SOUTH AFRICA: U.S. OFFICIAL VISIT PAVES THE WAY

C O N F I D E N T I A L SECTION 01 OF 07 PRETORIA 002956

SIPDIS

STATE FOR NP/NE, AF/S
DOE FOR NE-2.4 AND NNSA/NA-241, NA-243

E.O. 12958: DECL: 06/30/2014
TAGS: ENRG KNNP TRGY SF
SUBJECT: SOUTH AFRICA: U.S. OFFICIAL VISIT PAVES THE WAY
FOR CLOSER BILATERAL RELATIONS IN THE FIELD OF NUCLEAR
ENERGY

REF: PRETORIA 2927

Classified By: Economic Minister Counselor J. Jeff Hartley, Reasons: E.

O. 12958 1.5 (b) and (d)

SUMMARY
--------------


1. (C) Alex Burkart, Deputy Director in the Office of Nuclear
Energy at the Department of State, and Ron Cherry, Director,
Office of International Safeguards at the Department of
Energy (DOE),visited South Africa May 17 to 21 to discuss
advancing bilateral relations in the field of nuclear energy.
Burkart and Cherry participated in extensive meetings with
key officials at the Departments of Foreign Affairs (DFA) and
Minerals and Energy (DME),and with the management teams of
the National Nuclear Regulator (NNR),the Nuclear Energy
Corporation of South Africa (NECSA),PBMR Ltd. (developers of
the Pebble Bed Modular Reactor (PBMR)),and ESKOM's nuclear
power station at Koeberg. There was firm agreement on both
sides to establish a Joint Standing Committee on Nuclear
Energy Cooperation (JSCNEC) and to finalize R&D agreements on
nuclear energy cooperation and nuclear materials safeguard
technologies. The two sides are now considering December 1-3
in Pretoria for the first JSCNEC meeting. South African
officials expressed strong interest in possible collaboration
in a number of areas, including new technology to use low
enriched uranium (LEU) targets instead of highly enriched
uranium to produce Molybdenum-99, a medical radioisotope. In
general, the South Africans were more interested in
collaborating on the energy than on the safeguards side, but
clearly saw the need to collaborate on PBMR safeguards and on
technical activities that would facilitate PBMR licensing in
the United States. A constant theme throughout the week was
South Africa's need for skills development and capacity
building. Reftel provides an overview of visit and reports
key policy developments. This cable provides details of
meetings for technical officials. End Summary.

OFFICIAL DISCUSSIONS
--------------


2. (C) Following a courtesy call with DME Deputy Director
General Nelisiwe Magubane, who expressed full support for
greater bilateral cooperation, Burkart and Cherry met with
the entire staff of the Office of Nuclear Affairs in DME,
including Chief Director Tseliso Maqubela, Director for
Nuclear Energy Haresh Haricharun, Director for Safety Schalk
de Waal, and Acting Director for Non-Proliferation Elsie
Monale. DFA Chief Director for Peace and Security Peter
Goosen joined the second session in the afternoon. The South
Africans made it clear that they were interested in pursuing
closer bilateral relations at the working or technical level.
Maqubela explained that the government had recently affirmed
its decision to support the development of a Pebble Bed
Modular Reactor (PBMR) as part of an overall strategy to
provide a diverse and secure supply of inexpensive energy to
the country. Both he and Goosen stressed that such a
strategy included making maximum use of the country's uranium
resources.

PBMR: A NATIONAL STRATEGIC PROJECT
--------------


3. (C) PBMR, NECSA, and ESKOM (the national electric utility)
each told Burkart and Cherry that the government had recently
declared PBMR a national strategic project and was in the
midst of restructuring its shareholding in PBMR Ltd. The
plan was that "South Africa, Inc." would hold at least a 51
percent share, with other investors taking the rest. The
Department of Trade and Industry (DTI) was about to assume
the lead role for the government, with the Industrial
Development Corporation (a government parastatal reporting to
DTI) assuming the lion's share of equity. ESKOM Enterprises
has led with a 30 percent share of PBMR Ltd., but would
transfer some of these holdings to the IDC, NECSA, and
perhaps the rest to ESKOM Holdings, its parent company. In
the end, the government would pump another USD 100 million
into PBMR Ltd. and DTI Director General Allister Ruiters
would become the Chairman of the Board. This structure would
still allow for significant foreign investor participation,
though the only current foreign shareholder is British
Nuclear Fuels (BNFL). Negotiations with AREVA continue, as
do discussions with the Chinese on possible technological
collaboration.

ENRICHMENT AND NONPROLIFERATION
--------------


4. (C) Maqubela made a point of saying that while fuel for
PBMR would be imported in the short term, South Africa might
want to establish an enrichment plant in the long term.
Goosen made the specific point that South Africa already
possessed enrichment technology and would oppose any idea in
international circles that it be denied the opportunity to
acquire technology needed in the future to enrich locally
mined uranium ore for PBMR fuel. Goosen was quite concerned
that a ban or moratorium on enrichment technology might one
day preclude South Africa from developing it's own technology
to support PBMR. On May 18, Burkart and Cherry met with
Goosen for more than two hours to discuss this and other
issues in greater detail. Goosen clearly wanted to send a
message to the United States that South Africa did not
believe that a ban on the transfer of enrichment technology
would solve enforcement problems surrounding
nonproliferation, and that South Africa was willing to work
with the United States on an alternative solution.


5. (C) NECSA officials were a bit surprised at Goosen's
position when asked about it the following day. They
informed Burkart and Cherry that NECSA no longer possessed
working enrichment technology and that an enrichment plant to
produce low enriched uranium was quite a ways off. NECSA had
no plans to get back into the uranium enrichment business
since it was simply not cost effective to supply only a few
nuclear power plants. In fact, NECSA was awaiting a design
license from NNR to build a smelter to destroy old equipment
from its pre-1990's enrichment program. Furthermore, NECSA
ceased work on Molecular Laser Isotope Separation (MLIS) in
1997 when COGEMA withdrew from cooperation; this work had
been shelved for the next 20 years.


6. (C) Director to the Nonproliferation Secretariat Daan van
Beek joined the discussion with Goosen on May 18 to outline
the structure and function of the Nonproliferation Council,
and explain South African export and import controls on
nuclear, chemical, and biological technology. After giving
some examples of South African enforcement in this area,
Goosen made the point that South Africa greatly appreciated
U.S. intelligence when it came to the enforcement of
nonproliferation laws. "We are not threatened or pressured
by U.S. intelligence." he said, "Rather, we see it part of
our enforcement system, as an asset." He then emphasized
that South Africa viewed nonproliferation as just one side of
a two edged sword -- the other being disarmament, and
ventured a short lecture on whether the United States could
do more on both the nonproliferation and the disarmament
sides. He commented that the U.S. effort to avoid all
reference to the conclusions of the 2000 Nonproliferation
Treaty Review Conference (which he characterized as the
"disarmament review conference") in documents from the recent
Prepcom had, in effect, overwhelmed the U.S. message on
Article VI.

NATIONAL NUCLEAR REGULATOR (NNR)
--------------


7. (C) Also on May 18, Burkart and Cherry visited the
National Nuclear Regulator (NNR) in Centurion, where CEO
Louisa Zondo led her management team in a presentation of
NNR. Zondo explained that the NNR was a relatively new
agency, having been created by the National Nuclear
Regulation Act of 1999 and established in 2000. She stressed
that two key areas for NNR were compliance monitoring and
emergency planning. In addition, NNR was currently
preoccupied with putting into place a waste management policy
and strategy that would govern NECSA's Vaalputs repository.
While NNR had overall responsibility to regulate all things
nuclear, the control of medical sources of radiological
material rested with the Department of Health.


8. (C) Zondo stressed that while NNR was able to access
technical support from security agencies, from a management
perspective it was important for NNR to develop its own
in-house capacity. This would take time. NNR was exploring
training programs with the U.S. Nuclear Regulatory Commission
(NRC) and sister regulatory bodies. To meet current needs,
NNR was looking at bringing experienced South Africans out of
retirement.


9. (C) Zondo characterized the February emergency
preparedness drill at ESKOM's Koeberg Nuclear Power Station
as a success. She said that the NRC observers who attended
had written a favorable report on the exercise, and extended
an open invitation to NNR officials to visit the NRC in the
future.


10. (C) Senior Manager for Nuclear Technology and Nuclear
Suppliers C. Orion Philips then outlined his areas of
responsibility, including the licensing process and risk
control, determining compliance with best practices, the
control of scrap materials, surface and underground mines,
and radon measurement. This included regulatory oversight of
NECSA's Safari reactor safety and safeguards, the production
of Molybdenum-99 (Mo-99),and the licensing change request to
use LEU to produce Mo-99. He was also responsible for waste
management at NECSA's Vaalputs site.

11. (C) Dr. Simnanye Alex Tsela outlined his responsibilities
in the regulatory strategy division, which included the
review of regulatory philosophy, best practices, legislation,
and international collaboration.


12. (C) Mr. G. Clappison outlined his responsibilities as
head of the Power Reactor Division, which included Koeberg
Nuclear Power Station and PBMR compliance with the conditions
of their operating licenses, safety indicators, inspection
programs, and outage inspections. Clappison said that NNR
conducted periodic safety reviews at Koeberg, as well as
physical security reviews at Koeberg, Vaalputs, and PBMR. He
was in the process of reviewing safety and quality assurance
aspects of PBMR designs, and assuring public participation in
the licensing process. In response to Burkart's inquiry
about the absence of a high-pressure containment for the
PBMR, Clappison said that this would be a key licensing
issue. However, NNR did not want to blindly apply light
water reactor regulations to gas-cooled reactors, as the two
technologies were markedly different. Clappison explained
that risk evaluation must be based on assessing phenomenon
that might cause the release of nuclear or other hazardous
materials. Licensing would depend on assessing the risk to a
person of 10xE-8 per year of reactor operation (specific risk
was unspecified).


13. (C) Dr. D. Kgwadi explained that he was in charge of a
group of 18 engineers and scientists that provided support to
the rest of the organization.

NUCLEAR ENERGY CORPORATION OF SOUTH AFRICA (NECSA)
-------------- --------------


14. (C) On May 19, CEO Senti Thobejani presented an overview
of NECSA and how it had changed as an organization since it
was known as the Atomic Energy Corporation. NECSA still
operated the Safari research reactor, but had now assumed a
commercial focus, with commercial sales of medical
radioisotopes, chemicals, and other products and services
generating 80 percent of its income -- four-fifths of which
from exports. NECSA's six divisions included one that
produces radioisotopes for medical applications, one that
produces fluorine based chemicals, one that provides nuclear
commercial services (such as pebble bed fuel manufacture),
one that undertakes scientific research and provides waste
management services, one that manages the 120 buildings at
the Pelindaba complex, and one that provides corporate
services (human resources, financial, and legal). Nuclear
technology products and services included
radiopharmaceuticals, irradiation services, radiochemicals,
radioactive sources, and radiation services. In the medium
term, NECSA hoped to increase its sales of Molybdenum-99, for
which it was currently the world's fourth leading producer,
by a factor of eight. Thobejane thought that the South
African Government would remain NECSA's sole shareholder in
the foreseeable future, but admitted that this could change
someday. He explained that members of NECSA's Board of
Directors were appointed by the Minister of Minerals and
Energy for three-year terms, including the CEO. Thobejane
took office in September 2001.


15. (C) Thobejani said that the government had been
contemplating the creation of a new nuclear waste management
agency (to be born out of NECSA),but decided against it
because the size of South Africa's nuclear industry did not
justify the additional investment. For this reason, NECSA
would continue to fulfill this service for the government.
In return, NECSA would receive approximately $20 million per
year, or 20 percent of its income. This amount would also
cover other services provided to government, such as the
fulfillment of international nuclear safeguards agreements
and limited scientific research. Thobejane explained that
these days most research and development at NECSA was very
much product or service driven and, therefore, closer to
development engineering than to pure research. However, the
Department of Science and Technology and the University of
the Northwest (formerly Potchefstroom University) master's
program conducted limited pure research at the Safari
reactor. Thobejane added that a draft waste management
strategy had been released for public comment, but the
comment period had been extended through June because of the
technical nature of the document.


16. (C) Thobejane commented that NECSA was looking at ways to
rejuvenate its workforce and to develop young nuclear
physicists and engineers. To this end, NECSA had formed
exchange and training partnerships with AREVA and BNFL, had
created sister university partnership with Pennsylvania State
University, and was considering a collaborative program with
Argonne National Laboratory. NECSA's workforce currently
numbered about 1500, down from 6000 in the 1990's.

NECSA's INVOLVEMENT IN PBMR
--------------


17. (C) Thobejane informed Burkart and Cherry that NECSA was
about to intensify its involvement with PBMR Ltd. Until now,
NECSA's goal had been to become the primary manufacturer of
pebble bed fuel. While this goal still held, PBMR Ltd. was
about to become even more important to NECSA because the
South African Government had decided to transfer at least 10
percent of its shareholdings from ESKOM Enterprises to NECSA.
Division Manager Fanie Venter then provided a tour of pebble
bed fuel fabrication under development at a NECSA lab. The
lab's short-term objective was to replicate as much as
possible proven German production methods of TRISO fuel.
This would serve as a measure of technology acquisition, as
well as reduce the risk to PBMR Ltd. Burkart and Cherry
witnessed the production of a handball sized fuel sphere made
of graphite and other layered materials. At this time, no
uranium loading of the spheres was taking place. NECSA
needed a license for working with enriched uranium before it
could proceed with plans to implant 9.6 percent enriched
uranium particles into the core of the graphite fuel spheres.
The current objective was to build the production capacity
to manufacture 270,000 spheres per year, enough to fuel the
demonstration reactor planned for Koeberg. NECSA General
Manager Karel Fouche' said that PBMR already had contracts in
place with the Russians for the provision of 28 kg of 10
percent LEU for the demonstration plant. In the future,
however, tons of such fuel would be needed. Burkart advised
NECSA officials that the USEC license application for its new
enrichment plant in the United States would allow enrichment
up to 10 percent, but that the new URENCO plant would be
limited to 5 percent.

OTHER TOURS AT NECSA
--------------


19. (C) Burkart and Cherry toured the Safari reactor and also
saw the IQ3 Drum Scanner in operation at the site of NECSA's
decommissioned Semi-Commercial Enrichment Plant. At the
reactor, Fouche' stated that NECSA was fabricating two lead
test assemblies in a glove box to test reactor operation on
19.9 percent enriched uranium, vice the existing 90 percent
enriched uranium reactor fuel. At the IQ3 Drum Scanning
Project, funded out of Director Cherry's office at DOE, Bert
Rollen of Oak Ridge National Laboratories was on hand to
provide an overview of the project along with NECSA
supervisors. Currently, the contents of 1074 drums out of
1104 drums with HEU contaminated waste have been scanned to
determine the amount of U-235. The IAEA has verified 782
drums containing 21 kg of U-235 while 292 drums containing
5.9 kg of U-235 remain to be verified. As many as 40,000
drums containing LEU contaminated waste still needed to be
scanned.

NECSA MANAGERS SUGGEST AREAS FOR COOPERATION
--------------


20. (C) General Manager Karel Fouche' expressed NECSA's
desire to continue its involvement in the Reduced Enrichment
for Research and Test Reactors (RERTR) program. Fouche' was
very interested in Argentina's test using LEU targets to
produce of Molybdenum 99. He welcomed the opportunity to
host an August visit from Argonne National Laboratory
officials, who were assisting the Argentineans. Fouche' also
expressed NECSA's interest in attending the U.S. sponsored
workshop for radioisotope producing countries, now scheduled
for October in Vienna, Austria.


21. (C) NECSA Divisional Manager Pieter Bredell, whose charge
was management of the Vaalputs waste site, expressed interest
in sharing information with the United States on waste site
management and disposal, and was open to possible U.S.
assistance on the transportation of nuclear waste. In
return, he thought that the United States might be interested
in NECSA's pioneering bore hole concept for the disposal of
spent radioactive sources 50-100 meters underground -- a
technique that allowed fellow African countries with less
sophisticated technology to store medical waste at sites
within their own borders.


22. (C) Senior Manager Deitleib Tillwick thought that there
was room for technical cooperation in the area of safeguards.
Specifically, Manager Joseph Shayi was looking for a
solution to a problem he had on meeting safeguards
requirements, which impacted NECSA's PBMR fuel fabrication
operations.

23. (C) CEO Thobejani summarized the major categories for
potential bilateral collaboration as including waste
management, safeguards, licensing and regulatory issues, LEU
production technology for Molybdenum 99, and skills
development.

PBMR LTD.
--------------


24. (C) PBMR Ltd. CEO Nic Terblanche told Burkart and Cherry
that the South African Government had recently decided to
make PBMR a strategic national project, virtually assuring
government financing for PBMR Ltd. through the development
phase and allowing the construction of a demonstration
reactor at Koeberg. Almost 500 engineers and scientists were
now engaged in the project, including 50-60 at NECSA, 50 at
South African supplier IST Nuclear, and 30 at ESKOM. If the
PBMR dream came true, said Terblanche, the company would be
the first to build a nuclear power plant that was inherently
safe.


25. (C) Terblanche argued that PBMR, as a very high
temperature reactor (VTHR),was ideally suited for the
nuclear cogeneration component of DOE's Hydrogen Energy
Initiative at the Idaho National Engineering and
Environmental Laboratories (INEEL). PBMR Ltd. models already
predicted temperatures near desired levels for Generation IV
VHTR's. Compared to competing technologies, PBMR was safer,
more cost efficient, more environmentally safe, and more
flexible. Moreover, Terblanche thought that PBMR Ltd. was
probably four years ahead of its nearest competitor. U.S.
based Westinghouse Nuclear, a wholly owned subsidiary of
shareholder BNFL, would lead PBMR Ltd.'s consortium of U.S
companies that included Air Products (the world's largest
producer of hydrogen) and Sargent and Lundy (an experienced
engineering and construction firm in the power industry) in
its INEEL bid. For those who felt that PBMR was too advanced
to qualify for INEEL, Chief Technology Officer Dieter Matzner
argued that there was still plenty room for further research
and development oriented towards achieving even higher
temperatures.


26. (C) If PBMR were not selected for the cogeneration
project at INEEL, Terblanche said, PMBR Ltd. "would revert to
Plan A," which was to roll out its product in major markets,
especially the United States. In fact, success, as measured
by PBMR Ltd.'s business plan, would be achieved if the
company captured just 4 percent of new sales worldwide. With
or without INEEL, PBMR Ltd. planned to seek an NRC license,
and had already sent NRC a letter of intent. PBMR Ltd. hoped
to initiate discussions with the NRC this summer, partly to
engage the NRC so that PBMR would not be overlooked in the
wake of the NRC's licensing process for Westinghouse' AP1000.
To help with the licensing process, PBMR Ltd. was assembling
an advisory group of U.S. utilities that would include former
shareholder Exelon and First Energy, among other U.S.
utilities and potential customers. When asked how long it
would take for PBMR Ltd. to reach its targeted capital cost
of around USD 1000 per installed kilowatt electric, the
response was that it was important to first have sufficient
orders in the pipeline to justify PBMR suppliers setting up
dedicated manufacturing facilities. If this were achieved,
then 70 percent of the learning would take place during the
production of the first three "8-packs." By the seventh
"8-pack," 98 percent of the learning would be achieved.
Therefore, depending upon the starting point for cost, the
targeted cost of around USD 1000 per kilowatt electric would
likely be achieved between the 3rd and 7th "8-pack", or
between the 24th and 56th reactor built.


27. (C) Senior Scientist Dr. Johan Slabber then walked
Burkart and Cherry through PBMR technology. Slabber
explained how safety was primarily controlled by heat
production within the reactor vessel. The design also
incorporated 23 control rods in addition to spheres
containing boron carbide that could be activated to rapidly
shut down the reactor to cold conditions. Slabber also
explained why PBMR Ltd. felt that pebble fuel was better than
prismatic block. First, fuel temperatures were lower.
Second, there was no need for a shielded facility or down
time to replace fuel blocks, since the pebbles would cycle
out of the system once spent. And third, no burnable poisons
were required to stretch out the fuel cycle. Slabber also
explained the Brayton Cycle (the heat transfer system based
on using the helium coolant to directly drive the gas turbine
rather than to generate steam) and other aspects of the PBMR
technology. A copy of Slabber's briefing is available from
DOS/NP/NE Deputy Director Burkart.


28. (C) Slabber thought that PBMR development would benefit
greatly from the bilateral R&D agreements now under
discussion. The agreements would facilitate the exchange of
information and allow INEEL scientists to test PBMR models.
PBMR would be able to collaborate with the U.S. on the MELCOR
code that modeled meltdown and chemical reactions, and on the
Gas Reactor Severe Accident Code for air ingress events.
Slabber added that PBMR Ltd. had already shared its computer
codes on core neutronics with INEEL scientists so that they
could conduct independent analyses.


29. (C) PBMR Project Manager Abrie Botma then outlined where
the development and testing program stood. The University of
the Northwest (previously Potchefstroom University) had built
a 15-meter long, 37-ton PBMR micro model with a traditional
heat source to test the Brayton Cycle. PBMR Ltd. next
planned to build a helium test loop at NECSA. This loop
would be three times the size of a similar one in the United
States. Comment: PBMR Ltd.'s current development strategy is
in sharp contrast to that pursued under former PBMR Ltd. CEO
Dave Nicholls, which could best be characterized as "just
build it." While not compromising any of the innovative
aspects of the system, PBMR Ltd. is engaging in more
extensive testing of subsystems and has stretched out the
development/deployment schedule substantially. End Comment.


30. (C) Botma also explained that PBMR Ltd. had decided to
create a number of "Centers of Excellence" around knowledge
areas that were central to PBMR, including: turbine
technology, Brayton Cycle technology, stochastic analysis,
measurement technology, materials programs, thermo
hydraulics, hydrogen generation, fuel advancements, and
coolant chemistries. These centers would be managed as
international resource institutions.

KOEBERG NUCLEAR POWER STATION
--------------


31. (C) Burkart and Cherry ended their trip with a visit to
ESKOM's Koeberg Nuclear Power Station, which this year was
celebrating 20 years of incident free operation. Koeberg was
one of a series of French built plants with proven,
standardized reactor technology based on a Westinghouse
design. In fact, the French company Framatome still posted
6-8 employees at the site. Power Station Manager Peter
Prozesky reviewed Koeberg's various safety and training
programs, and ESKOM's decision, because of its relative
isolation, to reach out to other countries like France and
the United States to keep itself apprised of best practices
and changing international standards. Prozesky said that
because the South African Government considered Koeberg a
"national key point" (a critical asset),Koeberg was under
constant threat review. Prozesky also showed Burkart and
Cherry the unique foundation supporting Koeberg's two
reactors -- hundreds of pillars with rubber bearings to allow
for sway in case of earthquake.

CAPACITY BUILDING
--------------


32. (C) A recurring theme throughout Burkart and Cherry's
visit was South Africa's need to build technical capacity
through skills development and training. Specifically, DME
and DFA talked about the need to train their staff. Goosen
said that DFA was developing its own nonproliferation
seminar, and invited U.S. participation. NECSA talked about
university exchanges and rejuvenating its workforce. NNR
talked about the need for skills development and capacity
building. These discussions reinforced what Magubane and
Maqubela told officials in Washington during their visit last
October. Clearly, capacity building and technical exchanges
could be a very important part of our JSCNEC agenda.

NEXT STEPS
--------------


33. (C) Both sides felt that they were close to concluding
R&D agreements on nuclear energy cooperation and nuclear
materials safeguards technologies. The South Africans still
had some issues associated with how the agreements should be
framed, i.e., between governments or departments, and
indicated that they might have some questions related to the
annex on intellectual property. Recently, DFA told us that
it planned to call the relevant parties together to discuss
the R&D agreements and the possibility of holding the first
JSCNEC December 1-3, 2004 in Pretoria. Both DME and NECSA
have reconfirmed their desire to participate in the proposed
Workshop for Medical Radioisotope Producing Countries planned
for October, but need to know the new dates. NECSA has
welcomed the opportunity to host an August visit from Argonne
National Laboratory officials to discuss using LEU for
targets to produce Molybdenum-99; Embassy/Pretoria stands
ready to facilitate this visit.
HUME