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21 May, 2010 06:30

Nuclear energy warms up as Russian export earner

Nuclear energy warms up as Russian export earner

Gas and oil might be not the only resource Russia will export in coming years, with increasing global interest in nuclear power promising a market opportunity for Russia.

Nuclear power currently satisfies 16 % of Russia's energy needs, and the state's goal is to raise that to 25% in 15 years. But domestic construction is just one branch of the industry.

India, China, Turkey and Iran are just some of the countries where Russia is building nuclear power plants. With Governments around the world eager to diversify away from oil and gas, Prime Minister Vladimir Putin has set an ambitious target of capturing a quarter of global nuclear power plant construction market. Deutsche bank utilities analyst Dmitry Bulgakov says there are two key drivers.

“One is energy security, diversification of the fuels. And secondly, and I would say quite importantly is that we are moving towards a carbon free world, right. The nations around the globe are discussing, last year in Copenhagen, discussing the future of the world without carbon, and nuclear generation can provide a solution."

By 2030 Russia wanted to build 26 plants in Russia and 20 abroad. However the financial downturn has cooled the rush. Foreign contracts are essential for loading production capacity – which was built in Soviet times on a grand scale.

Loading the production capacity will raise profitability to about 15% – twice as high as producing for Russia alone, according to Sergey Kondratiev, senior expert at the Energy and Finance Institute

“Without foreign contracts nuclear construction financing falls on government shoulders and it's not very profitable due to the low loading of capacity. Many countries are looking at Russia to satisfy their demand, the exception is China which wants 70 percent of its construction needs met domestically.”

Building a nuclear plant is expensive and the margins are slim. But there is a pay-off later, after a 10 year construction project, there's the possibility of supplying 40 years of uranium.

Every sixth nuclear reactor in the world already runs on Russian nuclear fuel. Supply of Russian uranium is still fairly limited and more investment is needed in mining and extraction to cope with increased demand, but unlike the construction business, it promises high returns.