Oct 18 - International Herald Tribune

Chinese companies are setting their sights on investing in uranium exploration and mining in Australia as sustained high oil prices accelerate China's drive to develop alternative energy sources and reduce dependence on imported fossil fuels.

Senior Australian government officials confirmed on Monday that China asked in February whether Chinese companies would be permitted to identify and exploit uranium deposits in Australia, which has the world's biggest uranium reserves.

The two sides began formal talks in August on a nuclear safeguards agreement under which Australian uranium would be exported to China on the condition that it be used only for peaceful purposes.

China's request to invest in Australia's uranium sector is further evidence that the Chinese leadership is concerned about long- term energy security. Chinese energy companies are also scouring the globe for oil and gas reserves.

"It is part of China's efforts to avoid becoming too reliant on any one energy type and to diversify sources of supply," said Victor Shum, a senior principal in Singapore with the energy consultancy Purvin & Gertz.

"If you have a portion of your power requirement generated by nuclear, there is less of a need for other types of fuel."

As part of a growing trade in minerals and energy between the two countries, the Australian government is expected to support Chinese investment in uranium mining when the safeguards agreement is signed.

The Chinese energy company Cnooc, for example, has already signed agreements to buy stakes in Australian natural gas projects.

Australia's foreign minister, Alexander Downer, told the Australian Broadcasting Corporation on Monday that there was "no reason" China should be excluded from investing in the Australian resources industry.

Long-term supply contracts with China could galvanize Australia's uranium mining industry, which until recently had stagnated amid depressed prices and government restrictions. Uranium prices are soaring as what many experts describe as a "nuclear renaissance" gains momentum. Since 2003, the spot price for uranium on global markets has increased by more than 200 percent, to $33 a pound.

Australia last year exported about 10,600 metric tons of uranium from its three working mines, which accounted for about 22 percent of global production. Government and private sector experts say exports could triple by 2010.

China's request to invest in Australian uranium mines became public on Monday when Australian diplomatic cables released under freedom of information legislation were published in newspapers in Sydney and Melbourne. The cables show that China also wants to increase cooperation in nuclear science and technology.

If China becomes a major buyer, mining industry analysts say, Australia could surpass Canada as the world's biggest supplier of the nuclear fuel.

In a speech on Oct. 10, Mohamed ElBaradei, director general of the International Atomic Energy Agency, said the global share of electricity generated at nuclear power plants had remained constant at roughly 16 percent for about a decade. "But just in the past few years, we have witnessed a significant change in attitudes toward nuclear power," ElBaradei said.

"Fast-growing global energy demands, an increased emphasis on the security of energy supply and the risk of climate change are driving a renewed consideration in many quarters towards investment in nuclear power."

China is planning one of the world's biggest expansions of nuclear power, with output from nuclear reactors expected to increase sixfold by 2020.

Chinese power companies now operate nine nuclear reactors, and as many as 30 new plants could be required by 2020, according to energy experts.

For economic planners in Beijing, the desire to secure reliable uranium supplies and expand nuclear power generation comes at a time when China's soaring oil import bill is emerging as a threat to long- term economic growth.

In the first eight months of this year, China's oil import payments jumped 44 percent, to almost $30 billion, according to official government figures.

China is now the world's second-biggest oil consumer, after the United States. In a report released on Thursday, the ratings concern Standard & Poor's said China last year consumed about 314 million metric tons of oil, of which about 122 million metric tons were imported.

"China's startling increase in car ownership is one factor fueling its extraordinary growth in oil consumption," the report said. "The country's growing industrial base is also sucking up fuel fast."

China's finance minister, Jin Renqing, said on Sunday that Beijing would introduce a range of measures aimed at reducing oil demand and curbing imports.

These included higher taxes on cars with bigger engines, more investment in public transport and a renewed drive to develop alternative sources of energy.

After years of encouraging foreign and domestic investment in the auto industry, China has a growing fuel bill, with cars accounting for about 30 percent of oil consumption. This is expected to rise to more than 40 percent by 2010.

"We encourage automakers to increase production of vehicles with low energy consumption and low emissions," Jin said at a briefing after a meeting of the Group of 20 nations that was held near Beijing.

China Seeks to Explore for Uranium in Australia