Saudi Arabia is Going Nuclear

on September 09, 2013 at 10:00 AM

Kuwait Promises To Increase Oil Production In Case  Of War

Saudi Arabia has taken another step towards building up its nuclear power generation capacity by signing a Memorandum of Understanding for in-country collaboration with Westinghouse Electricity, Exelon Nuclear Partners and Toshiba. Nuclear could be a key tool in managing a mismatch between rising in-country energy consumption and a heavy dependence on oil exports to meet domestic funding needs.

Saudi Arabia is typically associated with oil, for obvious reasons. The country was the world’s largest oil producer in 2012, according to BP’s Statistical Review of Energy, and is commonly identified as the global oil market’s “swing producer” – it has sufficient production capacity to influence (but not control) global supply by raising or lowering output.

But Saudi Arabia, along with other Middle Eastern countries, is having to contend with rapidly rising domestic energy consumption, much of which is currently generated by oil and gas. Direct crude oil burn for power generation can reach 1 million barrels per day in summer months, according to the Energy Information Administration.

For more on gas shortages in the Middle East, see The Biggest Story in Natural Gas That Few Are Talking About

Using oil resources to satisfy electricity demand comes at the expense of oil export revenues, a problem that is exacerbated by subsidies for domestic energy consumption. “[National oil company] Saudi Aramco’s CEO Khalid al-Falih warned that rising domestic energy consumption could result in the loss of 3 million barrels per day (bbl/d) of crude oil exports by the end of the decade if no changes were made to current trends,” the EIA said in its Saudi Arabia country analysis.

The need for diversification has driven the country to set ambitious targets for construction of nuclear generating plants to help meet growing electricity needs. Saudi Arabia plans to spend over $80 billion to build 16 reactors over the next 20 years, forecasting that 17 gigawatts of nuclear power capacity by 2032 will generate 15% of its electricity needs in 2032, according to the World Nuclear Association. Solar power will provide another 30 gigawatts.

The MOU with Westinghouse, Exelon and Toshiba falls short of a concrete project plan. It provides for creation of a joint proposal for building new plants for a Saudi government body – King Abdullah City for Atomic and Renwewable Energy – that was formed in 2010 specifically for the development of alternative energy. But the group of companies involved offers a good combination of technological and operational expertise and sound finances, and Saudi Arabia has a pressing interest in maintaining forward momentum.