By Edward Attwood
Korea's strong show at World Future Energy Summit underlines its growing influence in the ME.
South Korea's strong showing at the World Future Energy Summit underlines its growing influence in the Middle East.
Last week's world future energy Summit saw a cavalcade of heads of state, ministers and senior executives of some of the world's largest companies all squeezed into the Abu Dhabi National Exhibition Centre.
Drivers and pedestrians alike stared as twelve-car motorcades sped along the city's arteries and helicopters shipped delegates to and from the summit, perhaps a little in contradiction of the main aims of the meet, which took place just a few short weeks after Copenhagen.
In fact, Copenhagen was a word that was on many of the keynote speakers' lips, with some leaders indicating that the accord in its current form would not prevent potentially disastrous climate change. The heads of state of the Maldives, Greece and Malaysia all lamented the outcome of the European climate summit and suggested that greater collaboration was needed if such events were to be considered a success in the future.
But perhaps the most important - and revealing - session of the first day of the Abu Dhabi summit was the reassertion by the Gulf's energy ministers of the retained importance of natural resources to the global energy mix.
The Qatari deputy minister and minister of energy, Abdullah Al Attiyah, in particular, sought to highlight the fact that some at Copenhagen had tried to scapegoat oil and gas producers as being responsible for rising emissions. Al Attiyah also made the salient point that some countries that had previously been critical of oil-producing nations quickly adopted a new position as soon as natural resources were found within their own borders.
The fact remains that the technology to provide renewable energy as a replacement, rather than an adjunct, to more conventional sources simply isn't ready yet. This is also compounded by the steadily increasing demand for energy, which is estimated to double by 2050. Such figures explain why ventures such as Masdar are so important.
The Masdar concept gains publicity in the UAE and in the Middle East due to its attempts to be carbon-neutral, and also due to local media being keen to support what is perhaps the Abu Dhabi's government's proudest venture. But the real benefit is that in the process of becoming carbon-neutral, the city will test some concepts and technologies to commercial level, which can then be deployed elsewhere around the world.
On the global stage, Abu Dhabi and the UAE have a significant number of national partners, some of which are more important than others. But former and recent deals have started to suggest that the profile of one particular country is rising. What that country offers to the UAE is not limited to one particular sector; in both conventional and ‘green energy' terms, as well as being a crucial trade partner, the influence of South Korea in the UAE and the wider Middle East region is certainly becoming more involved.
Is this a knee-jerk reaction to the recent $20bn UAE nuclear contract win? Perhaps, but it's also clear that the two nations make a pretty strong fit when it comes to collaboration.
While the UAE is in the process of investing millions into developing its knowledge economy, South Korea has pulled together expertise to such an extent that its high-tech industry is considered one of the strongest in the world, and is one of the globe's leading technology innovators. Not for nothing has the progress in the last fifty years become known as ‘the Miracle on the Han River'.
As the UAE looks to diversify its economy into areas as diverse as shipbuilding, aerospace and biotechnology, where better to learn from than a nation that has accelerated in these fields from nought to world-beating in just a few decades.South Korea is the world's largest shipbuilder and has the world's largest car assembly plant, and is currently building what will be the second-tallest tower in the world - after the Burj Khalifa - slated to be completed in 2015. In short, it's a small country with some very big ambitions, much like the UAE.
And where South Korea lacks natural resources, that's where Middle Eastern countries step in. Although the Asian powerhouse has done its best to become self-sufficient - with nuclear power providing just under half of the country's electricity needs - countries like Saudi Arabia and the UAE are vital export partners that enable South Korea to drive its industrial economy.
Low natural resources also mean that South Korea's investment in clean technology is strong, a factor that led to a deal between the country and Masdar, which was signed at the end of December last year. On this side, in particular, the symbiosis between the two countries was especially evident at the World Future Energy Summit, where 28 Korean companies sent around 100 delegates to take part. Also visiting Abu Dhabi at the same time was Korea's vice minister for trade and energy, Young Hak Kim, who was clearly impressed with what was on display at the event.
"I think the reason that it won the International Renewable Energy Agency headquarters, and this summit, is because the UAE now has a clear understanding that their fossil fuels are soon to be depleted and that there is a strong need to build and develop alternative energy sources," explains Kim. "In Korea, we have a very strong policy line on green energy as a source to continue developing our economy."
Kim believes that a balanced mix of the South Korean policy and the energy policies of the Middle Eastern countries would provide the best fit and deliver considerable benefits to the rest of the world. It's also obvious that his words are backed by domestic action.
At the beginning of 2009, the Korean government announced a ‘Green New Deal' - in an echo of US president Franklin D Roosevelt's groundbreaking initiative - that will see $38bn invested over a four-year basis.
The objectives for the project include the restoration of four rivers to prevent natural disasters and enhance water purity, as well as building a greener traffic network and using more clean energy. With investment on that scale, the benefits of collaboration between the UAE and South Korea are obvious.
Kim is understandably keen to talk about the nuclear contract win, which could prove a watershed for Korean exports. "Nuclear power is very important to our energy mix and as a result, we've been building nuclear facilities at the rate of almost one a year since the 1990s," he observes. "So we have very strong competitiveness in the field of nuclear technology thanks to our 30-year pedigree; if you look at the capacity of our nuclear reactors, it amounts to 93%, which is way higher than our competitors such as Areva and the American systems."
In addition, despite 30 years of operations, Korean reactors have never been involved in an accident. "We are developing most of the nuclear reactor technologies independently, and the reactor we are exporting is our standard model, so that is important from a cost and development perspective," Kim says.
But a factor that has perhaps been less highly publicised is Korean firms' strong performance record in terms of plant construction in the Middle East area. "That has given us an edge in the construction phase, and has allowed us to shorten the period required to build our reactors," Kim explains. "And if you look at the data release by WNA [World Nuclear Association], our EPC [engineering, procurement and construction] cost is around $2300 per kilowatt, which is much more competitive than US forms, which deliver at $2900 and France, with $3200 per kilowatt. I think the UAE acknowledged our competitiveness." Despite the official's confident response on the UAE win, he remains equivocal on new nuclear deals in Turkey and Jordan that could cement South Korea's position in this sector. "I don't think it's right to comment on other potential projects and say whether we are optimistic or pessimistic," Kim says. "What we want is fair competition, based solely on our competitiveness; we are open to all projects as long as a fair process is guaranteed."
The country's Ministry of Knowledge Economy said that South Korea would aim to take at least a 20% share of the global market for new reactors in the next 20 years. More specifically, the state wants to export 10 reactors (including the four just bought by Abu Dhabi) by 2012, and a total of 80 by 2030. Just by reaching that latter target, the total value of those contracts could outweigh South Korea's entire export volumes for 2009, a measure of how vital the nuclear industry has become.
On the more conventional energy side, Korean firms have been winning plaudits for breaking into areas where more established companies had previously held sway. Whereas the country had mainly focused on downstream projects - i.e. refining, and distributing natural resources or petrochemicals - Kim now says that there is increasing recognition on the upstream - exploration and production - side as well.
"We have identified this as an important niche going forward, because we have very strong competitiveness in the upstream field," Kim explains. "For example, we are the world's most competitive shipbuilder, and we possess very advanced drilling technology as well. Given that level of industrial know-how, there is a great opportunity to partner with Middle Eastern countries on the upstream side, and help them improve efficiencies in this field."
In Saudi Arabia, Korean mammoths like Hyundai Heavy Industries (HHI)- one of the largest oil and gas contractors in the world - are involved in such high-profile projects as the Karan gas facilities EPC contract and a joint venture at the Khurais gas facility. The country is also spreading its wings in Iraq, although it has limited its upstream development projects there for the time being.
"Other countries such as Japan and China have invested more, and we haven't been the lead investor in either of the two projects we have participated in," remarks Kim. "It is a key export market within the region, and given that Korea is so dependent on foreign imports for energy through our strategic partnerships with countries in the Middle East, it makes sense not to limit our imports to just one or two countries."
Small wonder, then, that the ‘Asian tiger' economy turned out in force to display its technological prowess at the World Future Energy Summit. And if matters are as bad as the headline statements emanating from world leaders are indicating, the role of cleantech and South Korea is set to rise even further in the future.
For Kim, the local partnership makes both strategic and economic sense. "We hope that this is the beginning of broadening the scope of cooperation between the UAE and South Korea, not just in the nuclear power arena, but also overall in many other areas of the economy".