CHILE: INFORMATION ON PLANS TO PURSUE NUCLEAR ENERGY FOR

UNCLAS SANTIAGO 001140 COMMERCE FOR KMANN AND SLOPP STATE FOR WHA/BSC, EEB/EBC/IEC, T FOR MHUMPHREY SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ENRG KNNP SENV TRGY PGOV CI SUBJECT: CHILE: INFORMATION ON PLANS TO PURSUE NUCLEAR ENERGY FOR TRADE PROMOTION COORDINATING COMMITTEE REF: STATE 127423 ¶1. (U) The following is a response to STATE 127423. This is Post's report on in-country developments regarding civil nuclear energy, as requested by the Civil Nuclear Energy Working Group of the Trade Promotion Coordinating Committee of the International Trade Administration in the U.S., Department of Commerce. Answers are keyed to the order of questions in Paragraph 8 of Ref. Overview of Civil Nuclear Power Program -------------- ¶2. (U) Chile's recent energy shortages have spurred the GOC to consider alternatives and explore the full range of energy sources, including renewable and nuclear energy. The Chilean National Energy Commission (CNE) awarded contracts in November to three different firms. Each firm will issue a report on ONE of the following topics: the implications of producing nuclear energy, defining the type of plant best suited to Chile, and designing the regulatory framework necessary for nuclear energy technology. The GOC has stated that it has yet to determine if it will even pursue nuclear energy. Therefore, the Government has not decided if and how this sector will be financed. ¶3. (SBU) Chile faced a serious energy crisis for most of 2008. Argentina reduced exports of natural gas from the contracted 22 mcm per day to 1.1 mcm, effectively reneging on its contract. The reduced gas supplies were the bare minimum needed for residential use, forcing the entire thermal infrastructure to rely more heavily on expensive diesel and increase use of coal. In addition, 2008 was Chile's driest year in half a decade, which severely restricted Chile's hydro output. The nation's electricity matrix is dominated by hydropower and thermal plants. [NOTE: Diesel is Chile's first source of energy, accounting for 35% of total consumption while coal is second at 25%]. However, the future of a large hydroelectric project in Patagonia is in question due to resistance from environmentalists and growing public concern. The GOC recently announced the 2008-2012 National Action Plan on Climate Change, emphasizing the need to reduce the Chilean economy's dependence on coal and providing specific measures on how to achieve this goal. ¶4. (U) Chile has explored cleaner energy options such as liquid natural gas. Chile's state-owned copper company, (CODELCO) and SUEZ Energy International are building new LNG terminals in the north of the country. However, natural gas supplies are subject to fluctuations in price and availability (based on growing demand from China). Limited capacity to transport LNG to the center of the country from terminals is also a concern. Energy Minister Marcelo Tokman announced in November that Chile's energy shortage was officially over. However, it is still uncertain if the nation will be able to produce the 12,000 MW required over the next 10 years to meet energy needs in the long-term. ¶5. (U) Chile has two existing nuclear reactors with 5 MW of capacity. The La Reina Nuclear Study Center, located in Santiago and established in 1974, houses the Chilean Experimental Reactor RECH-1. It focuses on neutron depth profiling, prompt-gamma neutron activation analysis, and scattering of neutrons. The reactors' operations support the Production Laboratories of Radioisotopes and the Laboratory of Analysis by Neutron Activation. The radioisotopes generated are mostly used for medical and geological purposes, and to sterilize medical supplies. The Lo Aguirre Center of Nuclear Studies accommodates the RECH-2 Experimental Reactor and is tailored to address electricity generation, saltwater desalination, and heating activities. This reactor has highly enriched uranium but is currently idle. ¶6. (SBU) The nuclear studies recently awarded by CNE indicate Chile is considering expanding its nuclear facilities. The studies are not likely to be completed before the end of 2009 making it unlikely the Bachelet Administration will reach a final decision. This could create an issue for the presidential campaign (elections are slated for the end of 2009). All three leading presidential candidates have made public statements indicating they may at least consider the use of nuclear energy. Sebastian Pinera, a Chilean businessman, member of the center-right National Renewal (RN) party, and the likely opposition candidate, supports conducting feasibility studies for all energy resources, not just nuclear. Jose Miguel Insulza, the current OAS Secretary General and member of the Socialist Party (PS),and ONE of two likely candidates for the governing Concertacion coalition, would like to explore all energy options. He has not ruled out the nuclear alternative. Eduardo Frei, former President, a Christian Democrat (DC),and the other possible Concertacion candidate, has declared that Chile should "approach nuclear energy responsibly." ¶7. (U) The Chilean Commission of Nuclear Energy (CChEN),established in 1965, is the national nuclear decision-making authority. CChEN is responsible for providing oversight for the production, purchase, transfer, transportation and peaceful use of atomic energy and of fertile, fissionable, and radioactive materials. CChEN is directed and managed by a council made up of seven members appointed by the President of Chile. This council appoints an executive director who manages the Commission. Dr. Roberto Hojman Guinerman is the current executive director. ¶8. (U) CChEN has several functions established by law including: 1) Assisting the GOC in all affairs related to nuclear energy, especially in the study of treaties, covenants, and credit agreements for the legal or statutory disposition of mineral deposits and fertile, fissionable and radioactive materials; 2) Developing the national plan for research, development, use, and control of nuclear energy; 3) Implementing the national plan for nuclear energy by itself, or in accordance with other persons or organizations; 4) Supporting and conducting research on the exploration, exploitation, and benefits of natural atomic materials, 5) Promoting teaching, research, and the use of nuclear energy; 6) Cooperating with the National HEALTH Service (SNS) in the prevention of any nuclear risks, especially occupational hygiene, environmental pollution, as well as food and air pollution; 7) Controlling the production, purchase, transportation, import and export, use and handling of fertile, fissionable, and radioactive elements. ¶9. (U) Chile's Nuclear Safety Law defines and enforces CChEN's regulatory authority, nuclear safety measures, and norms for radioactive facilities. CChEN is empowered to authorize the location, construction, operation, service, closure, and dismantling of plants, laboratories, and premises for nuclear equipment. The Commission can also authorize the entry or transit of nuclear substances or radioactive materials through national territory (including sea and air) and exclusive economic zones. The SNS controls the handling of radioactive substances and has responsibility for preventing risks derived from their use and manipulation. [NOTE: The Ministry of Mining acts as the regulatory back-up authority. End Note.] ¶10. (SBU) The Nuclear Safety Law also includes liability guidelines. Any transporter of nuclear substances or radioactive material that enters Chile will be considered an "operator" and must provide insurance or guarantees against an accident. The maximum liability must be equivalent to $75 million. Dr. Julio Vergara, a nuclear engineer at Santiago's Catholic University and a member of CChEN's council, has said to ESTH officer that the existing law is adequate given Chile's existing nuclear capacity but must be updated if the GOC pursues this energy resource further. ¶11. (SBU) CChEN currently has 300 employees working at the two nuclear reactors and an administrative building in Santiago. This relatively small workforce is adequate for handling all of Chile's present nuclear needs. Vergara believes the private sector might train domestic personnel to be able to participate in the industry. He also said Chile may need to hire foreign experts if the GOC plans on expanding its nuclear capacity. Chile is not yet equipped to manufacture nuclear-related products and services and would have to import most of these resources. Opportunities for U.S. Industry -------------- ¶12. (U) The Department of Energy (DOE) is cooperating closely with CChEN under the Global Threat Reduction Initiative (GTRI). The DOE has spent roughly $450,000 under the GTRI to remove nuclear and radiological materials from Chile to the U.S. for disposal, and to improve protection of nuclear material at the country's two research reactors. Los Alamos National Laboratories is assisting CChEN in planning for an unused nuclear material storage facility. ¶13. (SBU) The Embassy's Foreign Commercial Service section believes there may be opportunities for U.S. industry to provide consulting services in the nuclear sector. For example, earlier this year GE organized and funded a large conference in Santiago to discuss the steps Chile should take before pursuing nuclear energy. The conference focused on the need to develop a stronger regulatory framework and on defining the country's expectations for nuclear energy in the future. U.S. investors may be able to provide similar services in the sector. ¶14. (SBU) It is unlikely additional feasibility studies will be needed beyond the three currently being conducted. There are no current or anticipated nuclear-related tenders and, therefore, limited opportunity for U.S. investors in plant construction management, reactor sales, fuel cycle service provision, plant operations, or logistics. Also, no private companies are currently involved in civil nuclear energy as only government bodies such as CChEN have played a role in the sector so far. Foreign Competitors -------------- ¶15. (U) The three firms that won the right to conduct the nuclear feasibility studies have foreign ties. Amec-Cade, originally a Chilean consulting firm established in 1959, was acquired by the British partnership AMEC in 2007. Stuk is a Finnish governmental body in charge of providing regulatory framework for the nuclear energy sector. Technopark-Intermash is a Chilean-Russian partnership also known as Chile's Nuclear Electric Corporation. In 2006, Intermash approached the GOC with a nuclear power plant project as an answer to Chile's energy needs. At this time, there are no MOUs on nuclear energy cooperation, legal frameworks for nuclear commerce, or arrangements for technical information-sharing between the three firms (or any other foreign competitors) and the GOC. URBAN