Thursday July 22, 2010

ANALYSIS - West unruffled by Saudi, UAE nuclear aims

By Amena Bakr and Reem Shamseddine

DUBAI/KHOBAR, Saudi Arabia (Reuters) - Oil powers Saudi Arabia and the United Arab Emirates have joined the race to gain nuclear energy, but in sharp contrast to nearby Iran, their ambitions are unlikely to worry the West.

A worker adjusts the valve of an oil pipe at Samawa refinery in Samawa, 230 km (140 miles) south of Baghdad, December 13, 2009. Oil powers Saudi Arabia and the United Arab Emirates have joined the race to gain nuclear energy, but in sharp contrast to nearby Iran, their ambitions are unlikely to worry the West. (REUTERS/Ahmed Ameen/Files)

Sanctions are piling up against OPEC member Iran as the international community seeks to force it to contain its nuclear activities. On Monday, the European Union is expected to adopt the latest set of measures.

No-one disputes that Iran, in common with its fellow Middle Eastern oil producers, has an urgent need for more sources of power generation to prevent it burning fuel oil to meet surging domestic energy demand.

The problem is the suspicion Tehran is on the road to building a nuclear bomb, whereas Saudi Arabia and the United Arab Emirates are credited with only wanting peaceful power.

"We have no concern with these countries (Saudi, the UAE) developing conventional nuclear power," Luis Echavarri, director general of the Paris-based Nuclear Energy Agency, told Reuters.

"It is something every country has the right to have. Everybody should have the benefit of this energy. This is more difficult for some countries than for others, but conceptually nuclear power is available for everyone."

Wood Mackenzie energy consultancy in a report this month said energy demand on the Arabian Peninsula could increase by 85 percent by 2030 levels, compared with 2008 consumption.

Until other energy sources, such as nuclear could be developed, a lack of gas in the Gulf meant much of the increase would be met by burning oil, potentially holding back an estimated 1.5 million barrels of oil equivalent per day from world markets.

The United Arab Emirates has well-advanced nuclear plans and late last year awarded to a South Korean group the contract to build and operate four nuclear reactors.

Analysts refer to the "Abu Dhabi model", under which the emirate is building nuclear plants but has committed not to enrich uranium itself and not to reprocess spent fuel.

SAUDI STRATEGY

Saudi Arabia has also signed a nuclear cooperation deal in 2008 with the United States, although it might not be quite as willing as the United Arab Emirates to forfeit the right to enrich its uranium reserves.

"For Saudi Arabia, the enrichment process is a strategic option," said Nicole Stracke of the Gulf Research Centre.

"Choosing to develop a full nuclear cycle would send a clear message to Iran as well as to the international community that a failure to prevent Iran from acquiring nuclear capability will have an impact on the entire region and the non-proliferation system."

But Saudi Arabia is nowhere near a full nuclear cycle and most analysts say it will continue to look to its ally the United States if it ever feels it needs the backup of a nuclear armoury.

"Saudi Arabia's uranium resources and ability to mine them are speculative at best," said Anthony H. Cordesman, analyst at the Centre for Strategic & International Studies (CSIS) in Washington.

"It also is very doubtful that Saudi Arabia would find it could carry out such enrichment without at least doubling and perhaps quadrupling, its costs for nuclear fuel."

The costs of developing nuclear energy are always challenging. Although relatively cheap, plentiful and reliable once the plant is built, the initial capital costs are huge.

One rule of thumb in the industry has been that nuclear is a viable proposition when oil costs $90 a barrel, above current prices of around $76 for U.S. crude .

For the oil-rich Gulf producers, anxious to free up as much oil for export as they can, rather than to burn it for power, that consideration is academic.

Still some might look first to the most obvious option in desert kingdoms -- solar, which is more expensive than nuclear, but could be quicker.

"I'm confident that nuclear power could eventually play a role in Saudi Arabia's energy mix," said Vahid Fotuhi, director, Middle East, of BP's division BP Solar.

"But given that it typically takes 10 years to develop a nuclear energy programme, it would make sense to first get started with other forms of clean energy, like solar. Saudi Arabia has lots of sun and lots of land. They could build a large solar power plant in just 10 months."

Saudi Arabia is ruling nothing out and has ambitious plans to develop all kinds of energy, beyond oil.

News

Thursday July 22, 2010

ANALYSIS - West unruffled by Saudi, UAE nuclear aims

By Amena Bakr and Reem Shamseddine