Economics and Water Security Drive Nuclear Power Push in Middle East

This week, Iran announced the discovery of uranium deposits that, if confirmed, will bring the country’s estimated uranium supply up to 4,400 tonnes, according to The Guardian. The Middle Eastern nation is aggressively advancing its civilian nuclear power program and is said to have identified 16 sites for future nuclear power construction.

Most of the world is understandably suspect of Iran’s claim that its nuclear ambitions are strictly civilian. Yet nearly every nation in the Middle East has in recent years expressed interest in developing a nuclear power program; the United Arab Emirates (UAE), Saudi Arabia, Jordan and Egypt are the most advanced in this respect.

Over the long-term, the World Nuclear Association (WNA) believes the “trend to urbanisation” in these countries will “greatly increase the demand for electricity, and especially that supplied by base-load plants such as nuclear,” with “[t]he pattern of energy demand … becom[ing] more like that of Europe, North America and Japan.”

The region is pushing for nuclear power development for many reasons, the most salient ones being the desire to maximize the value of oil and gas resources and the need to acquire potable water resources — these driving factors are especially prevalent in Saudi Arabia and the UAE.

Saudi Arabia and the UAE, the world’s largest and second-largest producers of desalinated water, obtain most of their potable water from energy-intensive desalination plants. Over the next decade, Saudi Arabia plans to spend $66 billion on desalination plants and upgrades.

Desalination plants in these two countries are largely powered by oil and gas. Both governments believe these resources would provide much more economic value as exports than they do from being used domestically; nuclear power offers a viable solution to that problem.

“Water and energy are one for the UAE Government and, as such, these issues have been addressed by coordinated energy and water policies. Finding ways of balancing the demands from human and economic development with prudent management of water, energy and the environment will be a major challenge. But this challenge will also provide opportunities for more integrated policy making, international collaboration, and sustainable best practices,” said Mohamed Al Hammadi, CEO of the UAE-based Emirates Nuclear Energy Corporation (ENEC), at the World Energy Council’s World Energy Leaders’ Summit earlier this month.

Speaking at the POWER-GEN Middle East conference this month, Mike Waite, Westinghouse Electric’s international business development manager, expressed the belief that ignoring nuclear power as the solution to rising energy needs would be “a mistake of ‘gargantuan magnitude,’” Power Engineering International (PEI) reported. The UAE and Saudi Arabia, for example, could free up their massive oil reserves for export by using nuclear power to meet their energy needs; that’s “an economic difference of $4 to burn and $100 to sell,” noted Kelvin Ross, PEI’s deputy editor.

Developing nuclear power programs

At the end of 2006, the UAE and Saudi Arabia, along with their fellow Gulf Cooperation Council (GCC) members — Kuwait, Qatar, Bahrain and Oman — announced the commissioning of a study on civilian nuclear energy, according to the WNA. A few months later, the GCC entered into an agreement with the International Atomic Energy Agency (IAEA) to cooperate on a feasibility study aimed at developing a nuclear power and desalination program in the region.

Electricity demand in the UAE is projected to grow 9 percent annually and will require a capacity of 40 GWe by 2020, according to WNA research — that’s compared to the current 19 GWe capacity. Saudi Arabia has a current capacity of more than 30 GWe, but expected annual demand growth of 8 percent is expected to push that amount to 60 GWe by 2020.

In 2009, the UAE awarded a South Korean consortium led by KEPCO a $20.4-billion contract to build four 1,400-MWe reactors by 2020, the first of which are now under construction. The total 5.6-GWe capacity of the Baraka plant is expected to “produc[e] electricity at a quarter of the cost of that from gas,” a WNA report states. The plant will begin providing electricity to the grid in 2017.

Last month, IAEA Director General Yukiya Amano praised the UAE’s nuclear power efforts and the government’s cooperation with the United Nations’ industry watchdog after a visit to the Baraka construction site. “It is on schedule or even a little bit ahead of the schedule — this is very rare. It will be a good example for other countries,” said Amano.

In 2010, Saudi Arabia declared nuclear energy development a vital endeavor needed to meet its “growing requirements for energy to generate electricity, produce desalinated water and reduce reliance on depleting hydrocarbon resources.” The Kingdom backed up the royal decree by creating the King Abdullah City for Nuclear and Renewable Energy (KA-CARE) and appointing a Europe-based consultancy firm to develop a strategy for applying nuclear and renewable energy to the country’s desalination efforts.

Saudi Arabia expects to build 16 nuclear power reactors over the next two decades at a projected cost of more than $80 billion. The first units are planned to come online by 2022. By 2032, the total planned capacity of 17 GWe will provide about 20 percent of the country’s total electricity generation.

International support in the form of nuclear expertise and funding

Iran’s battle with the global community over the aggressive advancement of its nuclear program hasn’t had the damning effect on its neighbours’ nuclear ambitions that one might expect. In fact, many of the world’s top nuclear power nations are vying for a role in Middle Eastern nuclear power development. South Korea, the UK, the US, Japan, France, Russia, Australia and Canada have all expressed interest in aiding the UAE with its nuclear power program either through memoranda of understanding, cooperation agreements or direct financing. In September 2012, the US Export-Import Bank approved $2 billion in financing for components and services needed for building the Baraka power plant.

France, China, South Korea and Argentina have all signed nuclear cooperation agreements with Saudi Arabia, while Russia, the Czech Republic, the UK and the US are in the process of negotiating such agreements, according to the WNA.

Earlier this month, Japan’s industry minister, Toshimitsu Motegi, met with Waleed Hussain Abulfaraj, the vice head of KA-CARE. He offered his country’s assistance with building nuclear power plants in Saudi Arabia and proposed that the two nations sign a nuclear power cooperation agreement, reported MarketWatch. The Japanese government has allocated $13 million of its fiscal 2013 budget toward helping Japanese firms conduct research for overseas nuclear plant builds.

With no identified uranium resources, both the UAE and Saudi Arabia are open to uranium supply agreements with foreign firms. The UAE-based ENEC has awarded uranium supply contracts aimed at fueling the Baraka plant to Uranium One (TSX:UUU), Rio Tinto (NYSE:RIO,LSE:RIO,ASX:RIO), AREVA (EPA:AREVA) and Tenex.

 

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.