21 July 2009: Wall St Journal
By Tahani Karrar
DUBAI - - The United Arab Emirates' $41 billion nuclear program, aimed at resolving an impending shortage of electrical generating capacity, is gaining support from Western nations, suggesting a major shift in focus in the oil-rich region from security to business opportunities.
The rise in global energy demand, coupled with concern about greenhouse gas emissions, requires not just more renewable energy but a revival of nuclear power generation as well, said Giacomo Luciani, Geneva-based director of think tank Gulf Research Center.
"American companies and other nuclear power contractors haven't built a nuclear plant for a long time, so this is a great opportunity," Luciani said.
Since the 1980s, the nuclear industry, dominated by the U.S., France, Germany, Russia and Japan, has undergone immense restructuring and consolidation as contracts dried up after the Chernobyl disaster.
The International Atomic Energy Agency projects more than half of the world's 439 reactors in use in 2007 will be retired by 2030. Although most of these retirements will be in Europe, the majority of the new reactors will be built in the Far East, with substantial new construction also in the Middle East and South Asia.
Alan McDonald, head of the Program Coordination Group at the IAEA's Department of Nuclear Energy, said nuclear power companies will be attracted to projects in the Middle East because they will be tendered by oil-rich governments and last longer.
"Investment is more attractive to power companies if they can get direct government investments, government-backed loans and long-term electricity sales contracts with the government," McDonald said.
For decades, concern about political security in the Middle East has meant a lack of Western support for the nuclear power ambitions of Gulf countries such as Saudi Arabia and Kuwait. But the idea that nuclear power should be withheld from developing countries in undemocratic political environments, for fear of proliferation, has changed, Luciani said.
"Proliferation is happening independently. North Korea is especially telling and this strategy [of withholding the technology] hasn't yielded good results in Iran either," said Luciani.
Ben Rhode, a research analyst at the International Institute for Strategic Studies, said while nuclear companies have a strong commercial interest in the U.A.E.'s nuclear power program, political security and business interests don't necessarily clash.
After all, the U.A.E. has gone out of its way to demonstrate its nonproliferation intentions by signing agreements and protocols with the U.S., U.K. and France to forgo enrichment and reprocessing technologies that can be used for weapons-making.
"Western countries are keen on the U.A.E.'s program not only because it provides business opportunities but also because it is a strong counterexample to Iran's argument that Western countries wish to deny Muslim countries advanced technologies," says Rhode. "The U.A.E. could serve as a model for future nuclear programs in the region."
According to Barbara Judge, chairman of the U.K. Atomic Energy Authority, energy security, energy independence and climate change are driving the shift in Western attitudes but Abu Dhabi's oil wealth and the undemocratic nature of the U.A.E. government are also pluses as they ensure the U.A.E will be able to afford costly maintenance and there will be little political resistance to the program.
"Any country that has a strong central government is good, because you don't have the changes in policies when different parties come into power, and energy should not be a political issue," she said.
The U.A.E. hopes to build three nuclear reactors to generate power to meet a projected rise in electricity demand to more than 40 gigawatts by 2020 from below 19GW at present, according to the Emirates Nuclear Energy Corp., the body charged with implementing the program.
ENEC plans to award contracts in September for the primary construction work on the first reactor. The U.A.E.'s nuclear program will entail the use of Gen III and Gen III+ light-water reactors, says ENEC. In total, industry sources estimate the project to cost $41 billion, though ENEC declined to comment on cost at this stage.
The first reactor is scheduled to come onstream by 2017, under the guidance of the International Atomic Energy Agency, and ENEC will be governed by the U.A.E.'s independent regulator, the Federal Authority for Nuclear Regulation. ENEC envisages the safety-related concrete, the first step of the building process, will be poured in 2012.
Luciani said companies that gain a foothold in the U.A.E.'s nuclear program also stand to make massive gains elsewhere in the region as other members of the Gulf Cooperation Council - a trade bloc that includes Bahrain, Kuwait, Oman, Qatar and Saudi Arabia, as well as the U.A.E. - look to follow the emirates' example and build nuclear plants for their expanding energy demands.
GCC countries have experienced soaring demand for power, as their economies grow, their work force increases and demand for desalination plants to produce potable water rises.
For the nuclear industry and its personnel, the U.A.E. project is huge.
"As many as 2,300 nuclear scientists, technicians and support staff will be needed to run the U.A.E.'s proposed three-reactor civil nuclear power program within the next decade," Mahmoud Nasreddine, an adviser to the secretary-general of the League of Arab States, an intergovernmental organization, said at a recent GCC Nuclear Summit in Dubai.
Other Arab countries, such as Saudi Arabia and Qatar, have already taken their first steps toward building nuclear power plants, signing memoranda of understanding with nuclear countries. Whereas the U.A.E. nuclear power plant is independent and will only service the emirates' needs, other GCC countries have yet to decide whether their nuclear power plants should provide energy on a national, sub-regional or regional basis.
According to the Middle East Economic Digest, three groups of contractors are shortlisted for the U.A.E. contract to build the first reactor: a French consortium of Areva, GdF Suez (GSZ.FR) and Total SA (TOT); a Korean group comprising Korea Electric Power Corp. (KEP) and Hyundai Engineering & Construction Co. (000720.SE); and a third group involving Hitachi and General Electric. The companies declined to comment.
The U.K.'s HSBC (HBC) has won the advisory mandate for the French consortium, beating French banks BNP Paribas SA (BNP.FR), Calyon - the investment arm of Credit Agricole SA (CRARY) - and Societe Generale SA (SCGLY). A group of Japanese and U.S. banks are pitching to the Hitachi-GE consortium.
