UAE's nuclear project will save its oil wealth

A landmark plan by the UAE to build its first nuclear facilities for power generation will allow it to save its oil wealth, boost crude exports and cut electricity costs in the long term, said analysts.

The UAE, which controls the world's fifth largest oil and gas wealth, crowned such a plan on Sunday with the singing of an historic Dh75 billion contract with South Korean and US companies led by Korea Electric Power Corporation (Kepco) to design, build and help operate and maintain four civil nuclear power plants in the country for its peaceful nuclear energy programme.

"These are very important and strategic long-term projects, which will contribute to saving the UAE's hydrocarbon wealth and at the same time boosting its crude exports as nuclear power will partly offset the rise in the UAE's energy consumption… this in turn will allow the UAE to increase revenue," said Mohammed Asumi, a Dubai-based Gulf economist.

"I also expect these projects, when commissioned, to depress electricity generation costs in the UAE because nuclear power is less costly."

The UAE's oil production has more than doubled over the past 20 years, peaking at about 2.6 million barrels per day in 2008. The output accounted for 2.63 per cent of the world's total oil supplies, nearly 11 per cent of the Arab crude production and 7.8 per cent of Opec's output.

Its gas production has also recorded a steady rise during that period, with marketed gas supplies reaching a record 50.2 billion cubic metres in 2008, according to official figures. The supplies accounted for 1.6 per cent of the world's total marketed gas, about 11.9 per cent of the Arab gas production and nearly 8.8 per cent of Opec's total gas supplies.

The surge in hydrocarbon production has been offset by a sharp rise in domestic demand, with the UAE recording one of the highest consumption rates in the region over the past eight years because of an economic upswing.

From about 781,000 equivalent bpd (ebpd) of oil in 2004, the UAE's total energy consumption surged to about 1.005 million ebpd in 2008, according to the Organisation of Arab Petroleum Exporting Countries (Oapec).