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