A Plausible Scenario for Saudi Arabia’s Nuclear Energy Plan; Goodbye US AP1000, Hello China Hualong One via Pakistan

  • The Kingdom of Saudi Arabia (KSA) has long maintained that if it doesn’t get what it wants from a US 123 Agreement for export of nuclear reactor technologies, it has other options including buying Chinese Hualong One PWRs, at 1100 NMW each, similar to the two units now being built at a coastal site in Pakistan near Karachi.
  • Such an scenario would be a win for China, which would benefit from a long-standing relationship, first documented in 2003, between KSA and Pakistan, involving KSA’s financial support for Pakistan’s nuclear weapons program.
  • The Chinese Hualong One, a PWR at 1100 MW is comparable in electrical power output to the Westinghouse AP1000 at 1150 MW.
  • For its part, the US reiterated at the Munich Security Conference on Feb 16 that the U.S. will not open door to Saudi Arabia building nuclear weapons by abandoning the “gold standard” set with a similar agreement with the United Arab Emirates.
  • Saudi Arabia may be playing a double game with the US. On one hand it makes fiery disclaimers that if it doesn’t get a modified 123 agreement, it will talk to China. On the other hand, getting the reactors from Westinghouse and big chunks of its supply chain makes protecting Saudi Arabia from Iran much more in the US interest. Because . . . they will now have our nuclear reactors and we will want to keep an eye on them.
  • Is Saudi Arabia strong enough to make good on its “disclaimer” of having other sources? Maybe they do have a China option, but would China also come with a security guarantee? I don’t think so.

US DOE Official Repeats Official Line
for a 123 Agreement with Saudi Arabia


DOE’s Dan Brouillette

In a report by CNBC reporter Hadley Gamble at the Munich Security Conference on Saturday Feb 16, U.S. Deputy Energy Secretary Dan Brouillette, (right) said the U.S. will not open door to Saudi Arabia building nuclear weapons.

“We won’t allow them to bypass 123 if they want to have civilian nuclear power that includes U.S. nuclear technologies,” Brouillette told CNBC.

“As you know this technology has a dual use and in the wrong hands it becomes a dangerous, dangerous world,” said Brouillette.

CNBC reported that he added that while countries should pursue nuclear energy technologies, they must do so under a U.S. law that is intended to prevent the proliferation of nuclear weapons.

The Saudis have, so far, refused to rule out their right to enrich uranium for nuclear weapons, pointing to neighboring Iran’s ability to do so under the 2015 nuclear agreement that world powers signed with Tehran. The US has since pulled out of it, but all other nations that are party to it are staying in.

Section 123 of the United States Atomic Energy Act of 1954 (full text PDF file) , titled “Cooperation With Other Nations,” (plain English summary) requires that any nuclear deals between the U.S. and any other nation prohibit to dual use of the technology to produce weapons. Banning enrichment of uranium or the reprocessing of plutonium using US supplied nuclear reactors technologies is the first step.

UAE’s Gold Standard 123 Agreement

The United Arab Emirates (UAE) signed such an agreement with the US prior to kicking off its construction of four South Korean designed reactors that are based in part on US reactor technologies. It is often referred to as the “gold standard.” The bilateral agreement bans any work by the UAE to use nuclear reactor technologies supplied by US vendors directly, or supplied by other nations, to enrich uranium to any level and it also bans reprocessing of spent nuclear fuel.

Brouillette told CNBC such an agreement is an imperative to any nuclear deal with Saudi Arabia.

“We won’t allow them to bypass 123 if they want to have civilian nuclear power that includes U.S. nuclear technologies.”

Saudi Arabia Not Budging on Enrichment Issue

The Kingdom of Saudi Arabia (KSA) last year issued a request for proposal to build two full size nuclear reactors and received responses from the U.S. Russia, China, France, and South Korea. Energy ministry officials have said they plan to choose a vendor later this year. The construction of two units, at a potential cost of $5-7 billion each is seen as a precursor to an ambitious plan to build 14 more units spread over three coastal sites.

In its negotiations with a U.S. team led by DOE Energy Secretary Rick Perry, KSA has refused to rule out their right to enrich uranium for nuclear weapons, They claim that the U.S. has given Iran the ability to do that under a 2015 nuclear agreement.

The difference being ignored in this “what about” stance is that the Iran nuclear deal is not a 123 Agreement and Iran has no plans to buy nuclear technologies from the US.

In an interview in March 2018 on CBS’s “60 Minutes” Saudi Crown Prince Mohammed bin Salman said the country wasn’t interested in developing weapons, but would develop nuclear capability should Iran ever develop a working nuclear bomb.

On Sunday Feb 17, Saudi Arabian Prince Turki Al-Faisal responded directly to Brouillette’s words, telling CNBC the country had more options than just U.S. technology.

“Well the nuclear energy market is open. It is not just the United States that is providing nuclear technology,” he told CNBC’s Hadley Gamble in Munich.

“We have France, we have Russia, we have China. We have our friends in Pakistan and in other places as well, so if they want to remove themselves from that market, well, that’s up to them.”

Is Al-Faisal bluffing or does he really mean it? It turns out the links between Saudi Arabia and Pakistan in all matters nuclear related are long standing and involve several levels of cooperation both in terms of finances and technology development. Al-Faisal is not making an empty threat.

The Pakistan Angle Comes into View

  • An entirely plausible scenario is that KSA could buy reactors from China and get its enrichment tech from Pakistan.
  • The Pakistan angle in terms of KSA’s nuclear ambitions is of particular interest and hasn’t been covered recently in the US mainstream media.
  • The US nuclear industry, which recently presented a case for expanded exports to the White House, may not have yet fully grasped the competitive threat posed by China’s progress in Pakistan.

China’s advantage in selling nuclear reactors to KSA is that it is pretty far along in construction of two Hulalong One reactors in Pakistan, which are 1100 MW PWRs of Chinese design. Completion time is planned for 2020 or more likely occurring in 2022. Success there for China there would then be key confidence item for KSA.

Also, the history of development of Pakistan nuclear weapons program rife with reports of KSA cash to help pay for it. It points to a long standing relationship between the two countries in precisely the area where a 123 Agreement with the US would seek to ban any activities.

According to a Wikipedia article, in news media reports and think tanks studies it is widely believed that Saudi Arabia has been a major source of funding for Pakistan’s atomic bomb project since 1974.

In 2003, globalsecurity.org reported that Pakistan and Saudi Arabia had entered a secret agreement on nuclear cooperation providing Saudi Arabia with nuclear weapons technology in return for access to cheap oil for Pakistan. Pakistan is outside the Nuclear Non-Proliferation Treaty which means it has no international constraints on sharing uranium enrichment technologies with Saudi Arabia.

A Brookings study published in 2008 provided details of one key aspect of this support.

“In May 1998 when Pakistan was deciding whether to respond to India’s test of five nuclear weapons, the Saudis promised 50,000 barrels per day of free oil to help the Pakistanis cope with the economic sanctions that might be triggered by a counter test. The Saudi oil commitment was a key to then Prime Minster Nawaz Sharif’s decision to proceed with testing. It cushioned the subsequent U.S. and EU sanctions on Pakistan considerably.”

The AFX wire service reported in 2006 that Saudi Arabia was working secretly on a nuclear program, with help from Pakistani experts, the German magazine Cicero reported, citing Western security sources.

Since 1998, Western diplomats and intelligence agencies have believed that an agreement exists in which Pakistan would sell Saudi Arabia nuclear warheads and its own nuclear technology should security in the Persian Gulf deteriorate. Both countries have sharply denied the existence of such an agreement.

In 2013 a BBC report covered many of these previous developments and added this alarming description of the KSA relationship with Pakistan with regard to nuclear weapons.

“One senior Pakistani, speaking on background terms, confirmed the broad nature of the deal – probably unwritten – his country had reached with the kingdom and asked rhetorically “what did we think the Saudis were giving us all that money for? It wasn’t charity.”

Another, a one-time intelligence officer from the same country, said he believed “the Pakistanis certainly maintain a certain number of warheads on the basis that if the Saudis were to ask for them at any given time they would immediately be transferred.”

The BBC also reported that Gary Samore, who served as President Barack Obama’s counter-proliferation adviser, has told Newsnight: “I do think that the Saudis believe that they have some understanding with Pakistan that, in extremis, they would have claim to acquire nuclear weapons from Pakistan.”

More recently in January 2019 the Washington Post reported that the Pakistan shared ballistic missile technologies it bought from China with Saudi Arabia.

Given these existing relationships, nonproliferation experts worry that if Saudi Arabia decides it wants enrichment technology, its long time partner in Pakistan could be the first stop. Differences among analyst include the question of whether Saudi Arabia would risk its security relationship with the US to buy Pakistan weapon systems.

Why China Might Have an Edge in Competing
for KSA’s Nuclear Commercial Reactor Business

In January 2012 the Wall Street Journal reported China and Saudi Arabia inked an accord that lays the groundwork for the two nations to jointly establish atomic energy facilities and combine efforts in spheres such as the generation of nuclear fuel. Work between the two countries to develop nuclear energy technologies is not something that just popped up. It’s been going on for a long time.

What’s important for Saudi Arabia is that it wants commercial nuclear reactor technologies with proven track records. For this reason, the EDF/Areva EPR, with significant cost overruns and schedule delays at sites in Finland and France, is not a front runner.

Pluses & Deltas for South Korea’s Competitive Edge

On the other hand, South Korea’s contract to build four 1400 MW PWRs for the United Arab Emirates is a key factor that would be a competitive match for China. Note that South Korea also has a long standing relationship with KSA to develop a 100 MW small modular reactor.

The 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. So far the US hasn’t sought to develop an approach based on it.

Working against South Korea is the fact that commissioning the first of four of the 1400 MW PWRs in the UAE has been delayed. Reuters reported in May 2018 the start-up of first nuclear reactor in the United Arab Emirates has been delayed by nearly 18 months to late 2019. The UAE utility that will operate the plant has since said that it forecasts that the loading of nuclear fuel assemblies required to start nuclear operations at Barakah Unit 1 will occur by the end of 2019 or in early 2020.

Nawah Energy Company, the operator of the Barakah Nuclear Energy Plant in the Al-Dhafra Region of Abu Dhabi, told Reuters it “has completed a comprehensive operational readiness review” for an updated start-up schedule for the reactor. Clearly, there were open items in the review that will take more work to close.

Reuters also reported in March 2018 that the start-up had been pushed back again due to training delays and unspecified issues with the safety culture at the plant. An earlier delay in training reactor operators was caused by the shutdown of a similar reactor in South Korea due to the discovery in 2013 of counterfeit electrical cables in the plant. It was not available to develop nor deliver the required training to UAE plant operators. This was the second such incident to hit South Korea’s nuclear fleet.

There have not been any reports of counterfeit components being discovered in the UAE reactors. However, the delay in commissioning them may tarnish South Korea’s profile as a successful vendor in the Middle East. How much depends on an internal Saudi evaluation which, given the unpredictable nature of the current leadership, may take into account political and noncommercial issues as well as project-related factors.

Progress with the Hualong One in China

By comparison to South Korea’s headaches in the UAE, China’s first reactor adopting its domestically developed third-generation ACPR-1000 design has completed its trial operation and has begun commercial operation.

china h1 cgn

Yangjiang Nuclear Power Plant

CGN Power, a subsidiary of China General Nuclear Power Corp., announced that the 1000-MW Unit 5 of the Yangjiang Nuclear Power Plant (right) in Guangdong province completed a 168-hour period of trial operation on July 12, 2018. Construction of the unit began in September 2013, and it was connected to the grid on May 23, 2018.

Four Hualong One units are being built in China. CNNC is constructing two units at its Fuqing plant in Fujian province, while China General Nuclear (CGN) is building two at its Fangchenggang site in Guangxi province.

All four units are expected to enter commercial operation in 2019-2020. CGN proposes to use a UK version of its Hualong One design at the planned Bradwell B site in the UK.

Progress with Hualong One Reactors in Pakistan

The nuclear trade publication Nuclear Engineering International reported in January 2019 that all the reactor internals have been installed at the first Hualong One being built by China National Nuclear Corporation (CNNC) in at Pakistan’s Karachi nuclear power plant (Kannupp).

Construction of Kannupp 2&3 began in 2015 and 2016. They are scheduled to begin commercial operation is 2021 and 2022.  KSA’s leadership could be very comfortable buying the same designs from CNNC given its success in Pakistan.

Schematic of a Hualong One


Image Credit: By Ji Xing, Daiyong Song, Yuxiang Wu – http://www.sciencedirect.com/science/article/pii/S2095809916301515 (from PDF version of paper)Journal: Engineering. 2 (1). doi:10.1016/J.ENG.2016.01.017, CC BY 4.0, https://commons.wikimedia.org/w/index.php?curid=57429503

What About the Westinghouse AP1000?

China has completed and commissioned all four Westinghouse AP1000 units being built there. However, Saudi Arabia is also mindful of the failure of Westinghouse at the V C Summer project which resulted in cancellation of construction with less than half the work done.

Also, China is not interested in exporting the Westinghouse AP1000 since it would have to pay royalties for use of the intellectual property associated with the design. On the other hand, the Hualong One is an entirely domestic design which China is aggressively promoting to the UK, Argentina, and elsewhere.

& & &

Is Saudi Arabia the next stop for the Hualong One? If the US says no to KSA’s intense lobbying for a modified 123 Agreement, its certainly a plausible scenario. Plus, Saudi demands for the right to enrich uranium need to be seen in the context of its relationship with Pakistan which, it appears, could offer that technology to the Saudi nuclear effort if asked for it.

So what is KSA’s end game in pushing for enrichment as part of a 1-2-3 agreement with the U.S?

It’s to send a the message, one among many, to Iran from KSA that looks like is this – back off the ballistic missile program or we’ll get enrichment and maybe also get a bomb. Note that Iran backed rebels in Yemen in 2018 lobbed several Iranian supplied ballistic missiles into KSA barely missing the airport in Riyadh. That’s almost 700 miles. Saudi reactors would also be targets for Iran’s aggression either directly or through surrogates.

The whole thing about the KSA approach to a 123 agreement looks a effort by the Saudi to send Iran a message about its security guarantees from the US.

See what we think we can get our friends in the U.S. to do for us, If we succeed you’re behind the eight ball. Keep in mind that President Trump repeatedly called for tearing up the Iran nuclear deal which has U.S. nuclear trade groups that want to sell reactors to KSA tearing their hair out. If the Saudi government takes an extreme position on enrichment, there will be no 123 agreement and no reactor deals at least for US firms.

As far as Westinghouse getting any of the reactor business, which is the media narrative in DC, that’s unlikely since South Korea’s success, and experienced Arab speaking workforce, in the UAE building four reactors there positions it as a front runner.  The commercial factors are not in Westinghouse’s favor.

~ Other Nuclear News ~

UK PM May Says Hitachi Wants To Continue Discussions with Hitachi on Wylfa Nuclear Project

(NucNet) Hitachi said in a statement last week that it wants to continue discussions on building new nuclear at Wylfa Newydd in north Wales. In response, UK prime minister Theresa May has said the government will support those discussions.

In January 2018 Hitachi announced it would suspend work on plans to build the two UK Advanced Boiling Water Reactors because of rising construction costs and a failure to reach an agreement on financing with the UK government.

The Japanese company had been in talks with the government since June about funding for the project, which was being built by its Horizon subsidiary. The government said it had failed to agree terms with Hitachi.

The decision was made from the viewpoint of Hitachi’s financial rationality as a private enterprise, Hitachi said in a statement. Hitachi said the decision would cost it an estimated 300bn yen (€2.3bn) in expenses, plus another 300bn yen as “extraordinary losses”.

“We did offer [Hitachi] a package of support,” Mrs May said. “We offered a package of support that no previous government had been willing to consider of one-third equity, all debt financing and a strike price of no more than £75 per megawatt hour.

Hitachi president Toshiaki Higashihara said at a press conference in Tokyo recently that the company might consider “unfreezing” its plans to build Wylfa Newydd if the UK government can demonstrate a viable financing scheme.

South Africa Might Resume Nuclear Plant Talks With Russia

(NucNet) South Africa might be willing to resume talks with Russia on the possible construction of new nuclear power plants, despite Pretoria’s decision last year to drop nuclear from a long-term energy plan. The cost of 9600 MW of power was seen as too steep for South Africa to take on even with Rosatom providing 50% of the financing.

Complicating matters in April 2017 a Cape Town court ruled that a series of preliminary procurement deals for new nuclear construction between the government of South Africa and Russia, China, the US, South Korea and France were illegal. The court ruled that the procurement process was not sufficiently public and did not involve adequate environmental and financial assessments.

Lindiwe Sisulu, head of the ministry of foreign affairs, was quoted in South African media reports as saying the construction of new nuclear units in South Africa with the participation of Russian state nuclear corporation Rosatom will be discussed during a planned visit by president Cyril Ramaphosa to Russia.

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