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Kolkata, India — The United Arab Emirates' US$40 billion deal with South Korea to build and operate four nuclear power plants in the UAE serves to underline how even hydrocarbon rich states are embracing nuclear power in a big way.
Of the total value of the contract awarded by the Emirates Nuclear Energy Corporation to a consortium led by the Korea Electric Power Company, US$20 billion serves as payment for the construction, commissioning and fuel loading of the projected four units, while the remaining US$20 billion goes for operating and maintaining the proposed reactors for a period of 60 years.
Work on the first nuclear plant is expected to commence in 2012, with all four commissioned between 2017 and 2020. The KEPCO-led consortium includes Hyundai Engineering and Construction, Samsung C&T Corp., Doosan Heavy Industries and the Japanese-U.S. company Toshiba-Westinghouse. ENEC and KEPCO have also negotiated the key terms under which Korean investors will have an equity stake in the project.
The Korean victory surprised many, since France's Areva-led group was also engaged with the UAE on the nuclear deal. Moreover, the Koreans also beat the U.S.-Japanese reactor supplier GE-Hitachi.
On the face of it, the UAE seems to have opted for a partner that offers very little geopolitical gain. However, there are compelling reasons for the UAE's decision. Nevertheless, ENEC took pains to stress that it is open to doing business with other countries in areas outside the scope of the primary contract, including long-term fuel supplies, joint investments and training and education.
In fact, given that the UAE will outsource fuel cycle activities to third countries, there is every possibility that France with its prowess in enrichment and reprocessing may be a substantial beneficiary.
The UAE's desire for nuclear power is not as strange as it may sound. From the current round of climate change talks, it is clear that countries need to commit to reducing future carbon emissions. This applies to the UAE as well, which is set to see electricity demand almost treble from the current 15,000 megawatts to 40,000 megawatts in 2020.
Moreover, with the Gulf Cooperation Council states – Kuwait, UAE, Bahrain, Saudi Arabia, Oman and Qatar – seeing their water desalination requirements jump by 6-8 percent annually, the chief driver for nuclear energy may be their need for potable water.
The UAE presently generates 98 percent of its power from gas-based plants. Instead of using more of its gas reserves to meet its growing electricity consumption, the UAE can sell it in the international market, for profit. The avoided future consumption of gas can somewhat compensate for the substantial investment it is making in nuclear power, which it believes has the potential to increase the techno-scientific maturity of its economy.
Indeed, by turning to nuclear power the UAE seems to be going down a route that several other countries have taken in the past. A nuclear energy program is still seen by many governments as the best way to raise their overall scientific and technological base. This is because of the second order effects that nuclear research has on other areas of scientific enquiry and the vast range of technologies that must be simultaneously absorbed in the course of nuclear power development.
Naturally, the UAE has preferred a partner who is more forthcoming in rendering technological assistance. In the words of Mohamed al-Hammadi, chief executive officer of ENEC, "We were impressed by the Korean consortium's world-class safety and its demonstrated ability to meet the UAE program goals."
Hammadi also said, "Additionally, the KEPCO team dedicated a highly experienced team to our project and has shown a serious commitment to transferring the knowledge gained from Korea's 30 years of successful nuclear industry operation into the UAE program." It would be fair to say that the Koreans may have been more generous with the UAE by offering a long-term technology partnership.
South Korea may simply have offered the biggest bang for the buck to the UAE. According to some sources, South Korea's bid to build the four reactors was some US$16 billion lower than that submitted by the French group. This is important, as Abu Dhabi is the prime mover behind the UAE's nuclear policies. It set up ENEC with initial capital of US$100 million, and with an 86 percent share of the UAE's land and over 90 percent of its oil reserves, it is in a far better shape than Dubai. So it would naturally like to be judicious with this investment given the current state of the world's financial system.
The UAE could issue bonds in the future to fund its nuclear ambitions, in addition to the usual mix of securing financial support from export houses and banks.
For South Korea the deal represents a breakthrough of almost epic proportions. A statement from the South Korean president's office said, "This deal is the largest mega-project in Korean history," and "This contract is worth six times more than any other overseas."
The chosen reactor design – KEPCO's APR-1400 – has been talked about in the nuclear industry of late. Although sharing certain features with the CE System 80+, whose intellectual property rights are owned by Toshiba Westinghouse, the APR-1400 is essentially an independent product and has only minor consultancy support from Toshiba-Westinghouse.
Interestingly, the mega-deal came barely three weeks after Jordan opted for another South Korean consortium as a priority negotiating partner for a project worth about US$173 million to build a five-megawatt research reactor by 2014. Given that the UAE probably will require more reactors in the future and that other Middle Eastern countries are seriously looking to embrace nuclear energy, the South Korean nuclear industry may make even greater gains.
The UAE – or more aptly Abu Dhabi – is clearly working toward a long-term strategic plan, which it does not want derailed through any unnecessary distractions. This was evident from the beginning, when the UAE agreed to some of the most stringent safeguards of the International Atomic Energy Agency for its proposed nuclear program.
This also puts the UAE in the good books of U.S. President Barack Obama's administration, which could now use the UAE as an example for other states with emerging nuclear energy programs and juxtapose Iran's recalcitrant behavior on the same issue.
This may have given the Emirates some strategic leeway to choose a development partner for their nuclear program – in this case South Korea – that optimized their requirements. Such farsightedness is rather rare in today's volatile Middle East.