BRAZIL ENRICHES URANIUM AND RENEWS CALLS FOR ANGRA III

UNCLAS BRASILIA 000981

SIPDIS

SIPDIS

STATE PLEASE PASS TO ISN ALEX BURKHART AND CHRISTINE MARTIN

E.O. 12958: N/A
TAGS: TRGY TNGD EMIN KSCA BR
SUBJECT: BRAZIL ENRICHES URANIUM AND RENEWS CALLS FOR ANGRA III


1. Summary: In addition to renewed speculation regarding the resumed
construction of Angra III, Brazil also entered an exclusive club of
7 nations worldwide with the capacity to dominate the complete
nuclear fuel cycle. Following a discreet inauguration ceremony,
Brazil detailed its short-term goal of becoming self-sufficient in
uranium production/enrichment by 2016/17. This takes into account
the projected needs of a completed Angra III. Simultaneously,
Bolivia's decision to nationalize its gas-fields has spurred Brazil
to renew its search for sustainable, domestic supplies of energy.
The most evident short-term solution is Angra III. End Summary


2. On May 5, the GoB inaugurated the first cascade of its first
enrichment module in a final test at Brazil's enrichment facility in
Resende. Another eight cascades are expected to be on-line by 2010
with the capacity to generate 60% of Brazil's fuel needs. The
inaugural module is one of four enrichment units, one with four
cascades and the others with 2, requiring approximately US$ 50
million in investments. The event marked the conclusion of a series
of tests begun in 2005, and was the first to involve uranium. INB
already has the capacity to reconvert uranium, fabricate pastilles
and to assemble fuel units for use in Angra I and II. This does not
mean, however, that Brazil is in a position to enrich uranium on an
industrial scale. The enrichment facility still requires licensing
permits from CNEN (Brazil's National Nuclear Energy Commission) and
Ibama (Brazilian Environmental Protection Agency). Both are
considered routine, and one officer in CNEN's International
Relations officers relayed a belief to Scioff, though claiming to
not have access to the information, that the permits would be
granted sometime within the next three to six months.


3. Coinciding with this inauguration, there are renewed calls to
finish construction of Brazil's Angra III reactor. Construction of
Angra III was halted in 1992 due to a lack of resources. However,
recent events, most notably the nationalization of Bolivia's oil and
gas fields, have apparently convinced Brazil that it would be well
served by investing in additional atomic energy capacity. In the
fallout of the Bolivia gas crisis, Wagner Victer, Secretary of Rio
de Janeiro's Energy, Naval Industry and Oil, estimated that Angra
III would decrease Brazilian dependence on Bolivian natural gas by 7
million cubic meters per day. This is equivalent to 30% of the
Brazil's yearly gas imports. Angra III would generate 1,300 MW and
construction would require close to U.S.$ 2 billion in investments.



4. As recently as April, during the last meeting of Brazil's
National Energy Council (CNPE) there was agreement that the project
is viable. Media reports claim that even the project's fiercest
opponent, Dilma Rousseff (Lula's Chief of Staff),has capitulated in
the dispute. Othon Luiz Pinheiro (Director of Electronuclear)
added, "there exists a great possibility that the Angra III project
will be approved at the next meeting of CNPE" schedule for June.
The Minister of Science and Technology, meanwhile, noted that CNEN
is preparing a report about the construction of Angra III for
President Lula to determine whether works should be reinitiated.


5. The change of heart is, as in most cases, fueled by economics.
Nuclear power is showing itself economically viable against other
forms of energy. Previously considered an impediment, the cost of
producing atomic energy is now in line with the energy supplied by
thermal and hydroelectric plants. In fact, the projected value of
power produced by Angra III is on par with the energy sold during
previous energy auctions in December of 05. Prior to the gas crisis
with Bolivia, thermal energy from gas was priced at R$ 137/MWh as
compared to R$ 140/MWh when Angra III would begin operation in 2012.
Hubner Morreira, Interim Minister of Mines and Energy, recently
stated, that the GoB has not only admitted the economic viability of
Angra III but is also studying the legislative changes necessary to
commercialize it.


6. Comment: With a proven capacity to enrich uranium and a continued
emphasis on self-sufficient energy generation, Brazil appears to be
closer than ever to embracing nuclear energy expansion. End Comment

CHICOLA