There are a lot of media reports about Saudi Arabia’s plans to build 16 nuclear reactors by 2030 and whether Westinghouse will get any of the business. Every time I read this line in the mainstream news media it makes my head spin. Neither event is likely to happen, but the news media keeps reporting that both are coming any day real soon now.
The practical logistical challenges and the financial commitments that would be required over less than a decade are simply out of reach. Why is no one at these media outlets fact checking the prevailing narrative?
In the interest doing exactly that, I’ve assembled a “reader” of my coverage on the efforts by the Kingdom of Saudi Arabia (KSA) to pursue development of a commercial nuclear energy program. For good measure, I’ve also looked at what I see as a somewhat hollow threat to enrich uranium. This is something that KSA neither wants, needs, nor can afford.
Here are seven easy to read pieces, no technical background required, that explain why the current mass media narrative about KSA and nuclear energy misses a few crucial facts. Coverage on this blog about KSA’s nuclear energy plans began in 2014. Since then a lot has happened, but one thing that has emerged is that KSA’s ambitious plans for commercial nuclear reactors or a weapons related enrichment program may not come to pass as long as the price of oil stays low.
The current turmoil over the US backing out of the Iran deal may produce a temporary spike in the price of oil, but analysts like Barclays predict a long term decline in prices due in part to US shale production.
Seven Easy Pieces About KSA and Nuclear Energy
1. LOGISTICS CHALLENGES – No one can build that many reactors (16) in that short a period of time. This blog post explains why KSA cannot build 16 1000 MW nuclear reactors by 2030 No vendor nor state owned nuclear export firm can do it. Also, price of oil too low. KSA can’t afford the $80 billion price tag
2. REQUEST FOR PROPOSAL – So far plans are to build just two units. This blog post explains that KSA has downsized its nuclear ambitions to just two 1400 MW reactors which coincidentally matches the power rating for the UAE reactors being built by South Korea. KSA has since modified the RFI to open up the competition. However, my view is this is for industrial intelligence purposes and not because a lot of other folks, including Westinghouse, have a shot.
3. THE PRICE OF OIL LIMITS KSA NUCLEAR AMBITIONS – The price of oil controls the size of the nuclear program. This blog post explains that KSA first announced its nuclear program in 2011, but did nothing with it until September 2014 at which time it revealed the 16 reactor plan. At that time the price of oil was about $100 bbl. In January 2015 two things happened. First, the price of oil dropped to below $60 bbl and, second, KSA stopped its 16 reactors project cold. This decision shows the finance ministry has a strong grip on investment plans at this scale.
4. SOUTH KOREA IS A LIKELY FRONT RUNNER – This blog post explains why Westinghouse is unlikely to win business supplying nuclear reactors to Saudi Arabia even if the Trump administration relaxes the terms of a 123 Agreement. The reasons are that South Korea has the pole position due to several factors including; success with building four 1400 MW reactors for the UAE at a fixed price, an experienced workforce with a management team that speaks Arabic, and the fact that the 1400 MW design has already been built and operated in South Korea.
5. ROK / KSA deal for 100 MW SMART Reactor could be a model for U.S. A deal inked in 2011 between ROK and KSA could be seen as a model to form the basis for an agreement for U.S. firms to export nuclear technology to KSA.
The Kingdom of Saudi Arabia (KSA) has signed an $1 billion agreement with South Korea to build a 300 MWt PWR reactor. The SMART reactor has a design that uses integral steam generators and advanced safety features. The reactor will have a 60 year design life and a three-year refueling cycle It will be used to generate electricity and to power reverse osmosis desalinization plants at coastal sites. The reactor will generate 100 MW of electrical power for these applications. Bottom line South Korea is already doing nuclear business with KSA.
6. SAUDI ARABIA AND THE GOLD STANDARD IN A 123 AGREEMENT – The whole posture of KSA on enrichment is to get the US to keep the Iran deal so that it doesn’t have to spend $ billions on a uranium enrichment program it can’t afford, and doesn’t want or need. While KSA would like to see regime change in Iran, containment isn’t the worse option.
What the current low price of oil means is that KSA is coming up short in terms of financing its ambitious program of building 16 LWR type units at power ratings of 1000 MW or more. Given these numbers, the likelihood that it would spend several billion more on enrichment facilities, and in the absence of reactors to use the fuel, diminishes accordingly. Figure a cost of $1 billion for each 1 million in SWU in enriched uranium and then add the cost of the weapons program.
7. MIKE FLYNN’S FRACTURED RUSSIA DEAL The Russian deal presented by former National Security Adviser Michael Flynn was a non-starter. It made no sense from a commercial perspective.
He attempted to ink a deal between Saudi Arabia and Russia for nuclear reactors linked to the lifting of U.S. sanctions under the Majnitsky Act. The mainstream media continues to describe Flynn’s involvement in the Saudi nuclear deal as driven by greed.
It isn’t clear that this was his sole motivation. What does appear to be true is that most of his wires for this project were crossed and shorted out before his plane ever took off from the U.S. to the Mideast in April 2015.
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