Platts - Friday, January 13, 2006
http://www.platts.com

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Iran's 'clandestine' moves on nuclear work 'unacceptable': Bush

New York (Platts)--13Jan2006

Iran's move to resume nuclear research is "unacceptable," and it is
"logical" that Tehran's decision results in the matter being referred to the
UN Security Council, US President George W. Bush said Friday.

"Their behavior, trying to clandestinely develop a nuclear weapon...is
unacceptable," Bush said during a White House press conference with German
Chancellor Angela Merkel.

"We've made it abundantly clear to the Iranians, the development, the
know-how, of a nuclear weapon was unacceptable," said Bush. "And the reason
it's unacceptable is Iran armed with a nuclear weapon poses a grave threat to
the security of the world."

The simmering dispute escalated this week when Iran, against the wishes
of negotiators from the UK, France and Germany, resumed nuclear research
linked to uranium enrichment. Tehran has insisted the work is for peaceful
purposes and denies it is looking to develop a nuclear weapon.

The UN's nuclear watchdog, the International Atomic Energy Agency, would
need to refer the matter to the Security Council. The UK, France and Germany
responded to Iran's move this week by calling for an emergency meeting of the
Vienna-based IAEA.

"I'm not going to pre-judge what the UN Security Council should do," Bush
said during the briefing, televised live on US networks. "But I recognize that
it's logical that a country which has rejected diplomatic entreaties be sent
the United Nations Security Council."

Iran is OPEC's second-biggest oil producer at roughly 4-mil b/d.

--Kevin Saville, kevin_saville@platts.com

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PAEC says Pakistan taking steps toward new reactor construction

Islamabad (Platts)--12Jan2006

The Pakistan Atomic Energy Commission (PAEC) is acquiring land and carrying
out other preparatory work to build a new reactor, as part of a planned
addition of more than 7,000 megawatts of nuclear generation by 2030, chairman
Parvez Butt told Nucleonics Week last week.

Butt confirmed that Pakistan is in discussions with the China Atomic Energy
Authority and the China National Nuclear Corp. to supply at least part of that
new capacity, but the two sides have not gotten to the level of specifying the
size of the deal, he said.

Butt said the land acquisition is taking place near the Karachi site, which
already hosts Karachi-1, a 127-MW PHWR supplied by Canada. Pakistan's two
other nuclear power reactors, only one of which is constructed and operating,
are 300-MW PWRs supplied by China.

The new Karachi reactor is planned to be larger than that, Butt said. China is
assisting in the preparatory work for that unit, he said.

Overall, Pakistan is looking at building 10-12 new reactors and is considering
sites for them along the Indus River and Pakistan's coastline, Butt said.

The guidelines of the Nuclear Suppliers Group (NSG), which China joined in
2004, do not allow exports of reactors and other major nuclear goods to
countries, such as Pakistan, that do not accept "full-scope" safeguards?that
is, IAEA safeguards on all their nuclear facilities.

The deal for China to build the second 300-MW PWR?which, like the first, is to
be at the Chashma site?was signed just before China joined the NSG and
therefore is "grandfathered." But further reactor exports from China to
Pakistan would appear to require a change in the status quo, such as a
revision of or waiver from the group's guidelines.

Under a US initiative, the NSG is considering such a change for India, which
also does not accept full-scope safeguards. US critics of the plans for
increased nuclear trade with India have cited the possibility of a
China-Pakistan deal as an argument against weakening the rules for India.
China has indicated that its support for NSG easing of the rules for India
could be tied to a parallel change for Pakistan.

U.S. officials have acknowledged that Pakistan has approached the US about
making a concession similar to the one being pursued for India, but the US has
said such a deal is not being considered. US officials have cited the
difference in size of the two countries' civilian nuclear programs, as well as
their records on nonproliferation.

However, when asked to comment on the US-sought exemption for India, Pakistani
Foreign Ministry spokeswoman Tasneem Aslam told a weekly briefing in Islamabad
Jan 9, "We would like that the exemption is extended to Pakistan, also."

Aslam said Pakistan is already "talking to a number of countries" about
cooperation in the peaceful use of nuclear energy, including the supply of
reactors. "We do hope that the developed countries would respond positively"
to Pakistan's interest, she said.

Official sources said that the question of supply of US nuclear power plants
to Pakistan would be formally raised during the visit of Prime Minister
Shaukat Aziz to the US, scheduled for later this month.

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Weapons testing study should be made public, says ANA

Washington (Platts)--12Jan2006

A study on health consequences in the U.S. from nuclear weapons testing
conducted here and abroad should be made public, the Alliance for Nuclear
Accountability (ANA) said. The ANA--an umbrella group of local, state, and
national groups concerned with nuclear weapons policy--filed a Freedom of
Information Act request today with the Department of Health & Human Services
(HHS). A draft of the study was circulated in 2002; however, HHS refused to
issue a final version or make policy recommendations based on its findings
until the National Academy of Sciences (NAS) reviewed its technical aspects,
ANA said. It said NAS completed its review in 2003 but that HHS has not
responded to the group's request that it be released. "The report contains
data that will help millions of Americans and their elected representatives
better understand the potential impacts of fallout on the health of their
families," said ANA Director Susan Gordon.

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MARKET UPDATE: Crude nears $65/bbl on Nigeria supply cut, Iran

London (Platts)--12Jan2006

Crude oil rose Thursday, nearing $65/bbl, as an explosion and kidnapping
in Nigeria cut supply and tension between Iran and the West over Tehran's
nuclear work raised worries about flows from OPEC's second-largest producer.

Royal Dutch Shell shut down some 220,000 b/d in Nigeria as the UK, France
and Germany were preparing for talks Thursday on Iran's move to resume nuclear
research. Britain and the US say the dispute is likely to end in Tehran's
referral to the UN Security Council, which can impose sanctions.

"A lot of this price move is because of Iran," said Bruce Evers, an
analyst at Investec Securities in London. "Also, there is still a lot of money
coming into oil and commodities."

February crude futures on the New York Mercantile Exchange were up 61 cts
at $64.55/bbl as of 1350 GMT, having earlier risen as high as $64.77. In
London, Brent crude was 76 cts higher at $62.93.

Most of the world's oil producers are pumping crude at full stretch to
meet rising demand, leaving little in reserve to make up for losses and making
prices more sensitive to real or threatened supply breaks.

In Nigeria, Shell shut down 100,000 b/d of production after an explosion
Wednesday on a pipeline feeding the Forcados export terminal, said Aminu
Baba-Kusa, a Nigerian National Petroleum Corp official.

Shell's Nigerian venture, the largest oil producer in Nigeria, also shut
the 120,000 b/d EA offshore oilfield after gunmen Wednesday stormed a boat
servicing the field and abducted four workers, he said.

IRAN CONCERN

The Iran dispute is a concern because Iranian oil exports of 2.4-mil b/d
exceed the reserve production capacity in other countries. Saudi Arabia and
other nations could not meet the shortfall if Iran's oil stopped flowing.

Iran raised the stakes in its row with the West Tuesday by saying it had
removed seals at nuclear research centers. Tehran says its nuclear program is
peaceful, but the US accuses Tehran of seeking nuclear bombs.

Officials from Europe, Russia, China and the US will hold "urgent
consultations" on the Iran nuclear crisis in London next week, Interfax
reported Thursday, quoting Russian Foreign Minister Sergei Lavrov.

NYMEX crude has risen from about $61 at the end of December, helped by
the Iran standoff and a flow of fund money into oil and other commodities such
as metals as investors seek to beat the returns in sectors such as equities.

'UPSIDE RISK'

Slapping UN sanctions on Iran would make it difficult for the country to
import parts to renovate its oilfields, or could lead to more calls in Iran
for a halt in oil exports to protest any such move, analysts said.

The Iran nuclear dispute is an important reason why crude prices, which
hit a record $70.85/bbl in New York last year, could rise in 2006, analysts at
Barclays Capital said in a report Thursday.

"We see the path of relations with Iran as representing a major source of
upside risk for oil prices," analyst Kevin Norrish said in the report. "It is
not too difficult to construct a scenario in which prices will get back past
$70 in relatively short order."

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Near-surface storage considered in French nuclear waste debate

Paris (Platts)--11Jan2006

"Perpetual sub-surface storage" has emerged as an alternative to deep geologic
disposal of high-level and long-lived nuclear (HAVL) waste, the chairman of
the commission conducting a public debate on French waste policy said
yesterday. Georges Mercadal spoke to journalists in Lyon, where the Special
Commission on Public Debate (CPDP) conducting the waste debate is to hold its
final public meeting this Friday. Mercadal said that participants in the
nationwide debate since Sept. 12 had indicated that keeping HAVL waste close
to the surface in engineered concrete storage cells creates less anxiety
because the waste packages can be monitored and repaired, if necessary. The
storage facility would be renewed "every 200 or 300 years," Mercadal said.
Friday's meeting will be followed by an official report to the government by
the CPDP before the month's end.

Enercon to develop plant licensing applications for NuStart
Washington (Platts)--10Jan2006

Enercon Services Inc. will prepare two new plant licensing applications for
the multi-utility consortium NuStart Energy. Enercon said today that it was
awarded a "multimillion-dollar" contract to develop a combined construction
permit-operating license (COL) application referencing two Westinghouse
AP1000s at Tennessee Valley Authority's Bellefonte site and another COL
application for General Electric's ESBWR at Entergy's Grand Gulf. The Tulsa,
Okla.-based energy consulting company will lead a team that includes Burns &
Roe Enterprises, William Lettis & Assoc., MACTEC Engineering & Consulting, and
McCallum/Turner. NuStart anticipates submitting the Bellefonte application in
October 2007 and the Grand Gulf filing in February 2008, Enercon said.

Michigan report does not recommend adoption of a nuclear plant
Washington (Platts)--10Jan2006

New nuclear capacity should not be built in Michigan unless certain conditions
are met, the Michigan Public Service Commission (MPSC) said in a report
released last week. In its report on the state's Capacity Need Forum, an
"electric energy planning effort" that included some 60 organizations, MPSC
staff said it "does not recommend adoption of a nuclear plant until the NRC
permitting process has been used to site one or two new plants and the spent
fuel disposal issue is resolved."

The report's state energy model recommends adding coal-fired baseload
capacity when available. The model assumes a nuclear construction cost of
$2,180 per kilowatt, which is considerably higher than most recent industry
estimates.

The two-volume MPSC report is at http://www.michigan.gov/mpsc/0,1607,7-159--
133381--,00.html.

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http://www.nuclearnews.platts.com.

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MARKET UPDATE: Crude oil rises on Iran nuclear concern

London (Platts)--10Jan2006

Crude oil rose on Tuesday, trading above $63/bbl in New York, as Iran,
OPEC's second-largest oil producer, resumed nuclear research work after a
two-year suspension, raising the stakes in its row with the West.

Iran's move, which the US said it viewed with "serious concern,"
heightens the risk of Tehran being brought before the UN Security Council for
possible sanctions. The UK and Russia also expressed unease.

"Iran has the potential to get quite serious," said Mike Wittner, global
head of energy market research at Calyon. "The overriding factor since we've
come back from the new year is new financial money coming into commodities."

February crude on the New York Mercantile Exchange was up 50 cts at
$64.00/bbl as of 1515 GMT, after earlier gains in electronic trade. Brent
crude in London was 37 cts higher at $62.38.

Iran Tuesday said it had removed seals at its nuclear research centers,
paving the way for the resumption of work. The country says its nuclear
program is peaceful, but the US accuses Tehran of seeking nuclear bombs.

    The White House said Tuesday that Iran was risking a "serious escalation"
in the dispute.  "Any resumption of enrichment and reprocessing activities
would be a further violation of Iran's agreements with the Europeans,"
said White House spokesman Scott McClellan.

'MONEY COMING IN'

NYMEX crude has gained about 5% so far in 2006 as investors pour money
into oil and other commodities such as base metals, seeking to beat the
returns available in sectors such as equities.

"There's a lot of money coming in and a lot of money searching for a
home," Wittner said. "Commodities are still viewed as an attractive asset
class compared to other asset classes."

Tuesday's rally followed a drop in crude prices on Monday, when traders
focused on warmer-than-usual weather in the US, the world's biggest oil
market, that would dent heating fuel demand.

The concern about Iran comes on top of an expected drop in output of
benchmark North Sea Brent crude that traders said helped support prices, and a
spell of cold weather in Japan, the world's third-largest oil consumer.

Daily output of Brent is likely to fall almost 6% next month to 214,285
bbl, the loading program showed Tuesday. Total production is scheduled at
6,000,000 bbl over the 28-day month.

"With the weather still cold in other key consuming countries, notably
Japan, plus strong transport-driven demand and a number of problems that are
contributing to lower crude oil supplies, price risk looks skewed to the
upside for now," Kevin Norrish, analyst at Barclays Capital, said in a report.

--Alex Lawler, alex_lawler@platts.com

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http://globalalert.platts.com.

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Three Canadian parties oppose nuclear revamp, Liberals neutral

Washington (Platts)--10Jan2006

The Ontario Clean Air Alliance, citing a new survey, said that most of
Canada's political parties oppose having its federal government subsidize the
rehabilitation of Ontario's older nuclear reactors.
The Toronto-based OCAA said that its "federal election questionnaire"
also found that most of Canada's parties support the development of new
east-west transmission lines to facilitate the delivery of hydroelectric power
from province to province.

The environmental group, which opposes nuclear power, said that Canada's
NDP, which was formerly known as the New Democratic Party, Bloc Quebecois and
Green Party oppose federal subsidies for nuclear power projects in Ontario.
The ruling Liberal Party took a more neutral stance in its response,
stating that it "stands ready to work with Ontario in addressing the
province's energy needs," but that it "is the prerogative of Ontario...to
determine what energy supply mix it will rely upon." The Conservative Party
took no position on the issue.

The OCAA said that the NDP and the Liberal, Conservative and Green
parties all support the expansion of Canada's east-west transmission grid to
permit Ontario to increase its imports of hydro power from Manitoba, Quebec
and/or Labrador.

The Bloc Quebecois said it should be up to each province whether to build
new interprovincial lines.

Federal elections in Canada will be held on Jan 23.

Meanwhile, Ontario is grappling with how best to boost its supply of
electricity. An Ontario Power Authority report issued in December urged the
province to rehabilitate existing nuclear plants, and build new nuclear and
natural-gas-fired plants and wind farms.
The Ontario government also has been working toward expanding the
province's interconnections with Manitoba and Quebec.

For more nuclear stories, request a free trial to Nucleonics Week at
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Oyster Creek to get additional NRC oversight

Washington (Platts)--9Jan2006

Oyster Creek will get additional NRC oversight after receiving its second
"white finding," the agency said today. White is the second lowest level in
NRC's four-level hierarchy, indicating low to moderate safety significance.
The finding "stems from a failure by plant operators" to declare an alert when
the plant's coolant intake was reduced by sea grass accumulation last August,
NRC said. Oyster Creek, operated by Exelon subsidiary AmerGen, is therefore
now subject to additional inspections due to its placement in the "degraded
cornerstone column" of NRC's reactor oversight process, the agency said.

Swiss Axpo delays nuclear plans for gas
Freiburg (Platts)--9Jan2006

Switzerland's Axpo has for the moment shelved plans to build a new
nuclear power plant in favor of a CCGT unit, a spokesman for the company said
Monday.

"We will keep our hands off nuclear at the moment because it doesn't make
sense, but are now looking into building a combined heat and power plant,"
said the spokesman.

Axpo, one of the big power generators in Switzerland, is carrying out a
feasibility study on two 400MW blocks, which would initially serve as an
intermediate solution to cover an expected shortage of power from 2012.

"From 2012, we urgently need capacity, and because a nuclear unit would
need about 20 years to be built--15 years of political debate and five for
building work--we are looking at gas," said the spokesman.

Axpo would only consider building a new nuclear unit if parliament gave
long-term planning security, including the possibility to dispose of nuclear
waste in Switzerland. That decision is to be made by the government this year.

The Swiss nuclear forum meanwhile said a new reactor of 1.2-1.6GW
capacity would cost about SFr3.6-bil to SFr4.8-bil (about $3.3-bil) and that
that was a competitive figure compared with other source of energy generation.

The Swiss nuclear watchdog HSK meanwhile said Monday Swiss nuclear units
were in top condition in 2005, having ben safely and correctly operated in the
period under review. Switzerland generates about 40% of its demand with
nuclear units and 60% from hydro plants.

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Progress addresses US NRC inspection of security at Harris plant

Washington (Platts)--9Jan2006

Progress Energy Monday said it is launching its own internal
investigation of security at its Harris nuclear generating plant after the US
Nuclear Regulatory Commission last week said it is sending inspectors to the
plant near Raleigh, North Carolina.

NRC said its inspectors, one from NRC headquarters and two from Region 2,
will look into security concerns raised by the North Carolina Waste Awareness
& Reduction Network and the Union of Concerned Scientists. The groups said
last month that armed guards at the facility alleged that security "is
pervasively undermined by the plant owner and its security contractor, with
the acquiescence of the US NRC and that the plant currently has a number of
particular vulnerabilities that must be corrected immediately."

Progress Energy Chairman and CEO Bob McGehee issued a statement Monday
saying that when the allegations were made "we launched an immediate internal
investigation. While we continue to look at a few of the specific allegations,
we have confirmed that the plant is secure and protected." Progress will
cooperate with the NRC inspection and is encouraging "any employee who has
information or concerns about security at the Harris plant to bring those
concerns directly to the NRC team."

The guards alleged, among other things, that Progress Energy and security
contractor Securitas tried to "force" guards to cheat on state certification
tests and that company managers have tried to prevent guards from searching
trucks entering the plant protected area, according to the two groups.

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WGI completes its purchase of Westinghouse companies

Washington (Platts)--6Jan2006

Washington Group International Inc. (WGI) completed its acquisition of two
Westinghouse government services companies last week after it paid British
Nuclear Fuels plc (BNFL) $36.2-million in cash, ending BNFL's rights to future
profits.

WGI and BNFL jointly purchased Westinghouse Government Services Co. and
Westinghouse Environmental Services Co. from CBS Corp. in 1999. WGI began to
buy out BNFL's interest and took control of the companies in 2004. The cash
payment WGI made last week represents an accelerated payment of what the
Boise, Idaho-based company owed BNFL under the 2004 agreement.

Completion of the deal does not change WGI's standing in the government
contract market, because it already controls the two companies, WGI spokesman
Jerry Holloway said this week. It does, however, change the company's profits,
he said.

Under the 2004 agreement, WGI agreed to pay BNFL 40% of the profits from its
existing contracts with the two Westinghouse companies, 40% of the future
profits from the companies' contracts at certain DOE sites and one Department
of Defense site, and 10% of the profits from all other contracts WGI has at
DOE sites through Sept. 30, 2012.

WGI reported the completed acquisition to the U.S. Securities & Exchange
Commission Dec. 30, noting that the cash payment also ends BNFL's financial
obligations, including its contributions to certain pension and retiree
medical plans at the two Westinghouse companies.

The companies are separate from Westinghouse Electric Co., the commercial
energy company that BNFL bought from CBS and now is trying to sell.

Bids are expected from a General Electric-led consortium that involves
financial investors; a Shaw Group team that also includes financial investors;
Mitsubishi Heavy Industries; and Toshiba Corp. BNFL is expected to announce
the winning bid late this month or in early February.

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Due to industry exodus, Finland won't need sixth reactor

Stockholm (Platts)--6Jan2006

Finland will not need a sixth nuclear reactor because electricity -intensive
industry will move out of the country to avoid higher electricity prices
caused by the cost of emission rights, a government-appointed reviewer said in
a report delivered in late December.

Reviewer Mikko Kara argued that the 1,600-MW Olkiluoto-3, under construction
with a 2009 startup target, will be the last major power plant investment in
Finland. Kara is an energy specialist with the Technical Research Center of
Finland (VTT), one of the country's premier research institutions.

Kara said he expects Finnish industry to simply move production to areas
outside the European Union to get away from the cost of its carbon emission
allowance system.

Nevertheless, Kara added that carbon emissions trading is working as designed
and that utilities earning windfall profits from such trading should not be
subjected to further taxes.

"The price of emissions is being (transformed) on the market into the price of
electricity, as was intended," Kara said.

The windfall profits issue has become increasingly contentious in the Nordic
countries, especially in Sweden where electricity generation comes from
nuclear and hydro plants, and in Norway where almost all of it comes from
hydro power plants. Managements at utilities in those countries have
reiterated that there are no windfall profits because their profits stem from
market conditions in a system that rewards generation that does not emit
greenhouse gases.

Kara suggested that instead of a tax, utilities be required to use windfall
profits to maintain reserve power, which has become increasingly expensive in
the fully deregulated Nordic market.

But Finnish Trade & Industry Minister Mauri Pekkarinen rejected that
conclusion. Kara's handling of the windfall issue in the report was "somewhat
thin," Pekkarinen said at a press conference after the report was released.

He added he believes "there are more practical solutions through which a
portion of these unearned profits can be returned to consumers." Pekkarinen
said he wants to have specific proposals on windfall profits ready by summer.

Finland has more diverse generation sources than its Nordic neighbors. But
Kara said that as a result of emissions trading, Finland has cut back on its
use of fossil-fired power, specifically coal, and is importing more power from
neighboring Russia.

Some of that power comes from the Leningrad Nuclear Power Plant, which has
four RBMK units. Some also comes from Russian fossil-fired plants. Opponents
of Russian imports say Finland is contributing to the continued operation of
unsafe nuclear reactors and to production from old conventional plants that
emit more greenhouse gases than Finnish fossil-fuel plants.

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