Kazakhstan contains the world's second-largest uranium reserves, estimated at 1.5 million tons. In 2006 it produced 5,279 tons of uranium, 21 percent more than in 2005, and intends in 2007 to increase uranium production 31 percent to 6,937 tons, according to the country's Energy and Mineral Resources Ministry. Kazakhstan is the world's No. 3 uranium miner, exceeded only by Australia and Canada; the three countries account for more than half of global uranium production.

If market indicators are any gauge, Kazakhstan may soon become as big an international player in the global uranium market as it is in the oil sphere. All indications are there. Uranium prices have increased 1,000 percent in just five years and seem set to rise further. In 2001 a pound of uranium sold for between $5 and $10; current spot prices are $105 per pound.

The Royal Bank of Canada Capital Markets noted in a recent study, "Investing in Uranium Companies," that mining remains in the middle of a uranium bull market with an average $100 per pound price this year, further asserting that a supply gap will exist in uranium after 2013. Australia's Macquarie Bank's stock-broking division is even more bullish, projecting that by 2009 uranium prices might rise to $200 a pound.

Driving uranium prices upward are record-high oil prices and rising demand for the fuel, particularly from Asia. South Korea relies on nuclear energy to produce 45 percent of the country's electricity, and Japan is not far behind, relying on nuclear power for 30 percent of its energy needs.

Asia's rising economic powerhouses China and India are interested in nuclear energy as well. China's Commission of Science Technology and Industry for National Defense in its 11th Five-Year Plan for the Nuclear Industry said China will prospect for and develop indigenous uranium deposits in order to expand the nation's ability to produce 40 gigawatts of nuclear power electrical generating capacity by 2020. China is also developing a national uranium reserve, to commence in 2010. Nuclear power accounts for just 1.4 percent of China's electrical power generation. Despite Beijing's ambitious attempts to expand uranium production in Xinjiang and elsewhere, local sources will be insufficient to meet domestic needs; analysts predict that within less than a decade China's planned nuclear power reactors will consume 44 million pounds of uranium annually, as more than 16 provinces, regions and municipalities have announced intentions to build nuclear power plants within the next eight years -- a total of 77 planned and proposed new reactors.

India is also increasingly interested in nuclear electrical power generation, despite the fact that nuclear accounts for a paltry 3 percent to 4 percent of the country's power needs; India has 19 planned and proposed nuclear power reactors.

The rest of the world is taking a new look at nuclear power as well. London's World Nuclear Association in May reported that worldwide, 256 reactors were either in the planning stage or under construction, in addition to the 437 nuclear power reactors in operation. Even Ukraine, site of the infamous 1986 Chernobyl disaster, has announced plans to build 22 new nuclear power stations, while the United States, site of the 1979 Three Mile Island partial meltdown accident, has 23 reactors being proposed.

Unlike its dominant position in the world's oil and natural gas market, Russia's footprint in the global uranium market remains relatively small. Russian state holding company Atomprom is the world's seventh-largest holder of uranium ore reserves, the third-largest producer of nuclear fuel and the world's fifth-largest miner of uranium. Current Russian production is only 3,000 metric tons of uranium ore out of an annual requirement of 18,000 metric tons. It is most unlikely therefore that Atomprom will be able to meet the Russian government's declaration last year of its intention to increase the Russian Federation's nuclear power generation from its rate of 15 percent of the nation's energy by an additional 10 percent. In April, Russian President Vladimir Putin said, "Over the entire Soviet period, 30 nuclear power plant units were built, but we plan to build 26 such units over the next 12 years, and to do so using the most advanced technology available."

As with its oil and gas reserves, Kazakhstan has adroitly maneuvered to lessen its dependency on Russia by diversifying its partners and markets. In April 2005 South Korea and Kazakhstan established a joint mining venture for uranium, scheduled to begin operations in 2008 with an eventual annual output of 1,000 tons; last April Kazakhstan and Japan signed a civil nuclear cooperation agreement under which Japan will import 30 percent of annual uranium needs of 9,500 tons for power generation from Kazakhstan. Other foreign companies investing in Kazakhstan's uranium industry include Canada's SXR Uranium One Inc., Japan's Marubeni Corp., China's Guangdong Nuclear Power Group, Britain's New Power Systems Ltd. and the U.S. uranium trading company Nukem. Soothing Kremlin concerns, Astana has informally promised to export up to 6,000 tons a year to Russia as well.

As with its oil industry, Kazakhstan has actively courted foreign investment for its mining operations. The world's leading producer of uranium oxide, Canada's Cameco, has a 60-percent share in Kazakhstan's Inkai uranium mining operation, while the state atomic energy agency, Kazatomprom, the world's fourth-largest producer, also has a stake in Inkai. Nor is the investment one way; Kazatomprom, flush with cash, has proposed purchasing a 10-percent stake in the U.S. company Westinghouse Electric.

The rosy future for Kazakhstan's uranium ambitions faces some bottlenecks, however, including massive skilled labor and infrastructure shortages that could hamper a rapid expansion of uranium production. Astana is betting on its foreign partners to provide both funding and expertise to help close the gap.

There is also the question of selling uranium, which is not currently listed as a commodity on global exchanges. About 15 percent of uranium is sold via the spot market, while long-term contract pricing accounts for the remaining 85 percent. Given that the International Energy Agency estimates that global energy needs will rise by 51 percent by 2030, sales contracts would seem to be less of a future problem for the Kazakh government than choosing among a multitude of bidders.

(e-mail: [email protected])

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