Industry Trend Analysis - Nuclear Power Would Have Limited Effect On Domestic Oil Consumption - APR 2018

BMI View: The Saudi government's plans to develop 17.6GW of nuclear capacity by 2032 (in order to diversify its power sector) will have a limited impact on reducing domestic oil consumption for electricity generation. Due to the high costs and long construction times associated with nuclear reactors, and repeated delays to the implementation of planned power projects in the country, we will await more concrete progress before factoring in any nuclear projects into our forecasts.

The Saudi government is planning to diversify the country's power sector away from a high reliance on oil for electricity generation and, thereby, increasing the amount of oil available for export. As part of its strategy in achieving this target, the government intends to construct 17.6 gigawatts (GW) of nuclear power by 2032.

Nevertheless, we do not currently forecast that Saudi Arabia will have any nuclear power capacity online over our 10-year forecast period to 2027. A track record of delays in the development of nuclear power projects in other countries, both emerging and developed, prompt us to adopt a cautious approach with Saudi Arabia's plans. As such, we are waiting to see concrete progress in the contracting of developers and the start of construction before factoring any nuclear capacity into our forecast for the country.

The country has also had repeated delays in their plans for a large increase in solar capacity ( see 'False Starts Necessitate Caution On Renewables', February 21 2017). This indicates a negative track record and raises the risk that the challenges posed by the relatively more complicated nuclear technology could result in significant implementation delays. This risk is further compounded by the fact that the country has not yet established its independent nuclear regulator.

Gas-Fired Power Will Remain Outperformer
Total Net Power Generation, By Type TWh (2017-2027)
e/f = BMI estimate/forecast. Source: EIA, BMI
Limited Impact On Oil Consumption

While we note the plans for nuclear capacity by 2032 fall outside of our forecast period, we do not expect that the inclusion of nuclear power capacity into the country's electricity mix will have a large effect on reducing the amount of oil used for power generation. We estimate that the planned development of 17.6GW of nuclear power could free up to 55,000 to 70,000b/d for exports.

Although the government also intends to complement the planned nuclear power projects by increasing its non-hydropower renewables (target of 9.5GW by 2023) and gas-fired power capacity, we expect that the development of 17.6GW of nuclear will be very expensive (estimated at around USD80bn). As Saudi Arabia is estimated to have burnt an average of 450,000b/d in 2017, this means that the planned nuclear capacity would result in a reduction of less than 16% of the daily amount of oil used for power generation.