Uranium: A Carbon-friendly Substitute for Coal

Meanwhile, here in Australia, while the federal budget deficit looms as a growing threat the structural health of the economy, there are actual positive economic stories going on, mostly in the energy and resource markets.

BHP is seeking permission from the West Australian government to mine the Yeelirie deposit in WA. BHP reckons it’s a $17 billion ore body at current uranium prices, capable of producing 5,000 tonnes of uranium a year for 30 years. It says the project would increase Australia’s uranium exports by 50%.

You don’t have to worry about a uranium supply glut quite yet, though. It’s a subject we’ve been covering over at Diggers and Drillers. There are other, smaller ore bodies that could enter into production if the uranium industry ever gets off the ground in Queensland. And many Australian explorers are active in Africa.

But the big story of the week-the one that’s got us really excited-has been under-reported. Norway’s largest oil company, StatoilHydro, and Chesapeake Energy Corp. from the States are kicking around Asia and Europe for unconventional natural gas projects to develop. Asia includes Australia, according to the story in Bloomberg.

Statol’s Olivind Reinertsen, who runs the company’s U.S. and Mexican operations told an interviewer that, “At this point in time, we are looking at 14 different plays all over the world together with them to try to narrow it down.” The plays will be similar to the Marcellus and Barnett shale formations in the States that helped increase un-conventional U.S. gas production in the last two years.

Australia has some shale formations that are suitable for this kind of production. It’s capital intensive. And the formations have to be injected with something to drive the gas out, mostly because the sandstone formations are not porous enough to allow for conventional production. They don’t call it unconventional for nothing.

But one thing you’ll notice about natural gas produced from shale formations is that it’s not coal. It’s not uranium either. As the Federal government tightens the noose around the coal industry via the delayed but not-dead-yet emissions trading scheme, we wouldn’t be surprised to see unconventional gas production enjoy its own mini boom in Australia.

Uranium, of course, would be a carbon-friendly substitute for coal in terms of generating abundant and cheap electric power for Australia’s economy. But there is an irrational fear of developing a domestic nuclear industry. So even though uranium is going to be a valuable export commodity, the fact that only WA, the NT, and SA permit new mines to open means you’re not exactly spoiled for choice when it comes to uranium explorers who have ore bodies that can realistically be developed in the next five years.

What does that leave us with? Well , you have conventional off-shore LNG and unconventional on-shore coal-seam-gas. Seeing as how we’ve got both those stories covered in Diggers and Drillers and the Australian Small Cap Investigator, we’re going to bid you adieu for the day and get on the shale story for the May issue of D&D. See you next week!

Dan Denning
for Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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4 Comments on "Uranium: A Carbon-friendly Substitute for Coal"

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I am all for creating a Uranium backed currency rather than gold – as it is quite useful and not that common. However if there was too much Uranium around that equates to cheap power – not a bad outcome really.

Biker Pete

Yep, but why go for yellowcake, when fruitcake will do? ;)

Philip Coggan

Great idea! No more gold heists, and bank robbers would have to wear lead gloves!

Biker Pete

And _glowing_ testimonials in court, no doubt, Philip. (Actually, I’d rather my testimonials _didn’t_ glow, in court, or anywhere else… at least until they reach their use-by-date, anyway!) ;)

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