Fueling the Future: Mongolian Uranium and Nuclear Power Plant Growth in China and India

Abstract

Increased nuclear electricity generation in China and India presents uranium suppliers such as Mongolia with an opportunity to develop its uranium and nuclear industry. This paper discusses the Mongolian potential for interaction with the two larger nations, given the strategy, organization, and future developments in each respective nuclear sector. The paper will focus on front-end developments, where government-level agreements will likely dominate the uranium mining and supply negotiations. Established players such as France and Russia are poised to secure fuel resources from around the world, but the most of demand will be China and India. Therefore, this paper focuses on China and India as primary objects of study and link Mongolia’s growth with these markets. 

Introduction

Mongolia’s contribution in the nuclear arena has thus far been limited to providing uranium for military and civilian purposes. Conventional estimates place Mongolia’s uranium reserves at 62,000 tons1 , but untested reserves may raise the estimate to 1.39 million tons, constituting the largest reserves in the world.2 
 
During the communist era, strong ties with the Soviet Union led to extensive joint explorations. Beginning in the 1970’s, successful geological studies resulted in exclusive concessions to Soviet mining interests.3  Russian uranium mining companies have continued to operate in Mongolia given their existing technical expertise in the uranium reserves areas. Recent dialogues with Russian dignitaries, such as Prime Minister Putin’s May 2009 official visit, have resulted in agreements to jointly develop the uranium deposits and fuel cycle facilities.4

While Mongolian-Russian joint ventures are currently gaining much attention, Mongolia is rightfully diversifying investments partners in its nuclear industry sector to avoid over reliance on any single party. Such diversification can take place through direct investment from foreign corporations, the development of local mining groups, and government-to-government agreements.

This report highlights the government-level interactions of Mongolia with China and India in the nuclear arena. Currently, agreements between state-run actors appear to be gaining ground over investment agreements from private foreign companies. The choice of countries and types of agreement, discussed in this report, emerge for four principal reasons:

1) The current investment environment favors state actors, who wish to guarantee national access to uranium as a strategic resource.
Currently, state-owned corporations from abroad are expressing the greatest interest in developing Mongolia’s uranium resources. These groups consider uranium as a strategic resource, and are thus willing to make investments even at a loss. The lack of profitability potential in the uranium investments may be explained by the extreme deficiency of appropriate infrastructure and the domestic political desire to maintain a government equity share in the resource extraction process. The Nuclear Energy Law of 2009 has codified this situation by expropriating to MonAtom, without compensation, at least a 51% stake in licenses developed with state exploration funds, and 34% in those explored independently. This recent policy change presents an unfavorable climate to foreign investors, who are both wary of forced government participation and legislation which dramatically changes the legal structure of investment even after significant funds have been spent. The requirement for state equity participation and the need for intensive infrastructure investment are more palatable to foreign state-owned investors seeking to secure access to uranium supplies.

2) Mongolian policymakers have a history of partnerships with foreign governments, and appear to be content in extending such precedent.
Beyond the aforementioned agreements with the Russian government, Mongolian policymakers have viewed government-to-government interactions as essential for broadening the country’s diplomatic relationships. The Nuclear Energy Law of 2009 explicitly prefers investors to be “strategic partners,” defined as state-backed enterprises or private companies with a proven track record. Given the unfavorable investment proposals integrated into the legislation, the government has clearly created conditions where the only remaining “strategic partners” would be state-backed actors. 

3) China and India present the greatest area of growth in the Asia-Pacific region
Massive amounts of investment in electricity production through nuclear power plants (NPPs) are currently being undertaken in both India and China due to human health, climate change, and energy security concerns. India plans to increase its nuclear energy production from 3667 Mwe to 20,000 Mwe by 2020 and 63,000 Mwe by 2032, which will comprise 25% of total electricity production.5 Meanwhile, China is building advanced reactors that will increase its capacity from the current 8587 Mwe to at least 60 Gwe by 2020 and 120 - 160 Mwe by 2030, aiming to produce 4% of its total electricity production from nuclear sources.6 In terms of the international legal environment, India has recently acceded to the Nuclear Suppliers Group, enhancing opportunities for growth and international connections to construct additions NPPs. China, meanwhile, has embraced foreign technology, leading even the highly protective U.S. congress to approve nuclear trade with the mainland through the US - China Nuclear Cooperation Agreement.

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