Worldwide Development of Nuclear Energy and the Strategic Deployment of German Consultancies on the Arabian Peninsula

MA-Thesis / Master von Felix Wilde

Introduction:

The master thesis ‘Worldwide Development of Nuclear Energy and the Strategic Deployment of German Consultancies on the Arabian Peninsula’ is chiefly targeted at German consultancy companies so that they can assess their status of strategic deployment and prioritize their activities to enter a new business sector in a foreign market. This publication could also be of relevance for policy makers, investors, suppliers as well as nuclear energy and governmental agencies to identify their need for external advisers to safely operate a nuclear power program; provides a guideline for how to enter a new market. Hence this thesis should be considered as an aid to identify hurdles and obstacles that have to be foreseen and so overcome. Potential business fields are also noted as well as important factors that have to be considered to minimize the chance of failure in the new market. Nevertheless, this huge market with its continuously changing constraints and conditions could throw up a lot more obstacles than could be covered in this thesis. Also the internal organizations of individual companies may differ from the one described in the thesis. The objective of this master thesis is thus to set out a set of guidelines for possible approaches.

The first two chapters present an overview of the current geographical, political, cultural and economic conditions to familiarize the reader with the background information and constraints needed for the subsequent chapters.

The third chapter deals more specifically with the energy market on the Arabian Peninsula, particular in the Kingdom of Saudi Arabia and the United Arab Emirates. This chapter provides information on types of energy, pending developments, country-specific organizations and institutions, as well as means of financing such huge projects.

The fourth chapter is devoted exclusively to nuclear energy, starting with the current status and the motivation of the two countries to launch such a development. This is followed by a description of the legal requirements and other commitments as decreed by the countries’ governments. These specific legal conditions do not just apply within the countries concerned, but companies which do business there are likewise obliged to follow these regulations. Challenges for countries are opportunities for consultants, and identification of these represents is the core content of this chapter.

The content of the fifth chapter is the preparatory measures that are essential prior to entering a foreign market. A company’s vision and mission as well as various analyses are needed to provide a sound basis for taking a decision to proceed. In this context, SWOT analysis is noted as well as an evaluation of M.E. Porter’s ‘Five Forces’ to describe the market and internal organizations.

After the preparatory measures, the implementation phase follows. This and its various stages are described in Chapter 6. It is inevitable that, to ensure success, many measures will have to implemented and subsequently adjusted. This starts with deployment and steering of business units and proceeds to overcoming difficulties with external parties. Recruitment on a permanent basis of employees is also a prerequisite for sustained business success, together with a staff feedback, incentive and salary system.

Chapter 7 sets out methods for evaluating previous years’ activities in the new business. The first couple of years after ‘start-up’ are over and the situation in which the company is now has to be assessed. It is frequently necessary to undertake organizational upgrades, that could amount to a complete reorganization of the business, aided by change management provisions.

The final Chapter 8 summarizes the key information and content, and sets forth the need and reasons for strategic deployment. Changes in the market means that companies will have to re-adjust for economic survival.

Because the nuclear program of the United Arab Emirates is more advanced than that of the Kingdom of Saudi Arabia and information is less available in the latter country, the main focus of this thesis is on the UAE. Nevertheless, the KSA is an emerging nuclear market with great ambitious for a nuclear program and so is worthy of mention when discussing constraints and conditions that these countries have in common.

Other countries that are members of the Gulf Cooperation Council (GCC) do share an interest in nuclear energy but are not yet at the same stage of development as the UAE and KSA. These serve from time to time to support arguments and figures.

A sufficient and reliable energy supply is essential for continuous economic development, contributing also to poverty reduction and health care improvement. If these developments are restricted or lacking, often the result is social conflict that could even lead to civil strife. Examples are rural arid areas in the world where there is no access to potable water. A minor local conflict affects the economic development and population of specific countries and often results in regional instability and interventions from outside. The global energy imbalance has been steadily growing over the past couple of decades. Roughly 1.6 billion people live without electricity, and almost 2.4 billion people rely on traditional biomass to cook their daily meals . Modern fuels are not available or are restricted to the upper social strata. There is an almost equal share of the world’s population with no access to potable water, so in the struggle for survival the consequences will be social unrest and riots.

In some poor countries of the world, the per capita electricity consumption is as low as 50 kWh per annum, compared to developed countries with 8,600 kWh. Worldwide, the provision of energy is dominated by three major challenges.

1. Energy consumption has tripled in the past half century. If this continues, humankind will consume more energy in the 21st century than in the entire past history. This represents an increase of 53% in global energy consumption by 2030.

2. The main energy resources are now scarce, so to ensure economic development, countries will compete with each other to acquire their own supplies. Each country seeks to protect its existing sources and open up new ones. This will not result in a fair distribution of resources, as poor countries are not able to compete with their developed neighbors and lose out, as has often happened in history.

3. To an increasing extent attention is focusing on environmental impacts. Because of the greenhouse effect, carbon dioxide emissions from burning fossil fuels bring about a rise in global temperatures. The consequences are long-lasting drought, sea level rise, submerging coastal regions and more destructive storms.

For these reasons, many governments are reviewing their present energy mixes and are considering alternatives to avert the consequences of energy scarcity, including the renewal of interest in nuclear energy that has been noted in recent decades. Adoption or resumption of nuclear energy is at least one solution for some countries faced with a threat to the security of their energy supplies.

Among others, one benefit of nuclear energy is zero emissions of greenhouse gases during their operating phase and the ability of huge plants to provide electricity reliably and on a large scale. Much engineering effort has been devoted to significantly improving nuclear plant safety in recent decades. Furthermore, although they are finite, there are ample reserves of uranium and, unlike petrochemicals, they are not put to any other use apart from as an energy source. Prospecting is under way for new deposits, as currently in Yemen. The cost of electricity generated by nuclear power is now competitive, but a major concern that has still to be resolved is final storage of down burned nuclear fuel rods.

An overview of the economics is provided by a cost comparison of the various electricity generation technologies, as shown in Figure 1-1 below. This survey is ongoing in a couple of countries to seek a basis for taking decisions on their energy strategies. The quoted figures are ballpark estimates, with actual values depending very much on local conditions and the current market situation, but they do serve to provide a rough comparison.

The outcome of these calculations is that electricity generation from nuclear fuel is, at 91.0 US Dollar/MWh, much more competitive than firing crude oil at 133.4 US Dollar/MWh. However, a major consideration is the distinction that has to be made between supplying base and peak/cycling load. To meet the demand for base-load electricity, large-scale power plants, like nuclear and those fired with coal and crude oil are more favorable. These need an extended start-up period – ranging from a couple of hours to two or three days – before they can feed power into the grid. Smaller scale plant, like diesel-fired simple-cycle gas turbines and solar power plants are able to rapidly ramp their power output up and down to cover daily consumption peaks. For this reason, nuclear power plants almost exclusively operate continuously at or near peak output to supply base load, together with natural gas-fired combined cycle gas turbine plants and coal-fired power plants. Diesel-fired gas turbines and solar power plants find application for peak and cycling duty. The key factors are listed in the following table, with firstly the operating parameters, which are attributes specific to the various power plant technologies that are taken as basic assumptions for the further calculations. The second sub-heading is key financial constraints, which fix the technology that is more economical. These comprise the capital cost for construction and development as well as long-term costs that are highly cyclical and cannot be so readily predicted as the other costs. The third main distinction is the direct electricity generation costs. These are running costs incurred only during power plant operation and are directly related to the rated power output in MWe.

This calculation serves as well to identify companies and utility suppliers for nuclear power generation as well as to broaden the mix of energy supply technologies and reduce dependency on specific primary resources.

Table of Contents:

Text Sample:

Chapter 3.3, Renewable Energy in the UAE and KSA:

Utility companies in the GCC states are under enormous pressure due to the global scarcity of fossil fuels, which are running out much faster than expected, consequently they are boosting also renewable energies. Governmental agencies have been instructed to review energy consumption in the Middle East and are seeking alternatives to meet the rising demand, which is also in line with the global environmental movement to reduce greenhouse gas emissions. The long shoreline and high insolation throughout the year are optimal for generating wind, water and photovoltaic power.

The following illustrate the efforts made by government agencies for the upcoming year:

Abu Dhabi’s Masdar City is spending US Dollar 2 billion on promoting solar technology.

Saudi Arabia is looking to position itself as a centre for solar energy research and so become a net exporter of energy sourced from renewables.

Abu Dhabi is to build the world’s largest hydrogen power plant at a cost of US Dollar 15 billion.

‘Glance over the borders”: Jordan is assessing plans for constructing a wind farm while Qatar is considering solar power.

3.4, Pending Developments:

Regarding upcoming developments, the two countries, UAE and KSA, have to be considered separately due to the primary resources that are available. Crude oil and natural gas reserves in Saudi Arabia will last decades more than the resources in the UAE. A further reason is that the quality and composition of the mineral resources are much less favorable in the KSA than in the UAE. This means that their firing for power generation is, for economic reasons, the only reasonable option for their exploitation. In the UAE the situation is different, as there the mineral resources are of much higher quality and are too valuable to fire in power plants. The price obtainable on the world petrochemicals market is much higher than the benefit derived from electricity generation. The UAE therefore has a greater incentive to diversify its power generation and to invest in technologies other than fossil fuels much earlier. Based on the financial and economic crisis, the ‘Bundesverband der Deutschen Industrie’ expects a smoother growth of GDP in 2008 and 2009. This means that ongoing projects with a total CAPEX of US Dollar 378 billion will be postponed or abandoned. Despite these figures, the UAE will remain the most important project market for German companies in the Arabian region. Over the near term, between 2009 and 2011, the UAE expects investments of about US Dollar 540 billion. Showing high potential for investments of about US Dollar 24 billion is expansion of water production and power plant capacities.

To participate in this development, frequent consultations and top-level meetings are held to strengthen the relationship between German industry and local agencies like DEWA (Dubai Electrical and Water Authority) and ADWEA (Abu Dhabi Water and Electricity Authority). These authorities organize and guide all water and electricity projects, starting with planning and tendering through to commissioning. Over the past four years, energy consumption in the Emirate of Dubai has increased by around 10,000 GWh. As a consequence, the projection for 2010 is for a new electricity generation capacity of 9 GWe provided by power plants. Likewise electricity transmission has potential for growth. DEWA intends to award contracts annually for more than 6,000 km of HVDC (high voltage direct current) transmission lines. DEWA has an estimated annual budget of US Dollar 2 billion.