Australian uranium is heading to India

The first shipment of Australian uranium to India marks the next stage in contract negotiations between India and Australian industry. Cindy Vestergaard explains how the potential for commercial uranium sales to India heralds a new phase in a decades-long policy debate.

India’s economy is the seventh largest in the world, predicted to rank third by 2030 and second by 2050. Energy is central to its rising potential, especially considering Prime Minister Modi’s promise to connect all citizens to a reliable power grid.

In December, India’s Central Electricity Authority forecasted that 57 per cent of India’s total capacity will come from non-fossil fuel sources by 2027 — aiming to surpass India’s renewable energy targets set in Paris two years ago. India intends to generate 275 gigawatts from renewables, alongside 72 GW of hydropower and almost 15 GW of nuclear energy.

India has 22 operating nuclear reactors with a capacity of almost 7000 megawatts, generating approximately three per cent of India’s electricity. The annual uranium requirement for the current fleet is approximately 1400 tonnes of uranium (tU) per year. Five more reactors are under construction and ten more are planned — once completed this would see India’s annual uranium needs more than doubling double to 3600 tU.

To meet the fuelling needs for current and new reactors, India utilises uranium resources at home and imports from abroad.

While India does have its own domestic uranium deposits, they are small and low-grade, with production insufficient to meet even current reactor requirements.

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Uranium reserves are expressed as resources of ‘recoverable’ uranium at a fixed market price. According to the 2016 ‘Red Book’, the world’s reference for uranium resources, Australia has the world’s largest known uranium reserves, with more than a million tU recoverable for less than US$130 per kilogram. India, which does not list its reserves based on price, is far down the list at 181,606 tU of known conventional in situ resources. According to India’s Red Book submission, this would be sufficient to support 10-16 GW installed capacity of pressurised heavy water reactors, operating at 80 per cent for forty years.

Recent exploration activities have reportedly increased reserves to approximately 208,000 tU. However, exploiting identified reserves takes time, where factors such as environmental sensitivities, land acquisition, economic viability and public consensus are among the range of issues affecting the potential for uranium to be extracted.

Given that India does not publish its annual production figures for reasons of ‘public interest,’ it is difficult to ascertain current production figures. Estimates from the World Nuclear Association assume that India has been producing approximately 385 tU per year since 2012 — under a third of the amount needed annually to feed its current reactors.

India’s nuclear expansion is facilitated by its re-entry into the global civilian nuclear market after more than three decades of isolation. In September 2008, the Nuclear Suppliers Group (NSG) granted India an exemption from its rules requiring a comprehensive safeguards agreement with the International Atomic Energy Agency (IAEA) as a condition of nuclear supply.

The waiver made India the only State outside of the Treaty on the Nonproliferation of Nuclear Weapons to be accepted in mainstream international nuclear trade. Since then, New Delhi has signed 13 bilateral nuclear cooperation agreements (NCAs), including with France, Japan, United States, Canada and Australia.

In February 2009, India signed an umbrella safeguards agreement with the IAEA (INFCIRC/754), placing 10 nuclear power reactors under safeguards. India has since added more facilities to the list of those subject to safeguards — as of February 2015, 22 facilities were included.

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The first to supply uranium to India was the French-owned company AREVA, which shipped 300 tU of uranium ore concentrates in 2008, followed by Kazakhstan (Kazatomprom) and Russia (JSC TVEL Corporation). State-owned Uzbek mining company Navoi Mining & Metallurgy Combine and Canada’s Cameco have also signed contracts, with the first shipment of Canadian uranium arriving in India in December 2015.

The nuclear cooperation agreement with Australia entered into force in November 2015. It was reported in August 2016 that Australian companies were in negotiations with India to provide 1,500 tU over five years. More recently, during his visit to India in April 2017, Prime Minister Malcolm Turnbull said Australia would start supplying uranium to India “as soon as possible.” The lengthy timeline for contract negotiations is typical — it took Cameco and India’s Department of Atomic Energy two years to finalise the contract after the NCA with Canada entered into force.

India’s NSG exemption has given New Delhi its own status in the international nuclear market, particularly in relation to its bilateral civil nuclear cooperation agreements.

Australia’s agreement with India, for example, is unlike any other of its 23 NCAs in that it does not include any provision for dealing with the consequences of non-compliance with the NCA or the IAEA, nor fallback safeguards should the IAEA not be able to monitor Australian material for any reason. Australia’s NCAs with the United States, Russia and China reference making arrangements for equivalent measures based on “Agency safeguards principles and procedures” in the absence of IAEA monitoring, whereas the Australia-India agreement calls for Parties to “consult and agree on appropriate verification measures.”

The Australia-India agreement also gives India advance consent to reprocess Australian uranium. This raises particular concerns given India continues to produce fissile materials for its nuclear weapons program. Notably, this provision exists in only one other Australian NCA, Japan, a state that does not possess nuclear weapons.

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That said, the NCA stipulates that advance consent for India is restricted to facilities dedicated to reprocessing safeguarded material as per the agreement India and the United States concluded in July 2010. That agreement specifies that India will establish a new reprocessing facility for safeguarded nuclear material under IAEA safeguards.

India also does not accept bilateral reporting requirements on obligated nuclear material. These bilateral reporting requirements are employed by a number of suppliers, including Australia, as a way to ‘flag’ their material as it moves through the nuclear fuel cycle in other countries. India argues that because all imported uranium will be used in safeguarded facilities and thus reported to the IAEA, there is no need for bilateral reporting. Australia’s agreements with China and Russia, signed in 2006 and 2007 respectively, included bilateral reporting requirements on Australia’s obligated nuclear material (AONM).

Under Australia’s Nuclear Non-Proliferation (Safeguards) Act 1987, the Director General of the Australian Safeguards and Non-proliferation Office (ASNO) reports annually on the total quantities of AONM at each stage of the nuclear fuel cycle and its intended end-use. On 15 June, appearing before the Joint Standing Committee on Treaties (JSCOT), ASNO’s Director General advised that the mechanism developed with India will allow him “to determine the disposition of Australian obligated nuclear material in India and fulfil [the] reporting obligations under the Safeguards Act.”

Australia’s approach to its uranium production and trade has traditionally focused on using its resource muscle to promote domestic and international nuclear non-proliferation objectives. The overriding motivation however for Canberra in moving forward with NCA negotiations with India was developing a strategic relationship with New Delhi while at the same time further deepening its alliance with the United States. As was noted by JSCOT in 2015, the agreement with India “represents a different approach to non-proliferation in India; using engagement to bring India into the nuclear non-proliferation mainstream.”

In effect, India has been able to use its muscle as a rising economy to bring the mainstream also into its favour.