* Water leak suggests faster than usual corrosion and damage to core
* Japan's biggest nuclear reactor shut since May 2011
* Company will have to keep buying oil and gas to make up shortfall
By Risa Maeda
TOKYO, Aug 2 Chubu Electric Power Co could face the prospect of decommissioning Japan's biggest nuclear reactor after assessing damage this month from the world's first known case of seawater infiltration of a reactor core.
More than a year after the firm's Hamaoka nuclear plant was shut for safety reasons following the Fukushima disaster, water contaminated with low-level radiation is seeping internally in the No.5 unit's turbine building, suggesting serious damage to the core, experts said.
"We have not decided if the unit is to be decommissioned or whether the unit will be operable after repairs. We're making assessments in order to make a decision," Chubu Electric spokesman Akio Miyazaki said on Thursday.
A decommissioning or prolonged shutdown for repairs means Chubu Electric, which has reported four consecutive quarters of losses since Hamaoka was idled, will have to keep tapping oil and gas markets to run fossil-fuel stations, adding to the woes of Japan's third-biggest utility.
Reuters calculations show the company may have to import an extra 5 million tonnes of liquefied natural gas for each year the 3,617-megawatt Hamaoka plant is closed, assuming the generation shortfall is solely met by gas-fired plants.
Seawater entered the No.5 unit when Chubu Electric was shutting Hamaoka in May last year on orders from then-Prime Minister Naoto Kan because of concerns a large earthquake might strike nearby, producing a tsunami that would overwhelm the plant, as in the Fukushima disaster two months earlier.
As the shutdown of the seven-year-old unit with a capacity of 1,380 MW started, saltwater used for cooling steam from the boiling water reactor entered t h e core after a burst pipe damaged one of its heat exchangers.
About 400,000 litres (88,000 gallons) of corrosion-causing sea water entered the turbine building, with 5,000 litres getting into the reactor itself.
The extremely rare event set off an investigation that has unearthed widespread corrosion in the labyrinth of piping, pumps and steel partitions in the reactor building and secondary units.
As recently as Monday, the utility said it found water contaminated with low levels of radiation in the turbine building adjacent to Hamaoka's No.5 reactor.
"More detailed data from the operator is needed to make a judgement. But we should assume the reactor's strength has been impaired," said Atsushi Kasai, a former technical advisor on nuclear power to Shizuoka prefecture, where Hamaoka is located about 200 kilometres (120 miles) southwest of Tokyo.
Chubu Electric says no radiation has leaked to the environment but the discovery of radioactive cobalt below a 13-meter-high cooling tank beside the reactor confirms unusually fast corrosion through the walls of the stainless-steel tank.
As reactors abroad mostly use river water to cool the steam turbines used for power generation, no similar incident has been reported and little data is available for comparisons, Japan's atomic regulator, the Nuclear and Industrial Safety Agency, says.
Should Chubu Electric find serious damage inside the reactor pressure vessel after the fuel rods are removed, the damage may be irreparable, despite efforts to wash out the saltwater.
At a minimum, corrosion deposits may have formed a hard scale on the fuel rods, making them unusable, said Toyoshi Fuketa, deputy director general of the Japan Atomic Energy Agency, who is on a regulatory panel examining Chubu Electric's findings.
"They have to think hard about what they are going to do," Fuketa told Reuters.
The panel's experts have focused on whether below-par welding could have accelerated metal fatigue in the pipe that burst or if the structure of the heat exchanger was to blame.
Chubu Electric said on Monday completion of the plant's tsunami defences, including a 1.6 km seawall on a raised embankment 18 meters above sea level at a cost of 1 4 0 billion yen ($1.79 billion), w i l l take one year longer than planned and won't be finished until next December.
For the April-June quarter, Chubu said it had a net loss of 12.54 billion yen because of extra fuel and maintenance costs to run fossil fuel plants.
The company has not estimated the cost of repairs to the No.5 unit. There were no problems with the station's No.3 and No.4 units during the shutdown last year. In 2008 the company decided to decommission the No.1 and No.2 units about 10 years earlier than planned because of higher costs to meet tougher earthquake standards introduced in 2006.
The company will next meet the regulator's panel on Aug 10 and aims to end its investigation by the end of this year. ($1=78.2400 Japanese yen) (Reporting by Risa Maeda; Editing by Aaron Sheldrick and Clarence Fernandez)