Platts - Wednesday, January 18, 2006 http://www.platts.com ------------ NRPA says 23 canisters with cobalt-60 still missing Stockholm (Platts)--17Jan2006 Norway's military still can't account for 23 cylinders with radioactive cobalt-60, the Norwegian Radiation Protection Authority (NRPA) said yesterday. In all, 354 cylinders were missing; the problem came to light when a number were first discovered last November at an industrial scrap heap in northern Norway. Cobalt-60 is used to help adjust sensitive measuring instruments. NRPA officials said they consider the military's inability to account for the cylinders extremely serious and that prolonged exposure to cobalt-60 could be deadly. Military officials have said they will set up a system to register radioactive material, NRPA said, but did not explain why registration was not already required. Brent jumps $1.10/bbl on Iran nuclear, Nigeria supply London (Platts)--17Jan2006 IPE Brent crude futures rose sharply early Tuesday in London on Nigerian crude production outages and international concern about Iran's nuclear program. The February Brent contract on the Intercontinental Exchange's changed hands at $64.21/bbl at 1105 GMT, up 102 cts from Monday's settle. Brent had jumped as much $1.10/bbl in early trading. European, Russian, Chinese and US officials agreed to convene a meeting at the International Atomic Energy Agency on Feb 2. The meeting will address how to handle Iran's nuclear program. Iran's economy minister said Sunday oil prices could rise to unexpected levels if sanctions were levied on Tehran. "Any sanctions in the current situation would be more detrimental for the West than for Iran," Davoud Danesh-Jaafari told state television. In Nigeria, a militant group behind the attacks on the country's oil infrastructure said it aimed to totally destroy the country's capacity to export oil. The International Energy Agency report out Tuesday also impacted prices. "Fund buying and the latest IEA report also fueled the bullish sentiment," one London-based broker said. Global demand increased by some 1.3% in 2005 and should grow by 2.2% in 2006 as demand rebounds in the US and China, the IEA report said. Meanwhile, non-commercials, which are primarily comprised of hedge funds, added 7,823 contracts of crude futures and options, as of Jan 10, the Commodity Futures Trading Commission data showed. Non-commercials were long 62,133 contracts of crude futures and options, and short 722 lots of futures only. The buying kept the active front-month contract well bid above the $64/bbl level. Commercials, which are comprised of oil companies, refiners and banks were willing sellers, adding 19,070 crude futures and option contracts, leaving them short a total of 56,739 lots. Non-commercials added 4,125 contracts of unleaded gasoline futures and options, leaving them long 32,718 lots. Non-commercials added 2,153 contracts of heating oil futures and options, leaving them long 7,640 lots. For more information, take a trial to Platts Nucleonics Week at http://nucweek.platts.com. UKAEA forms alliance to target UK nuclear clean-up market London (Platts)--17Jan2006 The United Kingdom Atomic Energy Authority, AMEC and CH2M HILL have formed an alliance to target opportunities in the UK's GBP56-bil nuclear clean-up market, UKAEA said Monday. The alliance will initially target selected sites among the UK's 20 civil nuclear sites which are being opened to competition by the Nuclear Decommissioning Authority (NDA), the authority said. Around half of these are expected to be bid by the end of 2008. Beyond the UK market, the partners will explore international opportunities such as Eastern Europe and the former Soviet Union. The move will enable the UKAEA, which has led a significant share of the UK's nuclear clean-up work, to compete on a "new and stronger basis in this evolving market," it said. "UKAEA has led the way in decommissioning in this country, including the complete dismantling of 15 of our 26 research reactors, and accelerated programmes for our sites resulting in very substantial savings in lifetime costs," Dipesh Shah, CEO of UKAEA said. In October 2004, UKAEA announced plans for cleaning up its sites which accelerated the decommissioning by up to 35 years resulting in savings and cost estimates of over GBP1-bil. For more information, take a trial to Platts Nucleonics Week at http://nucweek.platts.com. Nuclear power to be central to German energy summit agenda Berlin (Platts)--17Jan2006 Nuclear power is a key element in the energy strategy of Germany's new economy minister and will be a central topic at the government's energy summit in April, minister Michael Glos told the Handelsblatt energy conference in Berlin Tuesday. The future role of nuclear came under the spotlight with the change of government in the fall of last year, when members of the now leading CDU party said the "atom consensus" framed by the previous SPD-Green party coalition--that aims for the withdrawal from nuclear by 2020--should be reviewed. While Chancellor Angela Merkel said after talks with coalition partner, the SPD, that she planned to uphold the agreement, members of her party, including Glos, have expressed their concerns that the omission of nuclear from Germany's energy mix would spell catastrophe for security of energy supply. Nuclear power covers a third of Germany's electrity demand. Glos told the conference that Merkel's support for the eventual withdrawal of nuclear power had been expressed before the recent 'crisis' when Russia cut off gas supplies to Ukraine, which had thrown the dependence of eastern and western European countries on Russian gas into sharp relief. "The Russian-Ukrainian gas dispute has also newly opened the discussion over the necessity of a reliable energy mix," Glos said. "We have to think about the the role of nuclear. We did not cut the Gordian Knot during the coalition talks," he added. Pointing to the government's aim to raise the share of renewable energy to 20% by 2020, he expressed doubt whether it was reasonable to rely on an increase in the share of gas in power generation. Renewables cover 10% of Germany's energy mix. "If we exit from nuclear, we would have to get the other 80% of out power from the fossil fuels gas, hard coal and lignite. With respect to the turbulence in gas, I really doubt whether such a development is sustainable. Some would say that gas as a scarce material is too precious to be burned for electricity," Glos said. In his view, the increasing demand for gas inevitably drove prices up and there was a price risk despite the potentially positive effects of the planned incentive-based regulation of networks on grid access tariffs. "A longer usage of nuclear energy in power generation would possibly relieve our burden. I do not share the view that uranium may not be available to a sufficient extent for the operation of nuclear power plants," he said, hinting to the recent reservations expressed by the environment ministry that nuclear power was heavily dependent on imports. "Based on the global annual uranium production, the known reserves will last for at about 50 years. And the security of uranium supply is very high when compared to gas and oil." Unlike, oil and gas, uranium is also imported from stable countries, Glos added, such as Canada, Australia and South Africa. In his open position towards nuclear power, Glos said he did not aim to be controversial. Referring to a recent TV debate, he said, "They have out a circle of radiation around me as if I was talking about nuclear rearmament," he said. For more nuclear news, request a free trial to Platts Nucleonics Week at http://www.platts.com/Request%20More%20Information/ German analysts support claim reactors would ease gas demand London (Platts)--16Jan2006 Research by energy economists appears to support the claim by Germany's economics minister last week that, if the nuclear phase-out were scuttled, German demand for imported Russian gas would ease. The forecasts also predict that current plans for wind development will increase the amount of gas needed for grid management. An intense debate about Germany's energy supply security was touched off by the decision of Russian state-owned gas vendor Gazprom on Jan. 1 to abruptly cut off Ukraine's gas supply in the midst of a price dispute. Pronuclear Christian Democrats (CDU/CSU) in the ruling coalition promptly argued for an end to the phase-out to reduce Germany's future dependence on Russian gas (NW, 5 Jan., 1). Social Democrats (SPD) in the coalition government who support the phase-out have since claimed that, because 90% of Germany's imported gas is used for heat, not power, nuclear reactors are no substitute for natural gas. Data obtained by Nucleonics Week from industry consultants, utilities, German statistical organizations, and the OECD International Energy Agency (IEA) suggest that a mix of fossil sources will be called on to supply replacement baseload capacity if and when reactors are shut under the phase-out. However, the data also suggest that during the coming two decades, 70% of European incremental gas demand will be associated with power generation, not heat production, and that arresting the phase-out might reduce Germany's demand for gas-fired capacity for power generation from now until 2025 by about 25 gigawatts. Moreover, experts forecast that, if Germany's plans for forced wind power development?plans inherited from the previous SPD-Green regime?remain on course, by 2020 demand for gas-fired capacity, needed for grid management and reserve capacity, will greatly increase. German dash to gas On Dec. 28, five days before the Russia-Ukraine gas dispute prompted Gazprom to cut off Ukraine's gas supply, Energie Baden-Wuerttemberg AG (EnBW), one of four German nuclear power generators, announced that it had allocated funds to study whether to replace its remaining 4,500 MW of nuclear capacity with two gas-fired plants. The first of four EnBW reactors is slated for closing in 2009. EnBW and Germany's three other nuclear generators, E.On AG, RWE AG, and Vattenfall Europe AG, had began to think about replacing nuclear with gas and coal plants as soon as the companies reached agreement on terms of the national nuclear phase-out in 2000. When German voters in September 2005 failed to elect a government committed to ending the phase-out, utilities stepped up preparations, a Berlin utility consultant said. Until now, most Germans have been comfortable with the notion that imported gas would step in to replace reactors being phased out. All 17 operating nuclear units, comprising 21,366 MW, are to be shut by 2023; one, Obrigheim, has already been shut due to the phase-out. There were good reasons to assume that gas might be a big part of the solution. While in 1994 only 8% of Germany's electricity demand was met with gas, the share of gas in Germany's generating mix has steadily grown to 20% today. Nuclear's share is about 35%. Since 1990, the contributions made by all other major fuel sources contributing to Germany's primary energy supply except gas and nuclear?oil, lignite, and bituminous coal?have declined. Only nuclear and gas are now are generating more power than they were 15 years ago. According to the Arbeitsgemeinschaft Energiebilanzen (AGEB), a statistical agency, nuclear fuel produced 9% more primary energy in 2004 than in 1990. Gas in 2004 produced 42% more than in 1990, as utilities and municipal governments built a fleet of low-cost and efficient combined-cycle plants to take advantage of stable gas prices. While in 1990 gas contributed 15% of Germany's total primary energy, according to AGEB data by 2004 its share had steadily increased to about 23%. Nuclear's share over those 15 years increased from 11.2% to 12.7%, as nuclear units were uprated. All non-gas fossil sources combined during this period declined, however, from 72% to 60%, the data indicate. Phase-out 'has a price' Widespread confidence in Germany that gas would continue its forward march may have vanished after this month's abrupt and brief Russia-Ukraine gas war. According to Klaus-Peter Schoeppner, director of the Emnid opinion research organization, the quickly negotiated settlement between Russia and Ukraine will favor efforts by the polarized German coalition to prevent a new debate over gas-versus-nuclear from bringing down the government anytime soon. "But in the medium term or long term, this is going to be a contentious issue" between the two ruling parties, Schoeppner said. The issue won't be easy for the SPD to manage, experts suggested this week. "For the first time" since the phase-out was promulgated, Schoeppner said, "citizens have the feeling that the phase-out is going to have a price" because alternative fuels, including gas, "are getting expensive." Nonetheless, so far, the two coalition parties remain deadlocked. When Michael Glos, Federal Minister of Economics, asserted Jan. 2 that German reactors would contribute to reducing rising demand for Russian gas, he was promptly echoed by strongly pronuclear CSU leaders and important German industry leaders and industry pressure groups. But Glos' argument was immediately rejected by SPD members in the coalition as well as by officials speaking for consulting groups and federal agencies that worked closely with the previous SPD-Green government. SPD critics in the government pointed out that there could be no simple substitution of nuclear power for gas in the German energy economy because uranium is virtually exclusively an electricity generating fuel. Michael Mueller, a foe of nuclear energy and newly-appointed state secretary in the Federal Ministry of Environment & Nuclear Safety (BMU), responded to Glos' remarks last week by asserting that 90% of the gas consumed in Germany is used for heat, not to make electricity. "Nuclear power is therefore no substitute for gas," Mueller said. Some statistical data, however, show that the Europe-wide expansion of gas in recent years has been spearheaded by the combined-cycle and power market. Studies by the IEA in Paris have concluded that the European Union's 25 states (EU-25) are cumulatively consuming about 450-billion cubic meters (bcm) of gas per year. While the gas share for power generation was small in 1980, now about a third of the gas consumed in Europe is used for power generation, the IEA said. But perhaps more significant for Germany's current gas-nuclear debate is the IEA projection that a full 70% of the incremental gas demand projected from the EU-25 through 2030 will be for power generation. By 2030, the agency says, the EU-25 will need about 750 bcm/y. Of this nearly half?about 350 bcm or 80% of the total gas in use today?will be used to make electricity, the IEA forecasts. Recent research by experts from the Energy Economics Institute (EWI) of the University of Cologne and from Energy Environment Forecast Analysis mbH (EEFA), a Berlin consultancy, appears consistent with the IEA's picture of an EU poised to significantly increase gas-fired power generation. Germany's 17 power reactors are principally baseload generators. EWI/EEFA conclude that, assuming that the phase-out proceeds as planned, and that about 20 gigawatts (GW) of nuclear capacity are decommissioned between now and 2023, through 2030 most of the replacement baseload requirement, and additional demand based on growth, would be met by non-gas fossil sources led by lignite. Only a small amount of baseload capacity in Germany by 2030 will likely be represented by gas-fired plants, EWI/EEFA said, related to some applications of combined-cycle technology. But if the price of emitting carbon rises from about 5 euros (about U.S.$6 currently) per metric ton to Eur 15/MT in 2030, EWI/EEFA experts said, that may be enough to trigger a long-term switch from coal to gas for intermediate-load generation, and adding demand to fuel 25 GW of gas-fired plants that would be brought on line by 2030 to substitute for more polluting carbon fuels. (Carbon allowances currently trade at around Eur 23/MT, but fossil generators get a substantial portion of their needed allowances for free in government allocations.) Still more demand for gas in Germany can be expected to meet peak load, EWI/EEFA said?as a direct result of SPD-Green energy policies during 1998-2005 that heavily subsidized renewable energy production using wind turbines. "The more wind power is applied to generate peak power, the more (non-wind) peak power sources must be installed to ensure sufficient reserves and manage the grid," according to an EWI/EEFA report prepared last fall for the German Federation of Industry (BDI). Both the former SPD-Green government and the new SPD-CDU/CSU regime have proclaimed the goal of installing 20 GW in renewables by 2010. Beyond that, the former government set a target of about 40 GW in renewables by 2030. Assuming that these targets are realistic (which many experts doubt), grid management and reserve requirements for peak power in Germany would lead to an increase in installed capacity for peaking plants fueled by gas from about 30 GW in 2010 to more than 50 GW in 2030. Supply side Until now, German confidence that the role of gas in power generation would continue to increase has been supported by the behavior of the gas market and gas suppliers. Germany currently meets about 15% of its gas demand with domestic sources. It relies on three main producers for more than 90% of its imported gas: Russia, Norway, and the Netherlands. Very small amounts are imported from Denmark and the U.K. From the early 1980s until now, gas vendors such as E.On?which acquired Ruhrgas AG last year?have argued that Russian supply has been predictable and stable. Not for long, critics say now, following the Russia-Ukraine gas feud. Otto Graf Lambsdorff, long-serving former German economics minister during the period when Germany established and built up its bilateral gas cooperation with the USSR, said last week that a further planned increase in exports from Gazprom to Germany will lead to a dangerous political vulnerability. Last year, then-Chancellor Gerhard Schroeder and Russian President Vladimir Putin agreed to build a new pipeline across the Baltic Sea to allow Germany to import more gas from Gazprom. E.On CEO Wulf Bernotat said Jan. 5, "The fact is that Russia has by far the world's biggest gas reserves," that Germany "will be competing with India, China and the U.S." for access to this gas, and that "it is not a law of nature that Russian gas has to flow to the West." In a presentation to the German Atomic Forum in 2005, Fritz Vahrenholt, a former SPD economics minister in Hamburg and now CEO of a wind power vendor, RE Power Systems AG, displayed slides depicting forecast gas reserves in Europe, North Africa, and western Asia from 1999 until 2025. In 1999, 15 states held gas reserves, led by Russia, Norway, and Algeria. By 2010 12 were left. By 2025, there were just two producers: Russia, with immense reserves, and Turkmenistan, holding a far smaller fraction. Whenever gas prices increased in recent times, German critics accused Ruhrgas and other firms of colluding with Gazprom to suppress competition by controlling pipeline-based trade. A German antitrust investigation of E.On is now apparently escalating. On Jan. 9 E.On failed to meet a deadline set by the authorities for reaching a negotiated settlement. E.On claims the case against it is legally invalid. The antitrust agency says it may now rule E.On's gas supply contracts with German distributors null and void. Thus far, Germany has no alternative to importing large volumes of gas through pipelines. Construction of port facilities for handling liquefied natural gas (LNG) has been opposed by local residents worried about safety and economic interests tied to the pipeline trade. E.On is now planning to build the country's first LNG port in Wilhelmshaven, but the company is only at the beginning of a delicate political approval process and faces an estimated investment cost of Eur 5-billion. A utility official close to the project said Jan. 8 that the political decision for or against LNG in Germany will be a decision by the German public "whether the risk of LNG or nuclear is greater. Until now, nuclear has been seen as the only fuel with a risk." Proponents of widening Russo-German gas trade argue that because Germany is Gazprom's leading customer?it took delivery of 36 bcm last year, while Ukraine took 34 bcm?Russia has no interest in using gas as a tool for political blackmail. But Germany, which last year burned about 100 bcm, is already the world's third biggest gas user, after Russia and the U.S., and is therefore vulnerable to a supply interruption. Last week, the Greens joined their former SPD coalition partner in dismissing Glos' claim that Gazprom's market might was a potential energy security threat. They asserted instead that Putin shut off Ukraine's gas as a response to Ukraine's 2005 sudden political democratization. Lambsdorff and other critics argued that on this point, at least, the Greens were right. Gazprom shut off the gas spigot to Ukraine, its deputy CEO Alexander Medvedev said last week, because the price of $50/1,000 cubic meters was just a fifth of the world market price. However, critics pointed out, Russia's ally Belarus, led by pro-Moscow strongman Alexander Lukashenko, continues to pay just $46/1,000 m3. If the direct Baltic pipeline from Russia to Germany is completed, Lambsdorff said, "in the event that German relations with Russia become tense, we alone will bear the brunt" of a Russian gas threat because no other customers will rely on the pipeline. Ukraine's conflict with Putin was settled quickly last week in part because that affected pipeline also supplied gas to western European states, which pressed Putin to quickly compromise with Kiev. This story was originally published in Platts Nucleonics Week. Request a free trial at http://www.platts.com/Request%20More%20Information/ DOE's Yucca Mountain program to restructure Washington (Platts)--13Jan2006 DOE's Yucca Mountain program will be divided into 13 program offices that will report directly to waste program acting director Paul Golan. Golan announced the major reorganization this week in meetings with the program's federal employees. He told Platts yesterday that the reorganization is aimed at increased accountability, noting that DOE's naval nuclear propulsion program has a similar structure. Initial reaction by some sources outside the department, however, was skepticism. Some questioned whether a highly technical program with 13 offices reporting to one individual would be effective, saying they believed such a structure could become cumbersome. The reorganization is expected to go into effect in one or two months, said DOE spokesman Allen Benson. US DOE to reorganize Yucca Mountain program into 13 offices Washington (Platts)--13Jan2006 The US Dept of Energy's Yucca Mountain program office is to undergo a reorganization aimed at increasing the program's accountability, the waste program's acting Director Paul Golan told its employees this week in meetings. Under the reorganization, the program is to be divided into 13 offices that will report directly to Golan. He told Platts Thursday that DOE's naval nuclear propulsion program has a similar structure. Some sources outside the department, however, initially greeted the reorganization with skepticism. They questioned whether a highly technical program with 13 offices reporting to one individual would be an effective structure. The reorganization is expected to go into effect in next month or two, said a DOE spokesman. --Elaine Hiruo, elaine_hiruo@platts.com For more information, take a trial to Platts Nucleonics Week at http://nucweek.platts.com. NRC review of Harris plant finds no immediate concerns: Progress Washington (Platts)--13Jan2006 Progress Energy on Friday said US Nuclear Regulatory Commission investigators sent to the company's Harris nuclear plant in North Carolina have not identified any security concerns that require the company's "immediate attention." NRC last week said it planned to send inspectors to the plant near Raleigh to evaluate security concerns raised by the North Carolina Waste Awareness & Reduction Network and the Union of Concerned Scientists, who in December said armed guards at the facility alleged that security has been "pervasively undermined by the plant owner and its security contractor...and that the plant currently has a number of particular vulnerabilities that must be corrected immediately." Progress on Monday said it planned to conduct its own investigation into the charges. In a statement Friday, Progress Chairman and CEO Bob McGehee said that the NRC inspectors had completed the on-site portion of their investigation. "While the NRC has not completed its assessment and provided us with its conclusions, the inspectors did not identify any concerns requiring our immediate attention while on-site. Once complete, we will act immediately on any insights the agency may provide," McGehee added. For more information, take a trial to Platts Electricity Alert at http://electricityalert.platts.com. NRG wins US NRC approval to acquire stake in South Texas nuke Washington (Platts)--13Jan2006 Merchant generator NRG Energy Inc, which in October announced plans to buy Texas Genco LLC for $8.3-bil in cash and assumed debt, Friday said it had received US Nuclear Regulatory Commission approval to take ownership of Texas Genco's 44% stake in the South Texas nuclear power. With NRC approval in hand, Princeton, New Jersey-based NRG said it expects to close its acquisition in the week of Jan 30. NRG, which owns merchant generating capacity in the Northeast, South Central and Western US, will acquire Texas Genco's 11,000 MW of generation in the Electric Reliability Council of Texas. For more information, take a trial to Platts Nucleonics Week at http://nucweek.platts.com. ------------