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 nucl

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.

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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.