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ANALYSIS - UAE could spur regional nuclear power rush
DUBAI/LONDON (Reuters) - The United Arab Emirates' huge nuclear power programme could trigger a race among Gulf Arab states for limited atomic energy resources to meet surging electricity demand and free up more oil for export.
The UAE hopes to open the first nuclear reactor in the Gulf Arab countries in 2017 as part of a $40-billion nuclear programme that would compete for engineers and nuclear equipment for decades and set a precedent for cash-rich members of the Gulf Cooperation Council (GCC).
A contract to build reactors is expected to be awarded soon.
"The major impact will be felt if other countries in the region, particularly Saudi Arabia, follow the UAE model and adopt nuclear power," Eurasia Group analysts said in an email.
"We believe this will happen and that the GCC represents a very positive growth market for nuclear power -- if not as big a market as China and India."
Rising concern over climate-warming gases produced from burning oil, gas and coal, combined with volatile fuel prices, has sparked renewed interest in nuclear power across the globe.
The six members of the GCC -- Kuwait, Saudi Arabia, Bahrain, the UAE, Qatar and Oman -- have shown interest in nuclear power to meet soaring domestic demand for electricity and free more oil and gas for export.
But decades of stagnant growth have limited the nuclear energy industry's capacity to meet the resurgent demand for expertise and equipment, so competition between countries with big nuclear ambitions could be fierce.
"Your first generation of nuclear professionals is getting a bit grey," Ian Hore-Lacy of the World Nuclear Association said.
"Of course there is always competition for resources and for manufacturing capacity but it's by no means an impossible ask."
Iran's refusal to halt uranium enrichment, despite agreeing to buy the fuel needed for its new power plant from Russia, has made major powers suspicious of Tehran's nuclear programme.
The UAE has already pledged to buy the nuclear fuel it would need to allay Western concerns about uranium enrichment facilities being used for making weapons-grade material.
"So long as there is sufficent transparency and monitoring and the fuel is imported, I think the UAE's plan is more likely to spur a regional race for nuclear energy than for nuclear weapons," said Daniel Freifeld, a fellow for energy at New York University's Center of Law and Security.
International backing for the UAE's plan, especially from strategic ally the United States, would provide a counterpoint to Tehran's programme. Western powers could point to the UAE, across the Strait of Hormuz from Iran, as an example of how to pursue nuclear power without being seen as a military threat.
"The UAE is trying to present itself as a model for how Middle East countries can develop nuclear power -- in contrast to Iran," the Eurasia analysts said.
Some of the UAE's neighbours have suffered attacks from Islamic militants, so concerns over safeguarding nuclear plants will probably linger, despite industry assurances.
"Nuclear plants are a very difficult terrorist target, to put it mildly, and in respect to proliferation concerns I think those will be fully addressed," the World Nuclear Association's Hore-Lacy said.
"A country which is simply equipped with light water reactors can't really misuse that in any way."
Abu Dhabi appears to have both the cash and motivation to move ahead with the $40 billion programme.
The UAE, the world's third largest oil exporter, expects to see its power demand grow from around 15,000 megawatts in 2008 to 40,000 MW in 2020 as oil wealth drives population and economic growth in a region where round the clock air-conditioning is seen as a necessity. But gas supplies could only supply 20,000-25,000 MW, leaving a big gap to fill.
"The bottom line is that without nuclear, sufficient fuel supply may not be available to the power sector, and this will hinder economic development," said Jennifer Evans, energy markets analyst at consultancy Wood Mackenzie.
Burning oil in power plants would reduce the UAE's oil exports, on which it depends for nearly 80 percent of state revenues.
"Heavy future reliance on liquids (for power) would entail extremely high economic costs," the UAE said in a nuclear policy paper last year.
The UAE is expected to build three or four reactors in the first stage, a boon to both local and international firms that would look to supply and build them. The plants would start up one at a time around 18 months apart, depending on power demand. Any excess power could be fed into a grid linking the GCC.
The three consortia vying for the contract are the French group of Areva, GdF Suez and Total, a South Korean trio of Korea Electric Power Corp., Hyundai Engineering and Construction and Samsung C&T Corporation, and a joint bid by U.S.-based General Electric and Japan's Hitachi.
(Additional reporting by Luke Pachymuthu, editing by Anthony Barker)
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