Saudis moving into nuclear power generation

Discussion in 'West Asia & Africa' started by ejazr, Jun 28, 2011.

  1. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

    Oct 8, 2009
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    Hyderabad and Sydney
    Powering the kingdom - Energy -

    Earlier this year, US energy conglomerate General Electric (GE) set a goal of broadening its $1bn nuclear service-and-parts business. With countries increasingly embracing nuclear power as a means to shed light on power blackouts, it was also aiming to push sales of new reactors.

    The landscape all changed in March 11 when an earthquake and tsunami in Japan crippled reactors at the country’s Fukushima Dai-Ichi nuclear plant — where three of the reactors were designed by GE — and governments from Germany to India and China began to scale back or halt their nuclear programmes.

    So will more countries follow suit and is this the final nail in the coffin for nuclear power? “I can’t comment on why certain countries reacted the way they did… [But] I don’t think so,” Joseph Anis, president and CEO of GE Energy in the Middle East, tells Arabian Business in an interview at a GE event in Saudi Arabia.

    While the UAE’s nuclear safety regulator recently announced it is conducting “a very thorough review” of the emirate’s atomic power plans, one big Gulf energy player is racing in the opposite direction and has given its seal approval to nuclear power: the Kingdom of Saudi Arabia.

    The world’s largest oil exporter says it will invest $300bn building sixteen nuclear reactors over the next two decades, in a bid to meet 20 percent of its electricity needs. Bids for each reactor, which will cost up to $7bn each to build, will be open to international companies, and GE is looking to try and snatch a share of this potentially lucrative new market.

    “I think it is a great step [that] they have put out that announcement,” says Anis. “The first step is the governments start talking to each other and put their policies in place. Once that happens, nuclear manufacturers will come in and start supporting those programmes and participating in their tenders. As they launch that, we will certainly be there to participate.”

    It is predicted that Saudi Arabia’s demand for electricity is set to double by 2020 and GE turbines currently help generate nearly half of all the electricity used in the kingdom, therefore the company already has a solid footing in the Saudi energy market and this new nuclear focus is a way for it to maintain its market share.

    “In terms of nuclear energy, we have been in that business for 60 years. Nuclear energy policy is driven by the government,” says John Krenicki, vice chairman of GE and president of GE Energy. “If the government of Saudi Arabia wants GE here in the nuclear business we will be here, but again, nothing happens in nuclear without government approval.”

    GE Energy has announced over $10bn in power generation equipment and services in the Middle East over the last two years and it has secured projects such as a $2.6bn contract for a power plant in Kuwait, a $500m contract in Bahrain, a $1bn project in Riyadh and $3bn to supply power generation equipment in Iraq.

    With GE Energy’s global business worth around $37.5bn, securing a lion’s share of the Saudi nuclear market would be a massive injection of capital for the company. As it stands, GE as a whole earned around $5.7bn last year and, speaking at the Saudi GE event, Krenicki said he expected the company to double its energy revenue from the kingdom in the next five years by increasing sales of gas power turbines.

    In May, GE, whose power plants generate about one-fourth of the world’s electricity, announced a new natural gas power plant design that it says is more efficient and flexible than any other in the market.

    Having invested more than $500m in the new plant development, the design’s flexibility has seen it dubbed the FlexEfficiency 50. Manufactured in France and set to be sold around the world, its unique selling point is the fact it can ramp up and down rapidly, and thus be easily combined with wind and solar power plants that generate electricity intermittently.

    GE claim competing plant designs are only about 60 percent as efficient at burning natural gas and Anis says the FlexEfficiency 50 will be destined for its future projects in the Middle East.

    “That is a programme we will roll out globally. That will apply in the Middle East as projects come forward we will participate with that and that is our latest technology,” he says. “It will mean greater output and greater efficiency [for customers].”

    As part of its expansion in Saudi, GE has opened a $100m plant in Dammam to build and repair turbines for power generators, and announced it plans to invest a further $150m in expanding the facility over the next three years.

    The GE Energy Manufacturing Technology Centre, a 10,000 sq m facility, has created more than 1,000 jobs in its first phase and another 1,000 in the second phase and will serve customers in the wider Middle East, Europe and Africa.

    “GE has been in the kingdom for 80 years. This is the first investment we are making which is beyond Saudi Arabia and will be for the entire region. This is a deeper manufacturing commitment. We are scaling our business for what we ten years out,” says Krenicki.

    With the kingdom also set to change its labour laws to increase Saudi employment, the new centre will also help GE increase its Saudisation rate.

    “Our Saudi percentage of the workforce is rising rapidly and near 50 percent and we see that going higher. We are taking actions with the universities and vocational schools to position this business for the future,” says Krenicki. “We are committed to having a high percentage of employees and having more Saudi employees.”

    The company made roughly $14bn worth of acquisitions over the past year, with $11bn in energy alone, and Anis said it is unlikely to stop any time soon.

    “As a company, where and when it makes sense, certainly GE will look at future acquisitions,” he says.

    With Saudi Arabia set to ramp up its much needed energy production with the introduction of a series of nuclear power plants, it is obvious the GE Energy Manufacturing Technology Centre won’t be the end of the company’s expansion and investment plans in the kingdom.

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