Tag Archives: King Abdallah Center for Atomic and Renewable Energy

The End of the Mindless Self-Indulgence: the Gulf States

Algeria needs the price of Brent crude, an international benchmark for oil, to rise to $157 dollars a barrel. Oman needs it to hit $87. No Arab oil producer, save tiny Qatar, can balance its books at the current price, around $40 (summer 2020)….The world’s economies are moving away from fossil fuels. Oversupply and the increasing competitiveness of cleaner energy sources mean that oil may stay cheap for the foreseeable future. 

Arab leaders knew that sky-high oil prices would not last for ever. Four years ago Muhammad bin Salman, the de facto ruler of Saudi Arabia, produced a plan called “Vision 2030” that aimed to wean his economy off oil. Many of his neighbours have their own versions. But “2030 has become 2020…” 

Still, some see an upside to the upheaval in oil-producing states. The countries of the Gulf produce the world’s cheapest oil, so they stand to gain market share if prices remain low. As expats flee, locals could take their jobs…

Remittances from energy-rich states are a lifeline for the entire region. More than 2.5m Egyptians, equal to almost 3% of that country’s population, work in Arab countries that export a lot of oil. Numbers are larger still for other countries: 5% from Lebanon and Jordan, 9% from the Palestinian territories. The money they send back makes up a sizeable chunk of the economies of their homelands. As oil revenue falls, so too will remittances. There will be fewer jobs for foreigners and smaller pay packets for those who do find work. This will upend the social contract in states that have relied on emigration to soak up jobless citizens….With fewer opportunities in the oil-producing states, many graduates may no longer emigrate. But their home countries cannot provide a good life. Doctors in Egypt earn as little as 3,000 pounds ($185) a month, a fraction of what they make in Saudi Arabia or Kuwait. A glut of unemployed graduates is a recipe for social unrest…

For four decades America has followed the “Carter Doctrine”, which held that it would use military force to maintain the free flow of oil through the Persian Gulf. Under President Donald Trump, though, the doctrine has started to fray. When Iranian-made cruise missiles and drones slammed into Saudi oil facilities in September 2019, America barely blinked. The Patriot missile-defence batteries it deployed to the kingdom weeks later have already been withdrawn. Outside the Gulf Mr Trump has been even less engaged, all but ignoring the chaos in Libya, where Russia, Turkey and the UAE (to name but a few) are vying for control.

A Middle East less central to the world’s energy supplies will be a Middle East less important to America. ..As Arab states become poorer, the nature of their relationship with China may change. This is already happening in Iran, where American sanctions have choked off oil revenue. Officials are discussing a long-term investment deal that could see Chinese firms develop everything from ports to telecoms… Falling oil revenue could force this model on Arab states—and perhaps complicate what remains of their relations with America.

Excerpts from The Arab World: Twilight of the Petrostates, Economist, July  18, 2020

For the Fear of Iran: The Nuclear Power in the Gulf

Saudi Arabia is pressing ahead with its ambitious plans to develop nuclear power to meet rising electricity demand and save oil for export.  But the outlook for other Arab states is less promising because of political turmoil and a lack of financial resources.  The Saudis have built a foreign assets cushion of around $500 billion from oil exports. It has used this immense wealth to buy its way out of trouble; for instance, heading off pro-democracy protests with massive social spending in recent years.  But, the Middle East Economic Digest observed, “a more serious set of challenges now faces the kingdom that threaten to be even more destabilizing.  “Inefficient and wasteful energy consumption, coupled with a rising population, is leading the kingdom to burn even more of its natural resources at home rather than selling them abroad and adding to the proceeds of the half-trillion-dollar cash pile.  “Unless action is taken, the kingdom could find it needs the oil price to be $320 a barrel by 2030 just to balance the budget,” the weekly, published in the United Arab Emirates, warned.  Nuclear power is seen as the solution. But, as MEED stressed, “time is of the essence.”

For one thing, Saudi Arabia and other Arab states, including the United Arab Emirates, Kuwait, Qatar and Egypt, have no wish to lag any further behind Iran and Israel in developing nuclear technologies.  In 2010, the King Abdallah Center for Atomic and Renewable Energy, known as KAcare, was established to oversee the gulf state’s nuclear program under its president, Hashim bin Abdullah Yamani, who was accorded ministerial powers.  KAcare consultant Ibrahim Babelli said in 2010 it took 3.4 million barrels of oil equivalent a day — known as boe/d — to power electricity generation. This is expected to more than double by 2028 to 8.3 million boe/d.

The aim of the Saudis’ $100 billion nuclear program is to achieve an electricity output of 110 gigawatts by 2032.  The Financial Times reports that in 2009, the latest data available, Saudi electricity capacity was 52GW from 79 power stations.  At least 16 nuclear reactors, each costing around $7 billion, are planned, with the first producing by 2019.  Some estimates state the kingdom, the world’s largest oil exporter, will burn as much as 1.2 million barrels of oil daily on electricity production, almost double the 2010 total, to meet domestic and industrial demand.  This is crucial, as the Saudis are driving to build an industrial infrastructure to sustain the economy when the oil fields run down. Some have already begun to decline.  For total reliance on nuclear power, Babelli says, 40-60 reactors would be needed by 2030. That’s four-six reactors per year from 2020.  “That’s stretching it,” he said. “The answer is an energy mix.”

That means fossil fuels will still be needed, probably as the primary energy source, while wind, solar and nuclear power capabilities are developed. KAcare is developing solar power projects that MEES estimates should produce 41GW within 20 years with geothermal and waste-to-energy systems providing 4GW.  The Emirates, which launched its nuclear energy program in 2009, is the most advanced in the Arab world, with Saudi Arab running second.  The United Arab Emirates’ $30 billion program — $10 billion more than originally planned — is smaller in scale than that in Saudi Arabia.  Both states benefit from political stability and vast financial reserves. Other regional states are less fortunate.

Bahrain, Qatar, Kuwait, Egypt and Jordan all have announced plans to invest in nuclear energy to crank up electricity generation but all have lagged behind or scrapped their programs because of lack of funds or foreign investment.  “Kuwait has the cash,” MEED reported, “but it’s been through eight governments in the past six years.”  Sunni-ruled Bahrain, an island state neighboring Saudi Arabia, “continues to face destabilizing protests by its majority Shiite population and its budget is already in deficit.”  Egypt remains convulsed by the political turmoil that ensued following the February 2011 overthrow of President Hosni Mubarak, its economy sagging dangerously.  In Jordan, heavily reliant on foreign aid, parliament recently scrapped nuclear plans as “hazardous and costly.”  Failure to start boosting electricity generation for burgeoning populations in the coming decades almost certainly will mean more political upheavals.

Saudis, Emirates push nuclear power plans, UPI,July 26, 2012