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Posts tagged ‘natural gas’

Standpoint on uranium

February 28th, 2014

Energy expert Thomas Drolet looks at nuclear power from a global point of view

by Greg Klein

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This is the second of a two-part interview. Read part one here.

Uranium stocks surged on the February 25 news that suggested Japan was reinforcing its long-term nuclear commitment. In part one of an interview with ResourceClips.com, energy expert Thomas Drolet discussed the Japanese situation and its effect on uranium prices. In part two of this interview, he covers several other aspects of nuclear energy from the perspective of a chemical engineer whose career with electrical utilities, including a term as president/CEO of Ontario Hydro International, gives him insight into the global energy picture.

Uranium prices in perspective

While miners understandably fret over uranium’s dismal price, the commodity itself means very little to the cost of nuclear power. Drolet says uranium contributes about 1% of the price of Candu energy, and about 2% to 3% of electricity produced by the average light water reactor, which requires enriched fuel.

Therefore utilities aren’t overly concerned about uranium’s price—“except do they want to keep all their cost inputs down? You’re darn right they do.”

Megatons to Megawatts has ended—or has it?

The Highly Enriched Uranium agreement ended in December, an event that was predicted to threaten supply. So far it hasn’t, Drolet maintains.

Energy expert Thomas Drolet looks at nuclear power from a global point of view

“One of the common opinions in the media is that that would mean an instantaneous falloff of 26 million pounds of U3O8 a year. That’s not true,” he says. “There were some amendments to the original contracts that allowed some continuing supply to the world, not just the U.S., to continue for about three to eight years. It’s not 26 million pounds that were lost to the world, mostly the U.S. It’s something like 14 or 15 million pounds.”

But he adds, “In several years that will be a major event.”

The source of that HEU supply has ambitious plans

“Russia’s into a very aggressive internal nuclear building program and exports to former East Bloc countries, south Asian countries and Turkey,” Drolet points out. “That will sop up a lot of supply from Kazakhstan and from Russia itself, and probably from Africa, where Chinese and Russian buyers get a lot of their sourcing. The very fact that Russia is building so much for itself and for export means that the world will have to get replacement uranium from somewhere else. And that’s why I think eventually all these shuttered mines will come back.”

Chinese nuclear expansion, he emphasizes, will be the primary reason for increased uranium demand. Russia holds second place, both for domestic use and export. The country’s state-owned Rosatom builds and operates reactors, enriches fuel and, through its subsidiary ARMZ, mines uranium in Russia and abroad.

“They have a marketing strategy that’s unique in the world, in that they’re supplying a turnkey service,” Drolet says. “Not only do they supply the reactors but they operate them or train local operators to work along with their staff. They supply the fuel and they’ll take back the spent fuel for disposal. It’s a very marketable package. Nobody else has adopted that, but I think some people will start to consider that model.”

Other countries ramp up nuclear

India ranks third for global uranium demand. “They have four or five reactors coming online this year and something like 13 under construction. Close behind them are the new commitments by South Korea in the UAE, for example, where they’ve sold four reactors. The first of those will be coming online in a couple of years. Saudi Arabia announced they’re going to construct 10, and they’re currently out with preliminary bid documents to the world suppliers. I can assure you that people like Toshiba, Westinghouse, General Electric, the Russians, the Chinese and the South Koreans are likely preparing to have a go with Saudi Arabia. Then there’s Jordan and Turkey, but we’re getting back to smaller numbers.”

What about the U.S.?

Ambivalence might characterize American policy. “The current administration has said it supports a balanced mixture of energy supply, including nuclear power,” Drolet says. “The Nuclear Regulatory Commission is a very strong institution with a prescriptive set of policies and procedures. It’s a very onerous burden for reactor operators but good for the public.”

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Propping up the oil patch

February 8th, 2014

Juniors seek near-term cash flow as the fracking demand for sand expands

by Greg Klein

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It’s the stuff that opened up—or more literally, holds open—the unconventional oil and gas deposits that have revolutionized the energy industry. As frac sand demand continues to increase, explorers have taken on the task of finding and developing new projects. In many cases they’re Canadian companies finding Canadian sources for Canadian customers.

Hydraulic fracturing, or fracking as it’s best known, involves pumping a high-pressure mix, often about 90% water and 9.5% sand or other proppants, to create cracks or fissures in otherwise impermeable rock. Proppants prop open the fissures, allowing gas and oil recovery. The process has undergone major advancements since its 1947 introduction and, more recently, has become vital to extraction of shale oil and gas, and coal bed methane. In 2012 Industrial Minerals credited the process for 90% of U.S. wells supplying 30% of American oil and natural gas production. By March of that year, Texas-based Cadre Proppants had sold a billion pounds of sand in just six months.

Explorers hope for near-term cash flow as the fracking demand for sand expands

An aerial view of Rainmaker’s neighbour shows
the near-surface deposit of Canadian Silica Industries.

Numbers released by PacWest Consulting Partners in December foresee 8% annual growth in American land proppant demand, “from 63 billion pounds in 2013 to 75 billion pounds in 2015.” These aren’t uniform commodities but, PacWest stated, the competitors—resin-coated sand and synthetic ceramic proppants—are losing market share to lower-cost natural silica sand.

The boom affects transportation too, especially railways. In December CN TSX:CNR president/CEO Claude Mongeau stated, “Over the past five years, CN’s frac sand market has grown by nearly 300%, rising to more than 50,000 carloads in 2013.”

How much sand is that? According to U.S. Silica Holdings NYE:SLCA president/CEO Bryan Shinn, quoted by the Wall Street Journal in December, “It takes 25 railcars of sand, on average, to frack one well.”

2012 prices cited by Industrial Minerals range between $60 and $200 a tonne, depending on size and quality.

Wisconsin is widely credited with producing about 75% of American supply and a big chunk of Canada’s too. One vertically integrated Wisconsin miner, Calgary-headquartered Source Energy Services, has Q1 plans to open Canada’s largest frac sand storage and distribution facility near Grande Prairie, Alberta. Capable of unloading 100 railcars of sand in less than a day, the Wembley terminal will be one of four new facilities the company intends to open this year. That will bring its total up to 15 along a 4,800-kilometre network from northern British Columbia to southern Texas.

Canadian sources mostly consist of “private producers scattered around the Prairies,” according to Chris Healey, VP of operations for Rainmaker Mining TSXV:RMG. In January his company signed a letter of intent for the 1,471-hectare Jayjay Lake project in northern Saskatchewan and a purchase and sale agreement for two other northern Saskatchewan properties totalling 10,275 hectares. On February 5 another LOI came through for the 24,363-hectare Peace River project in northern Alberta.

“We’re not stopping there,” Healey says. He hopes to see Rainmaker “move to the next level by becoming a producer, either by developing one of our properties to production as quickly as possible or potentially buying a producer. We’re developing our company as a pure frac sand play.”

Among the attractions of the frac sand space are “the potential for market growth, which is substantial, and the ability to acquire assets near customers at reasonable costs.”

Rainmaker’s access to road and rail also has Healey encouraged. “Transportation is one of the key factors in a location, offering proximity to end users,” he says.

The cost of exploration is reasonable too, compared to other commodities. “It’s simple technology to drill into the sand,” Healey points out. “The Jayjay Lake property is an old beach from the glacial lake that covered the Prairies up to 10,000 years ago. You can dig into it with a shovel, a backhoe or a post hole auger. The Peace River property will probably be a bit harder but not particularly hard. We can still use an auger to drill test.”

Patrick Kluczny agrees. A project geologist/manager with Dahrouge Geological Consulting, he was instrumental in evaluating the Peace River project for the vendors, Zimtu Capital TSXV:ZC and its partner.

Unlike other mineral deposits, frac sand is loosely consolidated so there’s no need for core drilling. “We can use an auger drill, which means that the costs of exploration will be a lot lower,” Kluczny says. “Auger programs are on an order of magnitude cheaper than core programs. Also these deposits pretty much have to be close to surface.”

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