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Sat 26 Jun 2010 04:00 AM

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Nuclear ambitions

Abu Dhabi's plunge into the nuclear age has put the Middle East on the nuclear map. UME examines the state of play, and speaks to Holger Rogner of the IAEA.

Nuclear ambitions
Holger Rogner, section head at the IAEA, says the agency is there to help countries develop their nuclear energy programmes.
Nuclear ambitions
Nuclear ambitions
Delays in the construction of the European Pressurised Reactor at the Olkiluoto 3 nuclear plant in Finland undermined the French bid to build the nuclear power plants in Abu Dhabi.

Abu Dhabi's plunge into the nuclear age has put the Middle East on the nuclear map. UME examines the state of play, and speaks to Holger Rogner of the IAEA.

Nuclear power is coming to the GCC, and to the wider region. Burdened with the lion's share of power generation in the United Arab Emirates, and devoid of vast resources of natural gas some of its neighbours enjoy, it is perhaps not surprising, that Abu Dhabi has taken the lead in the push towards alternative sources of energy.

Last November the emirate signed a US$20bn contract with a consortium led by the Korea Electric Power Corporation (Kepco), which includes Samsung, Hyundai, Doosan Heavy Industries, Westinghouse and Toshiba,  for four nuclear reactors with a capacity of 1,400MW each. The first of these will be completed in 2017, and all four are planned to come online by 2020.

The economic rationale behind oil-rich countries going nuclear is straightforward, and boils down to a simple maths, says Holger Rogner, section head at the Department of Nuclear Energy at the International Atomic Energy Agency (IAEA): "With the price of oil around 70 to 80 dollars per barrel, its a very simple calculation: Imagine you produce your oil at a cost somewhere between two to five dollar per barrel, and you need three barrels of oil to produce the equivalent of one barrel of electricity. If you use that oil for domestic power generation, you will get about15 dollar, if you sell it on the international markets you will get around 210 to 240 dollars. Just take that as a back of the envelope calculation."

In addition, some GCC countries, such as Abu Dhabi and Kuwait, and are looking to reduce their dependence on imported gas as a feedstock.

While the interest in nuclear power amongst GCC states can thus hardly be surprising, a few eyebrows were raised when the  Kepco consortium was awarded the Abu Dhabi contract.

The Areva-led consortium, in particular, was stunned, as it had been confident of clinching the deal. The group of French companies, which consisted of Areva, GDF Suez, Total, Vinci and EDF, were convinced of the superiority of their product, Areva's European Pressurised Reactor (EPR).

But the fanfare of an official state visit by French President Niklas Sarkozy in May 2009 was undermined by warnings from European regulators that there was insufficient independence between the day-to-day safety systems and emergency systems on the EPR. Areva is subject to further bad press over the delays in the construction of the Olkiluoto 3 nuclear plant in Finland. The plant was scheduled to become operational last year, instead Areva are as yet unable to confirm a completion date.

One of the main sticking points for the Abu Dhabi government is likely to have been the high costs associated with the French bid. Here the US-Japanese bid, which centred around General Electric and Hitachi, was also left wanting, some say. "The Korean bid was 40 to 50 percent cheaper than the competition," says Michio Hayashibara, director at Marubeni Power and Asset Management. "In their domestic market, Japanese producers are used to the client expecting very high safety standards and being willing to pay for it. But they should offer good quality as well as a good price."
But Kepco are unlikely to have won the bid solely on the back of price calculations, says Rogner. He believes that Abu Dhabi, like all the countries in the Middle East who are seeking to develop nuclear power, are looking at several factors. "Its not just selling the plant, it is about education, about the fuel supply, about other services.  Its not just the technology per se, it's the package. That's what the French didn't understand in the UAE deal, they thought, ‘We have the best technology, what can go wrong?'"

Kepco's offer was the package with which Abu Dhabi felt most comfortable with, says Rogner. He points out that EDF was initially not willing to commit to operating the plant. This turned out to be a serious strategic blunder in the bargaining process, as the emirate was not interested in running the plants itself, and has effectively outsourced the nuclear project to the Koreans. EDF did change its stance later on, but it was too little, too late.

By being the first to go nuclear in the Middle East, Abu Dhabi has certainly been getting a lot of attention on the international stage, as well as envious glances from its neighbours.

These are, however, not likely to follow the blueprint for nuclear development set out by the emirate. "I don't think the other countries will necessarily follow the UAE template of outsourcing everything, I know for example that other countries are hoping to develop their own human resources base," says Rogner. He believes that while aspiring countries will very likely make use of outside help initially, they will aim to develop their own expertise, run their programmes independently of a foreign operator.

Whose next?

And which Middle Eastern country will be the next to step into Abu Dhabi's footsteps and commit to nuclear energy? Jordan and Egypt are the Arab states that have so far made the most progress in developing their programmes.

In November, Australia's WorleyParsons was appointed to carry out a feasibility study for Jordan's first 1,000MW nuclear reactor, to be built near the port of Aqaba. Shortly afterwards the government awared a US$173m contract for a nuclear research reactor to the Korea Atomic Energy Research Institute and Daewoo Engineering & Construction.

WorleyParsons is also advising Egypt on its plan to build a 1,200MW reactor. During the next eight years, the firm will chose the site and the technology, as well as oversee the construction and the start-up of the plant.

In May, Russia's energy minister Sergei Shamtko admitted that Russia may help Syria built an nuclear power plant. His comments came after Russian president Dmitry Medvedev put the prospect of nuclear cooperation on the table during his visit to Damascus. Russia's move will have caused consternation amongst Western governments, who fear that Syria harbours ambitions to enrich plutonium for military use. In 2007, the Israeli airforce destroyed what the US said was a nascent plutonium-producing reactor.
Iran, has been developing is nuclear programme for years, and may be have its Bushehr plant coming online within months , if statements made by Iranian and Russian officials are to be believed.

In the GCC, Kuwait is a likely frontrunner, having signed a Memorandum of Understanding (MoU) with the France after another, and this time more rewarding visit to the region by Sarkozy. The MoU will go a long way in overcoming Gallic gloom over the UAE debacle, and more or less guarantees the involvement of French companies in future Kuwaiti nuclear projects.

As of yet, no timeline for the development of nuclear capacity has been revealed by the kingdom. A set of studies on the viability and cost of a nuclear energy project in Kuwait will be ready for decision makers by early 2011, however.

Work to do

The countries seeking to join the nuclear age clearly have work to do to. "Key challenges are the lack of infrastructure, and by that I mean  soft infrastructure such a nuclear law, human resources, independent regulators, education, all these aspects," Rogner identifies the main hurdles.

Furthermore, time delays can arise from the need to adhere to international conventions. "As soon as laywers get involved, it doesn't speed up the process."

Another problem that has been flagged up is that of grid capacity. Most of the countries in the Middle East currently have small grids, which would cause difficulties if a nuclear plant with significant output came online. "The largest unit on the grid should an output of no more than 10 percent of grid capacity," says Rogner. "So you put in a 1,700MW --reactor online, than you should have a 17GW grid, which most countries don't have."

Due to the enormous electricity growth rates of countries in the Middle East, grid capacity will probably have caught up by the time the first reactors come online. "Current demand growth rates are roughly doubling every 10 years. If that continues, most of the countries will be there, or in that order anyway," says Rogner.

Rogner stresses that the IAEA is there to help countries overcome their teething problems and ensure a smooth transition into the nuclear age. "We as the agency stand ready to help those countries to do it right. Of course we are not a police agency , but if member states want to know how to do it best, we are there to help."

Lastly, Rogner emphasises that nuclear energy needs total commitment to the cause. "We want to make them understand that this is a long term commitment. Once you're in, you're in."