Going Nuclear in the GCC Countries: Rationale ... - Springer Link

Chapter 6

Going Nuclear in the GCC Countries: Rationale, Challenges, and Politics Ashutosh Sharma, Nabil Sultan, and David Weir

Applications of Nuclear Power in the GCC Countries In the past few years, the GCC countries have treated the issue of alternative sources of power with some urgency and have created various programs to address it. Since 2006, some of the GCC countries began to focus on the potential of nuclear energy as a viable solution (World Nuclear Association 2011a). The peaceful usage of nuclear energy is being promoted by the Emirates Nuclear Energy Corporation (ENEC 2011a) as an extremely beneficial source of power for the UAE. The significant benefits include provision for climate change and progression toward a knowledge-based economy and self-sustainability. Nuclear power is an extremely clean and uninterrupted source of power. However, the process of obtaining nuclear fuel and its misuse remains a large concern for other countries of the world (EPA 2010). According to the World Nuclear Association (2011a), there are about 45 countries in the world that have embarked on new peaceful nuclear programs. Among the new countries involved in the adoption of nuclear power generation, the countries of the Gulf region appear to be the most dynamic. Out of the 45 new countries considering peaceful nuclear programs for power generation, the UAE seems to have taken the lead along with Iran, Turkey, Belarus, Vietnam, and Jordan. The UAE, as will be explained, has the most advanced civil nuclear program in the Gulf region and is well developed in terms of legal and regulatory infrastructure (World Nuclear Association 2011b). Saudi Arabia and Kuwait have developing plans which are expected to have completed by the end of 2011. Other GCC countries such as Oman, Bahrain, and Qatar are still in the process of serious discussions to formulate policies for adopting nuclear power for peaceful applications. Water

A. Sharma (*) • N. Sultan • D. Weir Business School, Faculty of Sciences and Social Sciences, Liverpool Hope University, Hope Park, Liverpool L16 9JD, UK e-mail: [email protected]; [email protected]; [email protected] M.A. Ramady (ed.), The GCC Economies: Stepping Up To Future Challenges, DOI 10.1007/978-1-4614-1611-1_6, © Springer Science+Business Media New York 2012

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desalination in the GCC region is highly dependent on power currently produced by oil and gas (an expensive process). Therefore, power generation and water desalination are the two most important and highly desired candidates for utilizing energy generated by nuclear power for this region (Sahin et al. 2010).

Country-Specific Analysis Kuwait Kuwait, like other GCC countries, depends heavily on oil for generating its revenues. According to the US Energy Information Administration (EIA 2010), Kuwait is the fourth largest exporter of oil among the Organization of the Petroleum Exporting Countries (OPEC). Revenues generated from oil account for 95% of Kuwait’s exports with 50% of GDP directly related to this commodity and constitute 80% of government income. Large quantities of oil are also being used for domestic consumption. To diversify away from using oil for domestic power generation, Kuwait has recently started to import large quantities of gas for domestic consumption. However, even with large reserves and domestic consumption of oil, there has been no significant expansion in Kuwait’s electricity sector that is facing an 8% annual increase in the demand for electricity. Kuwait would face large demands for power with a demand of about 30,000 MW being projected for the year 2030. The demand for water is also expected to double by the year 2030. In terms of carbon emissions, Kuwait emits 30 t annually per capita. This figure for carbon emissions is quite high as compared to other industrialized nations that have an average carbon emission of 10 t annually per capita. Therefore, there is an urgent need to set up an alternate, low-carbon-producing and sustainable source of power generation to meet the high demands of power and water (Shihad-Eldin 2011). Kuwait set up the Kuwait National Nuclear Energy Commission (KNNEC) in 2010 to consider the viability of peaceful application of nuclear power to address the demand for power generation and water desalination (Bishara 2010). KNNEC was set up in cooperation with the International Atomic Energy Agency (IAEA) with the aim of seeking international cooperation for assessing the potential of nuclear power and associated processes for future regional development. KNNEC conducted a feasibility study for setting up nuclear power plants (NPP) in the country which was part of phase 1 of the nuclear power program of Kuwait (ShihadEldin 2011). This feasibility study was expected to have been completed by October 2011 (KUNA 2011). In terms of political stability in the region, Iraq is unhappy with the developments of nuclear power in Kuwait. The side effects of Kuwait’s feasibility study already predate the official release as Iraq objected strongly to the plans for building a nuclear power plant next to the Iraqi coast (World Tribune 2011).

6 Going Nuclear in the GCC Countries: Rationale, Challenges, and Politics

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In April 2010, Kuwait signed a nuclear cooperation agreement with France relating to a range of civil nuclear energy applications, including electricity generation, and water desalination (Hore-Lacy 2011). There have been further nuclear-related international cooperation agreements signed with Russia, Germany, and France. However, none of these agreements is dedicated to new construction/builds. There are talks relating to technical cooperation in terms of nuclear development with Russia. However, the details of any actual technical cooperation would be linked to the full report generated by the feasibility study (Reuters 2010a) conducted by KNNEC.

Qatar According to Hore-Lacy (2011), Qatar had published its own findings of an independent evaluation in the year 2008 and determined that nuclear power for generating electricity was not immediately needed. This was mainly due to the nonavailability of small reactors with a varying capacity of 300–600 MWe. The total electricity being produced was 15.11 billion kilowatt-hours whereas consumption was 13.73 billion kilowatt-hours indicating a surplus amount of power which could be sold to neighboring countries. This indicates that for the next few years, there is no immediate need for an alternative to the existing power generation capabilities. Qatar has one of the highest per capita income and lowest unemployment in the region. It was ranked as third in the world for proven gas reserves and has proven oil reserves of 25 billion barrels that are expected to last for another 57 years (CIA 2011). However, about 50% of its GDP is dependent on revenues generated from exporting oil and gas. The existing export partners include Japan, South Korea, Singapore, and India. However, with most of these countries achieving self-sufficiency in power through nuclear technologies, export of fossil fuels from Qatar is expected to decline in the future. Qatar’s declining reserves of oil (as opposed to gas) and international pressure in favor of reducing reliance on fossil fuels suggests a Qatari future in need of alternatives to oil and gas.

UAE Among the GCC countries, the UAE has one of the most highly developed programs for producing electricity from nuclear power (World Nuclear Association 2011a). This rapidly developing program for peaceful nuclear power generation has been a result of extremely high demands for electricity due to a growing population living in an artificially sustained environment. High demands for electrical power have resulted in frequent blackouts in the city of Dubai during peak summer months (Reuters 2011b). These high demands for power are due to the rapid construction of power-hungry buildings such as the “Burj Khalifa” and other recreational facilities

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such as the artificially created “snow zones.” A comparison study reported by the same source also reveals that the “Burj Khalifa” building consumes power equivalent to 1/10th of electricity produced by a nuclear power plant. This gives an insight into the UAE’s rapid increase in demand for electricity which is projected at 40GWe for 2020 (World Nuclear Association 2011b). According to a report in The Economist (2010), the UAE has a population growth rate of 2.82%, energy output of 178.4 mTOE, and total energy consumption of 51.6 mTOE. The crude birth rate is 14.0 per 1,000 people, and crude death rate is 1.5 per 1,000 people. Most of the UAE population (84%) is settled in urban areas. This further increases the demand for power. The total power produced in 2006 was 66.8 TWh, out of which 98% was derived from gas (Hore-Lacy 2011). The UAE government considered the nuclear power option in order to address the huge demands of electricity which relies for its generation on large quantities of the country’s finite (and valuable) natural resources. The government appointed the US-based CH2M Hill as nuclear agents in the year 2008 to assist in the development of the peaceful nuclear power program for the next 10 years. The Emirates Nuclear Energy Corporation (ENEC) was set up in 2009 after a royal decree on a recommendation by the IAEA. ENEC, which is based in Abu Dhabi, was initially funded with US$100 million to evaluate the potential of nuclear power in the UAE. According to ENEC, the demand for power is increasing at 9% per year which is more than three times that of any country globally. To regulate the nuclear program, the Federal Authority for Nuclear Regulation (FANR) was set up in 2009. The FANR is responsible for establishing and implementing regulations to oversee the long-term safety, security, and sustainability in the peaceful uses of nuclear energy of the UAE (FANR 2011a). The nuclear power program is at an advanced stage with selection of a nuclear power plant (NPP) site at Braka in the emirate of Abu Dhabi and selection of a prime contractor. The UAE plans to build four 1,400 MWe nuclear reactors at Braka by 2020 with the first operational reactor to be completed by 2017. The business model for the nuclear program includes international collaboration for all aspects of the program with a joint venture partnership with provision of contractor services. The prime contractor that was chosen is the Korean Electric Power Corporation (KEPCO) which is claimed to be the world’s third largest nuclear power company and one of the leaders in reliability and safety (World Nuclear Association 2011b). KEPCO’s US$20 billion bid was accepted, and the organization is leading a consortium of companies including Samsung, Doosan Heavy Industries, Westinghouse, and Korea Hydro & Nuclear Power Co. Ltd. Nuclear-related international relations exist with the USA, South Korea, UK, Japan, and France, indicating a large presence of international organizations contributing to the development of the country’s nuclear program. Safety and training with human development in general is being given importance in the UAE. There are service-level agreements (SLAs) with the prime contractor of the Nuclear Development Program which include provision for safety, training, and human development. The UAE has an extensive labor nationalization


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program (i.e., Emiratization) which it hopes will benefit from this new venture in peaceful nuclear development and the above-mentioned SLAs. The UAE began to pursue this objective by collaborating with the USA for setting up the Gulf Nuclear Energy Infrastructure Institute (GNEII) in association with Khalifa University for Science Technology and Research (World Nuclear News 2010a). Moreover, ENEC has introduced a scholarship scheme aimed at supporting nationals to take up training and work in the emerging nuclear industry (ENEC 2011a).

Saudi Arabia Saudi Arabia is the largest country, in terms of geography and population, in the GCC group of countries and the gulf peninsula and is also frequently ranked as the world’s largest exporter of oil (CIA 2011). It is also the largest producer of electricity in the Gulf States with a production of 180 TWh reported in 2006 from a 50% mix of oil and gas (Hore-Lacy 2011). In 2007, the total energy production reported was 551.3 mTOE and consumption was 150.1 mTOE (Economist 2010). The above figures of energy production and consumption indicate adequate supply of power derived from the second largest reserves of crude oil (OPEC 2011). In addition, according to a Bloomberg report (DiPaola 2011), there are talks of harnessing solar power in a $100 billion energy plan. It is easy to harness Solar Energy in Saudi Arabia as there are extensive uninhabited areas of desert which can be host to large arrays of solar cells. Therefore, current power generation from oil and future power generation from solar energy indicate lack of requirement for considering any alternate sources of power for many years to come when compared to other GCC countries. Nevertheless, the Saudi government announced a royal decree in 2010 declaring its intention for the adoption of a civil nuclear program. This program is intended to help address the country’s high demand for water desalination more efficiently (Hore-Lacy 2011). In terms of human development, to address the training needs for the country’s peaceful nuclear ambitions, the Saudi government set up the King Abdullah City for Atomic and Renewable Energy. As well as taking care of nuclear-related skills training, this institute has the overall responsibility for supervising development works in the nuclear energy (K.A.CARE 2011). In terms of international nuclear collaboration, the Saudi government appointed “Poyry” (a Finnish-Swiss-based consultancy) to carry out supervisory roles in evaluating the use of nuclear energy for desalination purposes. In addition, there are collaborations and memorandum of understandings with France and USA under the supervision of IAEA. Saudi Arabia’s nuclear program is currently in exploratory/planning stages; however, there are intentions of building 32 nuclear reactors with provision to supply power to other countries in the future.

64 Table 6.1 GCC nuclear program status GDP (purchasing power parity in Population Country billion) (2010) Saudi Arabia $622 26,131,703 UAE $246.8 5,148,664 Kuwait $136.5 2,595,628 Oman $75.84 3,027,959 Qatar $150.6 848,016 Bahrain $29.71 1,214,705

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Existing (2010 est.) power consumption (in billion kWh) 161.5 65.98 40.21 11.36 13.73 10.1

Nuclear program Planning stages Progress Feasibility analysis Unknown None Unknown

Source: CIA WorldFactbook 2011; World Nuclear Association 2011a

Oman Oman, like other Gulf countries, has also explored the potential of nuclear energy for its power use. It conducted a feasibility analysis in 2009. However, the Omani government determined that the peak power output required is currently being met. In 2006, it was reportedly producing 13.6 TWh of electricity from gas (Hore-Lacy 2011). However, the country’s oil reserves are dwindling and the government has major plans to diversify (CIA 2011). This is suggestive of the fact that following the trend from other neighboring states, Oman may adopt a nuclear plan in the future.

Bahrain According to media reports in December 2010 (Reuters 2010c), there were plans to have a nuclear power generation capability. Bahrain is already one of the most diversified economies in the Gulf region. The industries include petroleum processing, aluminum smelting, iron pelletization, fertilizers, Islamic banking, insurance, ship repairing, and tourism. However, as indicated, petroleum is the largest industry and about 11% of the GDP is dependent on revenues generated from the export of oil. Unemployment at 15% is highest among all the GCC countries. However, to reduce the impact of oil export on the GDP and diversify into the nuclear sector with international assistance, Bahrain signed the US123 agreement. The US123 agreement is a nickname given to section 123 of the US Atomic Energy Act which is a requirement for any country to conduct peaceful nuclear activities with the United States of America (National Nuclear Security Administration 2011). Table 6.1 below summarizes the current status of the GCC nuclear program.


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The Rationale for Diversification There is no doubt that fossil fuel, especially oil, played a major part in the transformation of the GCC countries, many of which were tracts of desert populated by small Bedouin tribes a few decades ago. The total population of the GCC countries in 1950 was just over four million inhabitants (Tabutin and Schoumaker 2005). Their level of education was basic and largely traditional. There was not much of real economic activity then other than small trading activities in pearls, dates, fish, and slave trade (Rugh 2007). It took about six decades (less in some counties) for this to change dramatically. The GCC countries were able to use the large proceeds that accrued from selling oil internationally to build modern infrastructures and skyscrapers. The result was dramatic. Life expectancy in the GCC area increased by almost 10 years to 74 years between 1980 and 2000, literacy rates increased by 20 percentage points to about 80% over the same period. In 2010, they had a combined nominal GDP estimated at over US$ one trillion and an average GDP per capita of US$61,000 (CIA 2011). The GCC countries have spent lavishly on their infrastructures and people. Many government bureaucracies guaranteed well-paid employment for their nationals. But things have changed, however. There is an increasing awareness among the GCC countries now of the need to reduce their reliance on oil as a stable source of income for their future. Many of these countries began to address this issue with a series of diversification projects that included the building of financial centers, tourist, cultural, and futuristic cities. Very recently, as indicated above, more attention has been given to the potential of nuclear energy for addressing some of the countries’ diversification needs. There are seemingly sound economic reasons for considering the adoption of nuclear energy, especially to meet the growing local consumption of power. The GCC countries are hoping that by using nuclear power, they will reduce their reliance on their “valuable” and “finite” fossil fuel resources for generating power for local use (Luciani 2007). The promoted rationale is that with few major discoveries of oil and gas in the world and growing world population (exacerbated by countries such as China and India), fossil fuel prices are likely to continue to witness increases for many years to come. However, recent developments in the technology (known as “hydraulic fracturing” or “fracking”) of natural resource extraction (used currently to extract “shale” gas) suggest that this technology could be used to discover great untapped resources (i.e., resources that would be difficult to extract using old technology). The new drilling technology involves injecting millions of gallons of water, sand, and chemicals to shatter underground rock formations and unlock reserves. This is suggestion that the USA could become (once again after four decades) the world’s largest oil producer by using this new technology (Fortson 2011). If this new drilling technique is to be used widely around the world, the future scenario of scarce fossil fuel resources could be revisited. This will have implications for future oil prices (likely to retreat), and the current large GCC investments in nuclear technology will seem increasingly unjustified.

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Nevertheless, one often wonders if “economics” is the only motivation for going nuclear in this region. As we have seen, oil and gas revenues account on average for about 75% of total government revenues in the GCC countries and exports of products in these sectors currently comprise 65% of total exports; although of course there are variations among countries, these shares are nevertheless significant in all countries so their impact on the entire range of governmental policies and strategy is commensurately great. But that is not to say that it is the economic arguments that necessarily drive governmental strategic thinking for other policy drivers are also important. The first and clearly overarching considerations relate to the political system and the long-standing as well as more recent security-relevant situations in neighboring countries. Iraq and Iran form the nearest near neighbors to the North and East and within the Arabian Peninsula, the continuing lack of resolution of Israeli-Palestinian situation as well as more recent instabilities in Bahrain, Yemen, and Syria form an inevitable context to energy policy as much as to any other aspects of regional security. Bahrain is only four hours from Riyadh, and the causeway linking the Saudi and Bahraini jurisdictions is no barrier to the possibility of unrest among the Shi-ite part of the Bahraini population impacting on Saudi politics. But within many GCC countries, it is still the looming presence of Iran and uncertainty about the strategic direction of Iranian domestic policies and their impact on the wider region that form a context to decision-making. For the past 30 years, official thinking in the Western seaboard of the Arabian Gulf has been grounded in suspicion and anxiety about their large neighbor and its nuclear aspirations. It is quite possible that the Gulf countries’ nuclear energy programs may also be motivated by political factors. Their peaceful nuclear capabilities may allow them to develop a breakout nuclear weapons capability, thus giving them the capacity to quickly build an atomic bomb if they decide they need one without triggering international condemnation in the short run. This argument draws its rationale from the experiences of Pakistan and Iran during the reign of its Shah. Both were the first countries that the USA supported in obtaining nuclear technology through its Atom’s for Peace Program during the 1950s and 1960s which aimed at demonstrating the positive role that nuclear technology could play in the world through energy and medicine after the horrors of Hiroshima and Nagasaki (Ideasonenergy 2011). Furthermore, Iranian aspirations for moral leadership of the Islamic world pose a direct threat to the cultural dominance of Saudi Arabia and to its economic clout equally. Iranian implication in political violence throughout the Middle East and North Africa (MENA) region as well as its continued occupation of three islands claimed by the UAE, coupled with long-standing unresolved border issues like continuing claims to Bahrain and Iranian military domination of the Gulf’s entrance and exit points at the Straits of Hormuz, poses security concerns for the region. Moreover, there are longer-term aspirations for regional cultural as well as overall market leadership that frame policies in UAE, for example, evidenced by initiatives toward self-sustainability and “green” environmental stances such as


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the recent pact between UAE and South Korea to advance green initiatives. Under the agreement, the UAE government will provide $15 million dollars in green growth funds over the next 3 years, while Korea’s Global Green Growth Institute will exchange expertise with the UAE to help the UAE government to initiate low-carbon green growth policy strategies and to conduct research (BT 2011). This agreement includes the establishment of a MENA regional office in Abu Dhabi’s Masdar City as well as the development of joint capacity-building programs. It is certainly a significant pointer to official thinking that while these initiatives are very much in line with current UN energy policies and are consistent with genuine long-term aspirations for ecologically supportive domestic policies promoting sustainable infrastructures, they are also explicitly looking East rather than West and tie a significant player in the GCC region to developments in East Asia (UNEP 2011).

The Impact of the Fukushima Incident According to the World Nuclear News (World Nuclear News 2011b), a nuclear incident took place on March 11, 2011 at the “Fukushima Dai-ichi” nuclear power plant in Japan. The nuclear incident took place due to a massive earthquake and tsunami which affected the reactors at the nuclear power plant causing a release of radiation to the sea and atmosphere. This accident raised questions on the security and safety of nuclear power plants around the world. Some countries began to review their nuclear plans, and a few countries after reviewing policies decided to shut down existing nuclear power plants and/or abort future plans for nuclear power. Countries such as Germany and Italy have completely scrapped all activities for generating power from nuclear. A 2011 German policy decision to close all nuclear power plants and related activities are posing a threat to about 11,000 jobs according to energy utility company E.ON in the European supply chain. However, in other developing countries such as India and China, reviews after the Fukushima incident have stressed the urgency of testing existing nuclear power plants and enhancing safety procedures to improve preparedness for a future disaster (World Nuclear News 2011c). In the United Kingdom, an interim report by Dr. Mike Weightman on the UK’s operational nuclear power plants was released on May 18, 2011. The interim report seems to indicate potential lessons for the nuclear power sector and suggests recommendations that includes enhancements in safety procedures and training (DECC 2011). The GCC countries seem determined to go ahead with their nuclear programs despite the Fukushima nuclear incident (AMEinfo 2011). The main reason to proceed with new build of nuclear power plants is that the Gulf region is not prone to earthquakes like Japan. The GCC countries are utilizing international cooperation to speed up their nuclear programs. The Gulf countries are concerned about safety and security and want to capture and incorporate lessons from the Fukushima incident. Therefore, in the UAE, institutes such as the FANR and ENEC are carrying

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reviews of the lessons learnt from the Fukushima incident in cooperation with the IAEA. The prime contractors (led by the Korean consortium) are also reviewing the lessons from the Japanese incident. The UAE nuclear program is continuing as per schedule (FANR 2011b).

Conclusions The GCC countries have embarked on major diversification programs during the last decade. Some of those programs are of “energy-related” nature. These countries are increasingly aware of the potential depletion of their oil and gas reserves and have taken steps to explore the viability of other sources of energy. Some of those countries, such as the UAE, began to invest heavily in nuclear energy. The promoted rationale for this undertaking is that by investing in nuclear energy, the Gulf oil and gas countries will be able to reduce reliance on their “valuable” and “finite” fossil-based resources, a high proportion of which is consumed in meeting their increasing demand for domestic electricity and desalination plants. While seemingly making economic sense, we have argued in this chapter that the emergence of new drilling technologies such as “hydraulic fracturing,” used in extracting shale gas, has the potential of increasing current international reserves of oil and consequently impact negatively on oil prices. This prospect, if realized, could make the GCC nuclear projects unjustified, especially in the aftermath of Japan’s Fukushima nuclear disaster and its consequent human and economic costs. However, the economics of the GCC countries is hardly separate from their politics. The GCC countries are increasingly nervous about the nuclear ambitions of some of their strong neighbors, especially Iran. It is quite possible that the GCC countries’ drive toward peaceful nuclear technology has also strategic political objectives. Countries with well-established peaceful nuclear infrastructures, as explained in this chapter, are often capable of developing rapid nuclear capacity for militaristic purposes. Whatever the real motivation is, the GCC countries are forging ahead with their nuclear plans with the blessing of many of their Western allies, particularly the USA.