While the world is rethinking nuclear energy as an affordable and reliable source of power, following Japan's post-tsunami nuclear crisis, some developing countries are increasing their focus on nuclear energy development and investments.
After the Fukushima Daiichi nuclear disaster in March 2011, many developed countries either made a decision to scale back their existing share of nuclear power or rejected proposals to build new reactors. Japan announced that it plans to close down all of its nuclear plants by 2030. This decision remains controversial, as nuclear industry in Japan has been producing 30% of the country's electricity. Many believe that some nuclear plants may remain operational, despite reductions.
Similarly, following the disaster, Germany renewed its focus on the nuclear phase-out issue that has been high on its political agenda in recent decades. The country came out with a decision to phase out completely nuclear technology by 2022, hoping to increase reliance on its competitive edge in the renewable energy sector.
Even in France, which remains a major player in the development of nuclear technologies and where the nuclear power industry has been historically very strong, President Francois Hollande has pledged to reduce the share of nuclear power generation from 75% to 50% by 2025. The shift of the developed countries' focus away from nuclear power manifests itself in lack of funding to support large projects, although European, Japanese, and U.S. researchers have research advances to be noted.
At the same time, some developing countries are going full speed toward their goal of increasing their domestic power supply via nuclear, which they see as reliable and clean power, and becoming global exporters of technologies. They are heavily investing in nuclear technology and plan a lot of new builds. According to Bloomberg Businessweek, “70 percent of new reactor construction is taking place in China, Russia, India, and Korea."
China, for example, after lifting its nuclear moratorium, has undertaken a broad R&D effort to have fast reactors comprise about one-fifth of its nuclear capacity by 2030. The country's future construction and export plans are very ambitious, with 17 nuclear power plants in operation and 29 under construction, representing 40% of the world's total number of reactors under construction, significantly ahead of Russia, India, and South Korea. Provided China is successful in its efforts, it has the potential to become a leader in the nuclear power industry.
At the end of 2012, the Russian government renewed its commitment to developing Russia's nuclear industry, announcing that its R&D programs will be accelerated and it will increase its spending. Russia's long-term strategy is to move to inherently safe nuclear plants using fast reactors with a closed fuel cycle and MOX fuel with the hope that nuclear power will provide 23% of the country's energy mix by 2030. While Russia is building new plants at home, exports are among its key economic objectives. The State Nuclear Corporation, Rosatom, has many foreign contracts for the supply of nuclear fuel and uranium enrichment services, while Atomstroyexport has been competing for and winning contracts to build affordable reactors around the world. Unsurprisingly, Russia has been focused on nuclear cooperation and investments in its near abroad. For instance, it is lending $9B to its neighbor Belarus for a construction of a Russian designed nuclear plant and has been collaborating with Ukraine on nuclear initiatives.
Changes in the government following the death of President Hugo Chavez may lead to negative consequences for Russia's energy and other projects in Venezuela. Before going to Cuba for treatment, Chavez announced that Vice President Nicolas Maduro should inherit his power. Maduro is considered even more leftist than Chavez and could potentially keep to the same political tendencies. However, he is lacking the popularity that Chavez had. While the opposition in the country is quite organized, the system is volatile. In-fighting between the supporters of the existing system and the opposition will make the situation in the country even more unstable, which would mean uncertainty for the Russian companies doing business in Venezuela. If the opposition comes to power, Russia could lose all the contracts and agreements signed with the government of Chavez. Russian investors could be simply shown the door, something that previously happened to the U.S. investors.
There are many significant projects that Russia is developing in Venezuela. Among them is the Junin-6 field in the Orinoco Oil Belt, where commercial production has already started. The total investment in the project is evaluated at $20 billion. Additionally, Rosneft has signed documents agreeing to participate in several projects on the shelf of Venezuela, including natural gas development projects. There are also agreements to develop hydroelectric projects and nuclear energy projects. All this is in addition to the defense cooperation between Russia and Venezuela. In 2011, Venezuela became the largest importer of Russian arms for ground forces, according to the Moscow based Center for Analysis of World Arms Trade. In 2012, Venezuela became the second largest purchaser of Russian arms, after India. The value of arms acquired by Caracas from the Russian defense industry was estimated at $4.4 billion.
The main worry is that the work of the Russian oil companies will slow down due to bureaucratic red tape, which will really complicate Russia's position in Venezuela. Since Russia has no history of defending its investments using its military power, the new government may feel tempted to temper with Russia's investments. However, Russian political and energy experts believe that political chaos at this stage is unlikely. Russia is also hoping that its investments may be safe due to the traditional mistrust of the U.S. politics by Venezuela, which is expected to persist. Either way, things will become more clear only after the new President is elected.
The shale oil revolution led by the developments in the United States signals major changes for the global energy markets. Many experts predict that oil prices could drop sharply, decreasing other oil exporting countries' GDPs by a significant percentage. For instance, Russia's GDP could fall by 1.2–1.8% over the next few years. This is why major oil exporting governments in Russia and the Middle East feel the need to catch up with the U.S.
However, catching up may prove more difficult than originally thought. In the past seven years, the U.S. has made significant progress in the field of tight oil production. As a result, oil imports into the country have fallen to their lowest in 25 years and according to BP's "Energy Outlook 2030" report, dated January 2013, the "rapid increase in shale oil production could enable the U.S. to overtake Russia and Saudi Arabia as early as this year." This could put downward pressure on oil prices, which will not bode well for either Russia or other energy exporters' budgets. To avoid suffering significant long-term losses, Russia decided to start its own large-scale shale oil development.
In addition to its main shale oil deposit concentrated in the Bazhenov Formation in Siberia, Russia already holds a lot of "hard-to-reach" oil reserves spread out around its territory. Therefore, nearly all Russian energy companies have projects to produce "difficult" oil. Several oil service companies have been hired to recover stranded oil reserves. Multiple projects have been selected for pilot development. Companies such as TNK-BP are set to invest millions in the development of hard-to-reach oil. Rosneft has dozens fields in Western Siberia that hold billions of metric tons of stranded oil reserves. It struck a deal with ExxonMobil to develop more than twenty other sites, while a join venture between Gazprom Neft and Shell plans to develop another oil field.
Despite the attention, all these projects are at a very early stage of development for a variety of reasons. First of all, Russia's "difficult" oil reserves are harder to access than those in the United States and Europe. Russia does not have the infrastructure or the know-how necessary to tap the majority of stranded oil. Although the latest technologies are available in the market, to spread the financial risks and to employ the right technologies, Russians are looking to engage foreign partners. Secondly, Russia's investment climate is not stable. Previous scandals involving foreign investors in Russia's energy sector made it extremely unpalatable to do business there, despite promises of high returns. Another issue is the regulatory uncertainty or Russian government's inability to offer the companies terms that would make their investments attractive enough to participate. According to multiple sources, the government is currently working on approving tax breaks for companies undertaking such projects.
And yet, despite all the uncertainty, Russian oil experts believe that Russia has a reasonable chance of catching up with the U.S. in the next five years or so. Only time will tell whether those experts have a point.