Saudi Arabia to tap nuclear energy market

Dubai Initiative Fellow Justin Dargin speaks to Nuclear Energy Insider about Saudi Arabia's nuclear energy initiative.

By Heba Hashem

KSA will leverage nuclear energy to service domestic energy demand, and in doing so, free up natural gas and oil reserves for its petrochemicals and export sectors.

Rapidly increasing power and water shortages in the Kingdom of Saudi Arabia (KSA) have forced the local government to explore all sources of energy. The installed energy capacity in the kingdom has risen from 43,000 MW in 2009 to 46,000 MW in 2010, and by 2018 it is expected to rise to 65,000 MW.

This suggests an additional amount of 3,000 MW is needed every year. As a result, KSA is expanding its power grid across the country and is adding a new power plant to the grid every 20 months on average.

Until other energy sources such as nuclear can be developed, a shortage of gas implies that Saudi Arabia would need to burn oil in order to meet this spiralling demand. This would require holding back an estimated 1.5 million barrels of oil equivalent per day, otherwise destined for world markets.

Economising energy

KSA is primarily promoting nuclear energy for domestic power consumption to free more of its natural gas for petrochemical production and enhanced oil recovery, while conserving its oil for export.

Saudi officials have been interested in nuclear energy for three decades, yet it is only recently that progress was seen. This year, Finnish engineering consultancy Poyry was appointed to evaluate and explore the economical and technical feasibility of the KSA’s involvement in the complete nuclear energy cycle, including uranium enrichment.

“In a bid to lower the cost of uranium purchases and construction of nuclear plants, Saudi Arabia is interested in involving itself in all aspects of the nuclear production process, including enrichment, said Justin Dargin, Harvard University Scholar. He added that although KSA hasn’t announced it yet, this may involve NOC-NOC collaboration with major uranium producing countries.

Last month, U.S. Shaw Group, Japan’s Toshiba Corp and Exelon Nuclear Partners formed a partnership to provide operation and construction for at least two nuclear power plants in Saudi Arabia. This follows the establishment of the King Abdullah City for Nuclear and Renewable Energy, which will manage future nuclear energy activities.

Also last month, UAE’s independent nuclear sector regulator, The Federal Authority for Nuclear Regulation (FANR), issued two licences for the preparation of a remote site near the UAE-Saudi Arabian border to ready it for construction of a nuclear power facility.

These site preparation licences have been given to the Emirates Nuclear Energy Cooperation (ENEC) to conduct preparation activities at the 13 square-kilometre Braka site, 53km from the city of Ruwais, near the Saudi border. However, ENEC still needs to obtain a separate authorisation from the Environment Agency-Abu Dhabi to begin the work.

Grid links

In another attempt to meet the hike in power demand, a mutually beneficial project that will link the power grids of electricity-deficient Egypt and Saudi Arabia has been announced this month. The US$1.5 billion project aims to help both countries meet peak-time demand. The power link’s first phase is planned for completion by 2015, and an international tender for the project’s work is scheduled for January 2011.

Furthermore, KSA plans to invest around US$80 billion to increase power generation and transmission network over the next decade. Energy researcher at Judge Business School in Cambridge University, Jim Krane believes that the front-loaded capital needed for nuclear development is not a problem for Saudi Arabia, as “the country’s trade surplus and hard currency reserves make nuclear development an ideal investment”. He also suggests that nuclear power’s long horizon- around 60 years- would allow the government to transfer today’s oil wealth to future generations.

According to KSA’s deputy minister, Saleh Al Awaji, the kingdom will continue studying its nuclear energy options, as costs of renewable energy are still very high when compared to conventional sources. “Nuclear might be one of the long term strategies to produce electricity and desalinate water if we take into consideration that the daily average for power generation is around 1.3 million barrels of oil equivalent”.

Desalination and nuclear a good fit

In 2002, the Oil & Gas Journal reported that the kingdom’s 30 desalination plants produce about 21 percent of the world’s total desalinated water production, while as 70% of the local water consumed in its cities comes from desalinated sea water. As the population grows, KSA might need to spend another $40 billion to build more desalination plants, a process that will prove extremely expensive.

There are multiple advantages in combining water desalination with nuclear energy for electrical generation. Kazakhstan’s BN-350 fast reactor, which has produced 135 MW of electricity and 80,000 cubic metres per day of potable water, lasted for nearly 30 years. Similarly, Japan has ten desalination facilities that are linked to pressurized water reactors producing electricity.

While Saudi Arabia lacks guaranteed uranium deposits, its Tabuk region has low-grade amounts of uranium and thorium. Moreover, the country has large phosphate deposits that could be exploited; the two largest of them measuring about 750 million metric tons.

Although the extraction of uranium from phosphates can be costly, phosphates could provide a steady supply of uranium for the country’s desalination plants. This would only leave them with the minor problem of uranium enrichment; of which both Russia and France would be only too eager to supply.

On another note, Dargin, suggests that nuclear power generation could be a potential revenue source if KSA exports power though the GCCIP to its neighbours. He believes that power sales through GCCIP, and perhaps to other Arab countries, is an underestimated consideration for the Gulf drive for nuclear power production.

Meanwhile, if the U.S. government backs Saudi Arabia’s bids to build a reactor, they’ll be creating the potential for nuclear growth within the GCC, or Gulf Cooperation Council, whose members include Saudi Arabia, Kuwait, Qatar, the UAE, Bahrain and Oman. Those countries share one vision- they are all reviewing the possibility of producing nuclear fuel so they can export more oil and gas to foreign countries.

Ratification required

However, according to Mark Hibbs, senior associate of the nuclear-policy program at the Carnegie Endowment for International Peace, until the United States and Saudi Arabia conclude a bilateral nuclear cooperation agreement under Section 123 of the U.S. Atomic Energy Act, none of the U.S. firms can supply nuclear technology, material or equipment to the kingdom.

While as the UAE has already signed this agreement with the U.S. in 2009, the negotiation for a 123 agreement with KSA will possibly be delayed for a few years- until the recently implemented U.S.-UAE pact is evaluated. Although U.S. firms cannot participate until this bilateral agreement is reached, companies from other countries are potential suppliers.

Thus, Saudi Arabia can elect to contract with French or Japanese firms to set up reactors, following a bilateral cooperation agreement with each country. In all cases, with or without this agreement, France and Japan cannot transfer enrichment and reprocessing items to Saudi Arabia, as both countries joined other nuclear exporters in the G8 last December, pledging indefinitely not to export items for enrichment to newcomer countries.

As for having the means and infrastructure to deploy power reactors, there is no doubt that Saudi Arabia has sufficient financial resources. Moreover, its experience in setting up conventional power plants as large as 25,000 MW is similar to the capacity of a modern nuclear power plant, and the kingdom’s grid is stable and growing.

Yet the kingdom lacks skilled human resources and a unified legal framework for implementing nuclear power development on its own. Neighbouring oil exporter UAE, which will build its first nuclear reactor by 2017, may provide Saudi Arabia a blueprint for moving forward, having concluded a restrictive 123 agreement with the U.S. that pledges not to pursue sensitive fuel cycle activities (uranium enrichment and spent fuel reprocessing).

In conclusion, no country in the Middle East has built a nuclear power reactor yet apart from Iran, which may begin using it soon to generate electricity. Although Saudi Arabia signed a nuclear cooperation deal in 2008 with the United States, it might not be as willing as the UAE to forfeit the right to enrich its uranium services.

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