Russia Seeks More of China's Nuclear Power Industry

By Shai Oster
The Wall Street Journal
Thursday, March 23, 2006

BEIJING -- Russia said it wants to play a greater role in developing China's fast-growing nuclear power industry, in another sign of closer energy cooperation between the two countries.

Russian Foreign Minister Sergey Lavrov said Wednesday that China welcomes increased Russian participation in its nuclear power sector, which is undergoing one of its biggest-ever expansions and one of the biggest nuclear rollouts in the industry's history. China has said it plans to build 30 or more nuclear reactors during the next 15 years. Currently, it has nine reactors at two plants.

Lavrov's comments to reporters came on the final day of a two-day summit between Russian President Vladimir Putin and Chinese President Hu Jintao.

On Tuesday, Russia pledged to sharply increase oil and gas exports to China.

Chinese officials could not be reached for comment on Lavrov's remarks, but Russian officials point to participation by Russia's AtomStroyExport -- which operates under the umbrella of Russia's atomic energy agency -- in the first round of bidding to build four reactors in China valued at $1 billion to $2 billion each. The other two companies short-listed are Westinghouse Electric Co. and France's state-owned Areva Group. Overall, deals to build China's nuclear plants are potentially worth tens of billions of dollars.

China has decided to dramatically increase the number of its nuclear power plants as it seeks to reduce its dependence on Middle East oil and diversify its energy sources to sate the demands of its rapidly expanding economy. The country has plenty of its own, cheap coal, but Chinese leaders worry that using high-polluting coal to fire its power plants is coming at too great a cost to the environment. Increasingly, they see nuclear power as a cleaner alternative.

Sergei Kiriyenko, head of Russia's atomic energy agency, accompanied Putin on his trip to China. He made a stop at China's newest nuclear power plant, the Tianwan station, which is north of Shanghai and built jointly with the Russians.

The Russian visit comes just as the country's competitors to build the four Chinese reactors -- which will be located in the eastern province of Zhejiang and the southern province of Guangdong -- appear to have hit snags. China was originally expected to decide on the winning bid in December, but negotiations have dragged on.

Industry observers and analysts say the Chinese government is unhappy about the sale of Westinghouse to Japan-based Toshiba Corp. in February. Relations between China and Japan have grown increasingly tense, and the Chinese are reluctant to have sensitive technology controlled by the Japanese, the observers say. Westinghouse has said it expects a decision from Chinese officials soon.

France's Areva, meanwhile, is resisting Chinese demands to transfer more of its technology, they say. Last week, French Finance Minister Thierry Breton said Areva is still in the race.

Russia's expression of interest in helping build up China's nuclear power industry comes a day after Putin said Russia plans to construct two pipelines to bring natural gas to China and another pipeline to bring oil.

China, one of the world's fastest-growing energy consumers, has for years sought more direct supplies from its northern neighbor, which is the world's largest gas producer and second-largest oil producer. But Moscow has been slow to turn toward Asian markets. China currently gets no gas and only a small fraction of its oil supplies from Russia.

Some analysts said they doubt Russia has enough oil to supply both China and Japan.

China's pipeline would be built as part of a longer pipeline bound for Russia's Pacific coast, from where Moscow could supply Japan.

And Russia and China have yet to reach any agreement over the price for any gas sales. Russian officials say Beijing will pay the same prices Europe is charged. But those prices are much higher than China can stomach, analysts say. High international prices have recently forced China to delay other plans to import natural gas. Executives working on the deal point out that major technical challenges lie ahead in building the pipelines, which would eventually carry about half as much gas as Russia currently supplies Europe.

"This agreement is a significant milestone. But the question remains, where do we go next?" asked Alastair Ferguson, deputy executive director of OAO TNK-BP Holding, BP PLC's Russian joint venture.

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