DUBAI (World News) - Top oil exporter Saudi Arabia expects to finalize its atomic energy plans this year but the U.S. nuclear industry may miss out on multi-billion dollar contracts to turn it into a reality unless Washington and Riyadh sign a non-proliferation deal soon.
Saudi Arabia has some of the world's largest oil and gas fields but rapidly rising power demand in the kingdom threatens to absorb much of those reserves unless it can find alternative fuels for its long-term economic growth.
Riyadh, which says electricity demand could soar from around 45 gig watts (GW) to 120 GW by 2035, commissioned the King Abdullah City for Atomic and Renewable Energy (KA-CARE) in 2010 to draw up a plan for reducing reliance on oil and gas.
It has signed nuclear cooperation deals with countries able to build reactors, including the United States, France, Russia, South Korea, China and Argentina. And Riyadh needs to move relatively quickly if it is to achieve its goal of opening its first nuclear plant by 2020.
"We expect the current consultation phase with the Council to last for a few more months before we can a nnounce the Kingdom's energy sources, capacity targets, and milestone regulations," a KA-CARE spokesman said. "Soon we will be announcing what the energy mix for the reactors will be."
U.S. companies lost out to a lower-bidding Korean consortium in the first Gulf region nuclear plant tender in the United Arab Emirates (UAE) in 2009. They could be sidelined again until Washington and Riyadh sign a "123 agreement" under the U.S. Atomic Energy Act - opening the door for U.S. nuclear exports.
Nuclear projects tend to progress slowly - thanks to their size, complexity and many safety issues.
A U.S. embassy cable released by Wikileaks warned in 2009 that Saudi Arabia pressing ahead with one of the world's largest atomic energy programs without U.S. involvement was a "near-term risk to U.S. interests."
But with congress preoccupied with U.S. presidential elections and stopping Iran's nuclear program, which it suspects includes weapons development, it is unlikely any deal will be concluded this year.
"There's high doubt that President Obama or the U.S. congress, which needs to ratify the 123 agreement, will move on this in 2012," said a source in Washington familiar with U.S. energy policy.
"I think the Saudis will have to wait and see who wins the elections first before they proceed ... this may not be until 2014 before the United States considers it."
Riyadh, may not wait until 2014 for a U.S. non-proliferation deal and has several other options if the door to U.S. companies remains shut.
"It would constrain American suppliers of reactors or of services, like conversion or enrichment, but as far as anybody else is concerned, no," Ian Hore-Lacy, spokesman fo r the World Nuclear Association (WNA), a group representing nuclear power companies around the world, said.
"But there would be plenty of options. Even in a worst case scenario, there are still other avenues of buying equipment and services ... It certainly wouldn't be a show stopper," he said.
It is unclear how the use of some U.S.-patented technologies by other nuclear plant builders would be affected if the United States and the kingdom do not strike a 123 deal.
The UAE signed the 123 agreement with the United States in early 2009, forfeiting its right to enrich uranium domestically, before awarding a $ 40 billion contract to a Korean-led consortium later that year.
Prince Turki al-Faisal, a key Saudi royal, has said the kingdom would not surrender its right to enrich its own uranium for energy use in the long term, althou gh it expects to have to import fuel in the medium term.
"Early economic studies have indicated that although Saudi Arabia is naturally rich with uranium, using that uranium in Saudi Arabian facilities to produce fuel for electrical generation will not be economically feasible in the foreseeable future," the KA-CARE spokesman said. "Importing fuel is preferable at this time."
While concrete construction plans remain far off, Saudi Arabia has signed memorandums of understanding (MOUs) with several countries with experience in building nuclear plants - including the United States, France, Russia, South Korea, China and Argentina - over the last few years.
"Each provides us access to valuable technologies and suppliers options," the spokesman said.
Last year, a KA-CARE official said the country could build up to 16 nuclear power rea ctors by 2030, but KA-CARE has created many potential energy supply and demand scenarios and the actual number of nuclear reactors will depend entirely on what share of the overall mix the government finally targets.
Nevertheless, under most of the scenarios modeled by KA-CARE, nuclear energy emerged as one of the best ways for generating "baseload" electricity, or the lowest demand seen around the clock, so it seems a significant role in the kingdom's future power supply is likely.
The Middle Eastern oil giant currently relies on oil and gas-fired power plants to keep a growing population cool in summer, while running energy-hungry desalination plants year round to turn millions of liters a day of seawater into something they can drink.
Khalid al-Falih, the chief executive of state-owned Saudi Aramco, has warned that if left unchecked Saudi energy consumption could sap three million barrels a day from crude available for export by 2028.
Because nuclear power plants are not quickly started or shut down and are generally run at near-full production whenever possible, they are not suited to meeting power demand surges on hot summer afternoons, but they could be well suited to the more stable year round demand from water desalination plants and other heavy industry.
A source familiar with the KA-CARE study said that Saudi Arabia is likely to opt for a mix of large reactors near the coast because water is needed for cooling, while employing smaller portable reactors, such as those offered by Argentina.
Saudi Arabia signed a cooperation deal last year with Argentina's Atomic Energy Commission and technology firm INVAP, which develops smaller reactors designed for water desalination plants - an option that would likely remain open regardless of any 123 deal with Washington.
Some analysts say Saudi Arabia is likely to pick the foreign partners for its nuclear program based on how economically attractive the bids are, rather than to cement political alliances.
But builders may seek oil supply assurances from the world's largest crude exporter, given that their reactors could save millions of barrels of crude a month from Saudi power plant furnaces in decades to come.
"Given Saudi Arabia's role as an exporter, vendor nations will likely be willing to make financial or other concessions in exchange for some type of supply guarantees," said Will Pearson, energy analyst at the Eurasia Group.
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