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Cablegate: Chile: Information On Plans to Pursue Nuclear Energy For

VZCZCXYZ0000
OO RUEHWEB

DE RUEHSG #1140/01 3581943
ZNR UUUUU ZZH
O 231943Z DEC 08
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4188
RHMCSUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
INFO RUCNMER/MERCOSUR COLLECTIVE

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

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