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« USA Putting Price On Carbon: Enter Nuclear Power | Main | A Readers View On Uranium: Where To Next? »
Saturday
Nov172007

Peter Schober Gives His View On Uranium

One of our readers, Peter Schober, has offered his opinion on the uranium market at the moment and the current situation in the global energy market.

The following article, "Connecting the Dots -Basic Reasons for Uranium Investment" was written by Peter Schober who is working as a business consultant in germany and has been researching energy matters for several years.

[Please click on images to view full size verisons]

1.
Over the next 15 years China alone plans on building 30 new reactors. Without those reactors, the country's environment and economy will face brownouts that will start political unrest and upheavals, the one thing the ruling elite will avoide at all costs. Shortage and price buildup of lead (needed for insulation) gives an indicator of building activity.
2.
"We are at the beginning stages of a massive bidding war in Uranium. China is locking in massive deals in Africa and is now working on ever bigger deals in Kazakhstan which holds the worlds second largest reserves of Uranium after Australia. Note to that China signed a multi billion dollar uranium deal with Australia. China is basically locking up Uranium supplies, which means its taking this uranium out of the market place; this effectively means that there will be even less uranium for the rest of the global world players to go after". Sol Paha "Uranium Wars 1/14/2007
3.
China can run for two days on oil, or it can run for an entire year on uranium – all for the same fuel costs, according to top nuclear analysts. And .. They have all the cash needed to buy what they can get.
Some analysts say Uranium is headed fast to $576 per pound – and even that’s a fair price for the energy, and still much cheaper than coal or oil…Do the math yourself, it doesn´t take more than an spreadsheet.

Peter Schober Gives His View On Uranium

4.
Today, most of the Soviet weapons-grade uranium is gone. Currently a bare 30 % of secondary supply (around 8.000 tonnes pa) comes from Russian sources.
5.
Russia has decided to start stock piling on uranium after declaring that Uranium is now regarded a strategic resource. It´s a only a matter of time when they will stop exporting. Now (Nov 07) they are demanding higher prices for their material.
6.
Supplies aren't always growing, but are actually declining 2006, partly due to flooding at two of the world's largest mines. Last October workers at Canada's Cigar Lake mine, half owned by Cameco, mistakenly hit water, flooding the mine. CAMECO said, production at the unfinished mine will now be delayed another 3 years and won't come online until 2011, and even this ain`t sure!
7.
2008 will also show, if the gambling of the utilities (not buying at spot market prices in summer the of 2007 to supress prices) has depleted their uranium reserves enough to generate a massive buying impetus.
8.
The U.S., besides France and Japan the largest producer and user of nuclear energy, is nowhere near meeting its own uranium needs. Uranium production should become a national priority of the US but isn`t.
9.
The uranium mining industry is still struggling with the repercussions of 1989. Soon after that Russia decided to sell its 435-million-pound from military sources. Other stockpiles also came into the market, too. Uranium was quickly hammered down to $10 per pound, exploration was curtailed, people set off and know how lost.
10.
2007: However: This year’s global uranium-mine production is forecast to rise 9% to 51,000 t U3O8, driven largely by expected higher production in Kazakhstan (!?), Namibia and South Africa. In 2008, world uranium production is forecast to increase by a further 18% to 60,300 t U3O8 due to increased production in Kazakhstan as a number of uranium mines continue to lift output towards full capacity and new projects commence production.
11.
Worldwide there are 284 research reactors operating as well. Add to that another 220 nuclear power ship and submarine reactors in operation. Most analysts never consider the fuel necessities of these “other users.”
12.
A typical one-gigawatt nuclear reactor requires around 200 tons of natural uranium per year. As of June, there were 442 nuclear plants in operation worldwide. There are 28 others being built, 38 on order, and 115 proposed. And the U.S. and Britain haven’t even started building new nuke plants yet. Assuming there will be 5 new reactors going online per annum and a growth of 7 % in yearly uranium production, production capabilities and use will not meet in the next 10 years.
Peter Schober Gives His View On Uranium 1

13.
Peter Schober Gives His View On Uranium 2

14.
Not one single ounce of uranium comes from the Middle East. Therefore direct geopolitical risk is not comparable with oil.
15.
The renowned Energy Watch Group estimates that of 300 uranium mines examined, roughly 90% of global uranium resources have ore grades below 1%. With global ore grades at very low levels, the overall supply issue becomes even more of a problem.
One production hurdle is the current shortage of sulphuric acid, used in uranium extraction, which will for example have an effect on Uranium One's 2008 production. The rising costs of the acid will be a specific problem for low grade producers, eventually reducing their earnings or postponing production, waiting for prices that will check these growing costs.
16.
The nuclear reprocessing sites have an annual production capacity of 5500 tonnes. It will take years to enhance the output capacity of these plants. Therefore there will be no short time relief from this side.
17.
It takes seven to 10 years to find and bring an economic uranium discovery into production. Very little supply relief is scheduled to come on line until 2011 or later. Nations who are not building a strategical reserve of Uranium and who are not systematically developing their resources (like the U.S.) will possibly not be able to build enough producing power capacity because they don' t have the fuel for that.
18.
Nuclear energy is one of very few alternatives that has a chance of alleviating the global energy supply crunch. It is safe, clean, and relatively cheap. The injuries and deaths associated with producing and utilizing nuclear power are minuscule in comparison to any other fuel source.
19.
Global warming: Nuclear power is the most obvious solution to this potential catastrophe. Other forms of alternative energy are interesting but are years or decades away from having a significant impact.
20.
As other energy sources are becoming scarce, their prices growing, the role of uranium as a still cheap, affordable and reliant source of energy will be greatly enhanced.
21.
The term “peak oil” means global oil reserves and production are in decline. The planet remains dependent upon oil because we didn’t have the foresight to develop a better energy strategy over the past three decades.
22.
The peak oil theory is going to be put to the test in 2008. Since global oil production has remained flat for the last few years, oil prices could really get out of hand next year as demand continues to rise.
In 2008, we're going to find out which OPEC countries are telling the truth about production capacities and reserves.
23.
Comparing Data of EIA and IEA the best thing to say is that we have a plateau on all liquids and a sinking production of crude oil. But looking only at output amounts is grossly misleading. The reasons of current price spikes is only marginally the popular “speculation activity” but you have to dig deeper finding the real reasons.
24.
Essentially we could say that the energy content of 'a barrel of oil' is less then it was yesterday and it has been going down for decades now. This can easily be seen, when looking at the quality of US imports with a growing part of low quality API crude (Casey: Energy Speculator 11/15/2007 has the graph)
25.
Also, the growing amount of oil consumed directly in the extraction of oil should be stripped out to get actual "net" oil production figure. It appears that this oil production-consumption accounts for an increasing %age of the decline in exports.
The reasons for this are many. As extraction gets more difficult, we use more oil to get less oil from the ground. The oil we get from the ground today is more energy intensive to process.
Overall efficiency of crude oil production should be measured by the "net energy" produced, not the volumes of 'liquids' coming up the well.
26.
The net effect of using Liquids to produce ethanol etc is not accounted for. Regarding the low EROEI of ethanol , the net surplus of these produced liquid is only of marginal significance.
27.
Last but not least. Looking at production numbers only, is misleading, because a growing part of production either stays in producing countries to fulfil their growing demand, or is not made available to the spot market because of bipartisan treaties (eg Angola and PR China).
28.
Regarding disinformation/misinformation on energy reporting: One should skip any article wherein EROEI is not at least mentioned or discussed!


Comments welcome: info@peter-schober-condulting.de

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Reader Comments (3)

In regards to your comment on Russia exporting uranium. You may not be aware that the Russian Premier visited Australia recently to sign a deal to allow Russia to import uranium from Australia.

It was the first visit by a Russian Head of state to Australia and the uranium deal was the main reason he came.

This would indicate to me that the chance of Russia entering into any new contracts for the sale of Uranium would be fairly limited.

Extract from HERALD TRIBUNE.

SYDNEY, Australia: Leaders from Russia and Australia signed a deal Friday to export Australian uranium to fuel Russian nuclear reactors, but promised it would not be transferred to Iran's disputed atomic program.

Russian President Vladimir Putin and Australian Prime Minister John Howard signed the deal during bilateral talks on the sidelines of a summit of Pacific Rim leaders in Sydney.

Link to full article:
http://www.iht.com/articles/ap/2007/09/07/asia/AS-GEN-APEC-Australia-Russia-Uranium.php

November 17, 2007 | Unregistered CommenterJames Baldwin

Peter:

I read your article "Peter Schober Gives His View On Uranium," which I feel is the most well-communicated, concise summary of the overall situation that I have read --I have been involved in uranium metal and infrastructure investments for over two years. Thanks.


Regards,
George Miller
~~~~~~~~~~~

November 18, 2007 | Unregistered CommenterGeorge Miller

Although I agree with Peter almost 100%, he does one dangerous thing: he presents only one side of the argument. If he were in court, he'd win the case because no defense argument would have been supplied. In a game of football, he'd be on the field with just his team...of course he'd win.

But in investing--and in life--it's important to be aware of what factor(s) might frack up your plans for world domination. What if? Although I still think Pete's got the hammer squarely on the head of the nail, let me throw in a few what ifs...

What if there is not one, but two or three major nuclear accidents within a short time? I'm talking big ones at old reactors that haven't been built using the new technology.

What if the disposal of nuclear waste becomes a really big pollution issue? People are already worried about trains speeding through their towns carrying glowing yellow-and-black leaky metal drums that'll fall off at the first bump. (Or, a less cartoony example: a train collision with an oil truck stuck on the tracks, a large explosion, and the irresponsible, conjecturing press asking if the truck might have been left there by terrorists trying to create a "dirty bomb"?) How viable will nuclear energy be when it's nearly impossible to dispose of spent waste? (And Yucca Mountain is far from being a done deal either.)

What if the lack of uranium for our reactors in the next few years results in a surge of research on solar and other alternatives? And what happens if there's a breakthrough within the next few years making solar or geothermal or whatever a viable alternative to nuclear? I'm not saying solar is going to ultimately be cheaper than nuclear, but let's imagine the world where there simply isn't enough uranium for everyone...China's got it all. Rather than going to war with the world's most populous country and superpower, what if the U.S. decides to take our lemons and make lemonade? We innovate and come up with a viable, competitive nuclear-alternative. What then?

What if a way is discovered to re-energize spent uranium and/or plutonium much more efficiently than right now? Again, this would be innovation--likely by us or the Europeans. Suddenly, recycling uranium becomes the "in" thing, and the world doesn't need to mine nearly as much.

What if someone figures out how to create cold fusion? (Okay, I think we're way farther than a few years away from that. But these are the what ifs.)

What if the global short supply of uranium results in more money going for oil drilling, and we decide to live with global warming in order to keep our lights on for right now? (Again, unlikely...but you never know when another Texan will make it into the White House.)

These are just a few what ifs. The uranium story is still a good one, a strong one. But let's not keep our eyes completely shut while we hold out our hands in front of us waiting to catch all that falling money.

November 19, 2007 | Unregistered CommenterJonathan Lane

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