Peak Oil is You

Donate Bitcoins ;-) or Paypal :-)

Page added on January 17, 2018

Bookmark and Share

Saudi Arabia’s Ambitious Plans for Nuclear Energy

Saudi Arabia’s Ambitious Plans for Nuclear Energy thumbnail

It’s not clear that the saudi-nuclear_thumb.jpgplans will work as expected in terms of the announced timeline of completing 16 reactors (17.6 Gwe) by 2032.

The cost of the program is close to $90 billion which over a period of more than two decades for a feasible schedule would involve a significant diversion of oil revenue even at $100/BBL. The current price is about $60/bbl and has been in that range since January 2015.

Key issues for success are adequate sustained financing, supply chain logistics and reliability, as well as cost control, for three separate sites, and managing the fleet of reactors once they are built.

The demand for long lead time components for a new build of this size would raise the prices for them on a global scale.

The Reuters wire service reports that Saudi Arabia plans in April or May 2018 to release a short list of qualified bidders for two nuclear reactors and to make the contact award by December.

It plans to build 17.6 gigawatts (GW) (16 1100 MW reactors or a mix of various sizes) of nuclear capacity by 2032.  The date is wildly ambitious and even a simply exercise in looking at the schedule of building 16 reactors of this size shows a minimum 20-to-25 year time frame.

If the first two units breaks ground in 2020, the last one will be finished in the early 2040s. (See table below). The analysis that follows is an intended to show, using a simple linear model, why the plans appear to be overly ambitious.

Saudi Arabia’s energy minister, Khalid al-Falih, told Reuters last month that he expects to sign contracts to build two nuclear reactors by the end of 2018. Commissioning of the first plant, which will have two reactors with a total a capacity between 2.0 and 3.2 GW, is expected in 2027.

These numbers suggest that the specifications in the RFI have changed from an initial requirement for two 1400 MW units, which is the size the ones being built by South Korea in the UAE, to a more flexible requirement to either open the bidding to wider competition or to put pricing pressure on a South Korean deal.

Saudi Arabia has sent a request for information (RFI) to international suppliers to build two reactors. An RFI is the first step in the procurement process. Once there are expressions of interest, the Saudi government will pre-qualify firms or countries to submit actual bids.  Based on experiences with other countries, the Saudi government should count itself lucky if it even gets bids by December. It will take a minimum of another six months to make an award putting the contract date well into 2019.

According to wire service reports the Saudi government is evaluating requirements from five countries; China, Russia, South Korea, France and the United States.

Russian and South Korean companies have said they plan to bid and sources have told Reuters that Toshiba-owned U.S. company Westinghouse is in talks with U.S. rivals to form a bidding consortium. French state-controlled utility EDF also intends to take part in the tender.

“Currently we are in the evaluation process for RFI (request for information) and we will hold discussions with them (suppliers) next month,” Abdul Malik al-Sabery, a consultant at the King Abdullah City for Atomic and Renewable Energy told Reuters in Abu Dhabi.  He added that financing would be provided in part by the winning vendor.

From the time the units break ground until the time they are commissioned for revenue service could take six-to-seven years with a cost of $5-6 billion each.  Bear in mind the Saudi government has selected three coastal sites for the 16 reactors which means site mobilization will also be a factor.

There is no guarantee costs would remain in the range of $5,000/kw for the reactors.  Given the scale of the project, cost escalation is probably inevitable.

The Saudi plan gives up certain economies of scale by mixing reactor vendors, sizes, and locations. Three sites were short-listed as of September 2013: Jubail on the Gulf; and Tabuk and Jizan on the Red Sea.


Why the Saudi Nuclear Plan Will Take More Time

While the Saudi government has claimed it would be able to finish all 16 reactors by 2032, as a practical matter they will only be able to complete eight units by that time. It will take until the early 2040s to commission all 16 units at three sites.

The table below shows that if the first two reactors at the first site break ground by 2020, they will enter revenue service by 2027.

There are practical limits to financing, supply chain capacity, and available workforce that will force the Saudi project to start each two unit module at least two years apart.  Also, to achieve maximum economies of scale, the project managers would not start units at all three sites at the same time.

saudi table 3Financing is a crucial element.  The ability of the Saudi oil infrastructure to produce oil is estimated to be about 12.5 million barrels a day.  The price of a barrel of oil has been in the doldrums at less that $60/bbl since January 2015.  Oil analysts point out that market conditions in the future might reduce that level of output to maintain price.

Overall , the project would represent a substantial diversion of oil income on an annual basis for the next two decades. The total cost of 17.6 Gwe at $5,000/Kw is $88 billion over a period of about 22 years

saudi table 1

The assumption here is that Saudi Arabia will lean out the construction schedule to start two units every two years. First, this move will lessen demands on the supply chain and available manpower. Second, it will reduce the amount of revenue from oil sales that will have to be diverted to reactor construction.

Why Saudi Arabia Wants Nuclear Energy

The main driver for the Saudi plans to build reactors, which were initially announced in 2011, is that at the rate that it is burning its own oil, it may have substantially less to export in just a decade or so. At a minimum, it may lose the excess capacity the rest of the world relies on when there are disruptions in supplies from other countries. One scenario suggested by energy analysts that follow oil markets is that within two decades most of the Saudi output would be used for domestic consumption.

Electricity demand is predicted to increase from 75 GWe by 2018 to more than 120 Gwe by 2030. This growth can’t be sustained by fossil fuel alone and also maintain the income stream the nation depends on from oil exports.

Nuclear reactors are an obvious choice to intervene in an unsustainable growth scenario. The 16 reactors KSA plans to build will be part of a strategy of being a regional exporter of electricity. When complete they would provide as much as one-third of all the electricity used in the country.

For more information see the World Nuclear Association’s profile of nuclear energy in Saudi Arabia last updated in October 2017.

Lack of a 1-2-3 Agreement is a Problem but not a Barrier

American firms like Westinghouse and Curtis-Wright will not be able to participate in the project unless Saudi Arabia signs a 1-2-3 Agreement with the U.S. That prospect looks problematic at best due to statements from Saudi officials that they do not want to give up the right to uranium enrichment as a strategic hedge against Iran.

The Obama administration sought but did not complete a 1-2-3 agreement with Saudi Arabia along the lines of the one it signed with the UAE, which committed to reliable fuel services rather than developing its own enrichment capabilities. The UAE has been touted as a model for other nations as a so-called “gold standard” as it has a a $20-billion contract with South Korea to build four nuclear reactors. The first of the four units will come online in 2018.

According to Mark Hibbs, a nuclear energy analyst with the Carnegie Endowment for International Peace, the lack of a 1-2-3 agreement with the United States could impact Saudi Arabia’s ability to import nuclear technologies from other nations.

France and Japan would not transfer enrichment and reprocessing technologies to Saudi Arabia. Both of these countries, along with the United States and the other members of the G8, pledged indefinitely not to export these items to newcomer countries. Saudi Arabia could get these technologies from Pakistan .

Brazil Suffers Setback in Financing for Angra-3

The Reuters wire service reports that Brazil’s government is struggling to attract investors to restart construction on its Angra 3 nuclear plant, where work has been halted since 2015.  The State controlled electric utility Centrias Electras Brqasileiras SA told the wire service it had held exploratory discussions with Russia and China but that no agreement had been reached with them nor EDF nor any other potential investor.

So far spending on the project has totaled about $5 billion with an anticipated additional spending needed of about $4 billion.  The project is said to be two-thirds complete. The utility hopes to raise the needed funds by 2019 and complete the reactor by 2025.

Brazil has plans for additional nuclear reactors, but given its inability to fund the current project to completion, investors who would want guarantees of future work, like China National Nuclear Corp., are reported to be wary of making commitments.

Once complete the price of electricity from the plant will be set at close to $0.13/KwH to cover the costs.

Budget woes were not the only reason work stopped on the project.  A major bribery and money laundering scandal involving construction firms working on the site claimed the careers of several high level government officials.

In August 2015 Federal police in Brazil have arrested Othon Luiz Pinheiro da Silva, CEO of Elecrtrobas Termonuclear, which is building the country’s third nuclear reactor, Angra 3, on charges he took bribes from construction firms involved in the project. The investigation into the bribes got its start in an unrelated investigation into a money laundering scheme.

Standard & Poors said at the time the arrest of the nuclear chief was another “political uncertainty” that caused the rating agency to change Brazil’s credit outlook to negative.  U.S. investors have sued Electrobas for failing to disclose the arrest of the company’s CEO. Bond yields for the firm, reflecting the higher risks associated with the company’s CEO being caught up in a bribery case, rose to 8%. Elecrobas has denied any wrong doing and put the CEO on a leave of absence.


27 Comments on "Saudi Arabia’s Ambitious Plans for Nuclear Energy"

  1. Darrell Cloud on Wed, 17th Jan 2018 9:04 am 

    Trying to move away from its dependence on oil makes perfect sense in a world of declining resources and increasing population growth. The red flag this presents to the rest of the world will by concealed by the techno hype that follows this decision. The public offerings of Saudi Armco and Saudi political chaos are evident to all. The vested interests are spending considerable capital to prevent potential investors for connecting the dots.

  2. tahoe1780 on Wed, 17th Jan 2018 9:53 am 

    Uranium? Thorium? Molten Salt? How long will uranium be available?

    Always “At current rates of usage”

  3. kanon on Wed, 17th Jan 2018 11:31 am 

    I wonder about rising sea levels and rising temperatures. I suppose they are selling shares in Saudi Aramco in order to finance their fossil fuel divestment. No mention of wind or solar. No mention of lack of water. It would not surprise me to see SA electricity demand fall in the future. I cannot see how nuclear power could possibly work in Saudi Arabia when there is no reason for the rest of the world to sustain that country. However, promotions do not generally dwell on the downsides.

  4. Bob on Wed, 17th Jan 2018 11:37 am 

    The rational for building nuke reactors is now so bizarre as to make no sense. Only an underlying military use to make bombs keeps these things going. SA could move to solar without any problems at all. They have the space and sunshine needed. But who said logic had anything to do with this?

  5. Cloggie on Wed, 17th Jan 2018 11:45 am 

    Why Saudi Arabia Wants Nuclear Energy

    Not a word about nuclear weapons.

  6. Sissyfuss on Wed, 17th Jan 2018 1:31 pm 

    The Saudis have done the math. The majority of their wealth is derived from oil exports which could be of a declining nature. That plus their growing population is using and taking more of the share that would be exported. So they plan on reducing demand by switching to alternative sources for producing electricity. Trouble is those reactors will be much more inviting targets for Iranian/Yemeni missiles than airports or pipelines. They had better consult their 7th Century prophet for the correct path forward. Yeah, that’ll fix it.

  7. djysrv on Wed, 17th Jan 2018 3:17 pm 

    This is a reminder to readers that this blog post is copyrighted material. Just providing the original link and posting the full text is not “fair use.”

  8. MASTERMIND on Wed, 17th Jan 2018 3:34 pm 

    A few years ago according to the BBC the Saudis purchased 12 nuclear bombs from Pakistan, in exchange for oil..

    Now the Saudis have the “Great Islamic Bomb”

  9. MASTERMIND on Wed, 17th Jan 2018 3:36 pm 

    The collapse of Saudi Arabia is inevitable

    Saudi Arabian oil reserves are overstated by 40% – Wikileaks

    Saudi Arabia’s Energy Minister Warns of World Oil Shortages Ahead

    Saudi Aramco CEO sees oil supply shortage coming as investments, discoveries drop

  10. Norman Pagett on Wed, 17th Jan 2018 5:24 pm 

    pre-oil, the population of Saudi was about 1 m

    now it’s 30m, and rising

    without oil, those 30m people have no means of existence or support. Nuclear reactors deliver electricity. Electricity has no use outside a fossil fuel based industrial environment

    Nuclear reactors will not sustain 30m people in a desrt hosile environment.

    Already desalination is becoming self defeating, as the Gulf is becoming too salty to extract water from. By the time the reactors are built, desalination will become impossible.

    In 20 years, Saudi oil will be gone, and there will be no purpose for which Saudi can continue to exist

  11. Mad Kat on Wed, 17th Jan 2018 5:54 pm 

    Norman, I think that, in 20 years the US will be gone also. Or, at least, what we consider to be the US. There will be no 1st world or even 2nd. The planet will likely be thousands of small ‘countries’ similar to pre-history. Or at least in the process of the breakdown. That is, IF there is no nuclear war. If so, all bets are off. There may be no humans left in 2038

  12. MASTERMIND on Wed, 17th Jan 2018 6:42 pm 

    Soon MBS will be king of the worlds biggest kitty litter box!

  13. Simon on Thu, 18th Jan 2018 2:11 am 

    MK – Lets try to stay on topic, only picking on you as now the Anti US has posted we will have to pro US and the thread is lost in a tidal wave of shouting

  14. Mad Kat on Thu, 18th Jan 2018 3:31 am 

    Simon, who gives a damn about KSA’s dreams of an impossible future, Not most of the people on this forum. The county will be 3rd world again in the next 10 years, or less, as will most of the 1st world.

  15. Mad Kat on Thu, 18th Jan 2018 3:37 am 

    Simon, you can wave your American flag, drenched in the blood of babies and children in your wars of plunder and murder, if you want and I can point out the shithole hell the US is becoming. You can ignore my comments. They now begin with: Mad Kat.

    Obviously the owner of the site doesn’t care. They post articles that they know will stir up controversy. I would suggest either ignore the posts or find another site to visit.

  16. Norman Pagett on Thu, 18th Jan 2018 4:22 am 

    Mad Kat

    I agree completely

    the USA has been a construct of fossil fuels

    without fossil fuels it must disintegrate.

    this applies to all the industrial nations of the world

  17. DerHundistlos on Thu, 18th Jan 2018 4:36 am 


    What a Way to Go – Life at the End of Empire:

  18. Mad Kat on Thu, 18th Jan 2018 4:40 am 

    DerHundistlos, a very good video. I saw it a few years ago. It is very good, but I would bet that few here will take two hours to watch it. Too much reality. I watch it about every six months to keep my mind focused on my preps.

  19. Davy on Thu, 18th Jan 2018 5:35 am 

    der hund, get a life. We don’t need the drama. Posting the same shit 6 times is juvenile.

  20. Simon on Thu, 18th Jan 2018 5:42 am 

    And …. were back FFS change the record.

  21. Mad Kat on Thu, 18th Jan 2018 5:49 am 

    DerHundistlos , ignore the village idiot. Hew just doesn’t like to be reminded that he lives in a shithole country.

  22. Roberto Bravo on Thu, 18th Jan 2018 4:21 pm 

    The 16 reactors ore O.K.. But what will they eat? They will be 30 million plus inhabitans.

  23. peakyeast on Thu, 18th Jan 2018 6:46 pm 

    Empirical evidence shows that by 2032 they will be about 40% completed and an adjusted total of 270billion$.

    This is, of course, because we have such good planning and knowledge about these constructions.

    “Olkiluoto-3 was originally meant to start production in spring 2009 and cost €3.2bn but the last price estimate was almost three times as high. ”

    Which is by no means the only recent example. This is an industry standard.

    To be on schedule and on cost would be a truly revolutionary progress.

    That is not something I think we can expect the coming from very bottom of bad cultures the earth can provide and the possibly dumbest, laziest people on earth. But okay – they are probably going to hire an army from abroad to do everything for them – which is NOT going to make it cheaper making or later during production and maintenance.

  24. MASTERMIND on Thu, 18th Jan 2018 6:59 pm 


    Yes of course…. collapse cannot happen to you …. you have magical powers…. that will keep the goons away … so that you can grow your organic carrots in peace and tranquility …. You will just sing Koombaya while thumping a drum…. and that will appease the murders… and they will leave you alone… because you are deemed sacred…

  25. Antius on Thu, 18th Jan 2018 10:37 pm 

    “Why Saudi Arabia Wants Nuclear Energy

    Not a word about nuclear weapons.”

    That’s because pressurised water reactors aren’t very useful from that point of view as the spent fuel has the wrong isotope ratio. Although one might reasonably argue that having trained engineers, familiar with nuclear technology generally, could make producing nuclear weapons a little easier. Then again, reactor technology isn’t required for nuclear weapons development, as gas centrifuges can enrich uranium.

    My question is, why do 16 reactors cost a wopping $90billion? How come we could build these things cheaply in the 70s but not today?

  26. Mad Kat on Thu, 18th Jan 2018 11:04 pm 

    Antius, I would say it was inflation plus the size of the reactor plus “extras”.

    The cost in the time from 1974 to 1984 multiplied by ~5 according to the chart. Multiply that by 4 more decades and the $90B is possible. Especially if they are built with more safeguards now. Not to mention under the table payoffs.

  27. Cloggie on Fri, 19th Jan 2018 12:22 am 

    17 GW for 90 billion?

    That’s 5.27 billion/GW and usually these mega-projects have huge cost overruns.

    And then you have to pay for fuel that will run out as well by the end of this century.

    The sun in all likelihood will continue to shine in KSA for millennia to come:

    The energy ministry said Abu Dhabi’s Masdar and Electricite de France SA bid to supply power from a 300-megawatt photovoltaic plant for as little as 6.69736 halalas a kilowatt hour, or 1.79 cents, according to a webcast of the bid-opening ceremony on Tuesday in Riyadh. If awarded, that would beat the previous record for a solar project in Abu Dhabi for 2.42 cents a kilowatt-hour.

    Only fools would opt for nuclear in the desert. I would spend my halalalalas on solar kwh, that’s for sure.

    Unless of course the KSA leadership has ulterior motives.

    But no, that can’t be. I mean, if we can’t even trust KSA, then who CAN we trust, I am asking you?

Leave a Reply

Your email address will not be published. Required fields are marked *