade agreement.

The current buyers of Australian uranium are the United States, with a 39 percent share, followed by Japan and the EU with 25 percent each, South Korea 10 percent and Canada 1 percent.

Total exports are worth about A$500 million ($355 million), but China's entry could see that figure reach A$1 billion ($710 million) by 2010.

One constraint is that the opposition Australian Labor Party, which controls the state and territory governments, has a policy of having only three uranium mines operating in Australia.

However, Howard said Monday that there were signs the "three mines" policy was "already crumbling."

China is already Australia's second-largest trading partner behind Japan. Total merchandise exports grew to A$13 billion ($9.2 billion) in 2004-05, up 30.5 percent from the previous year, driven by 50 per cent increases in iron ore and coal exports and a 57 per cent increase in copper and copper ore exports.

According to the latest Australian government statistics, resources worth about A$7.5 billion account for about 60 percent of total Australian exports to China. Iron ore, alumina, crude petroleum, coal and aluminum top this list.

Later this year 2006, Australia will begin exporting between A$700 million ($500 million) and A$1 billion ($710 million) of liquefied natural gas (LNG) to the Guangdong LNG project annually, during a 25-year period.

China is the world's second-largest energy consumer after the United States and under its plan to diversify away from fossil fuels, aims to quadruple its nuclear energy production by 2020.

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