UAE NUCLEAR PLANS

UNCLAS SECTION 01 OF 02 ABU DHABI 001432

SENSITIVE
SIPDIS

STATE FOR NEA/ARP, T (MHUMPHREY) AND EEB

E.O. 12958: N/A
TAGS: ENRG TRGY BEXP BTIO ECON EFIN PGOV AE
SUBJECT: UAE NUCLEAR PLANS

REFS: A) STATE 127423
B) STATE 111186
C) ABU DHABI 1086
D) ABU DHABI 397
E) ABU DHABI 371
F) ABU DHABI 299
G) ABU DHABI 45

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1. (SBU) The United Arab Emirates is rapidly pursuing a civilian
nuclear power project that is expected to come online in 2017 and
ultimately may include as many as ten nuclear plants valued at over
$50 billion. Although the program is being developed by and
initially for the Emirate of Abu Dhabi, the UAEG is currently
developing the necessary legal and organizational infrastructure to
meet these targets. The UAE is actively discussing its plans and
opportunities for cooperation with the IAEA, NSG and foreign
governments, including the United States (refs B-G). The extent of
the opportunities for cooperation with the United States will depend
largely on the status of a Section 123 Agreement, although a MOU for
nuclear cooperation was signed in April 2008.


2. (U) The responses below are keyed to Ref A questions:

OVERVIEW
--------------

-- Following its analysis of projected energy needs through 2020,
the UAE Government began to evaluate the development of peaceful
nuclear power to meet its long-term energy needs. In April 2008,
the United Arab Emirates released a white paper entitled, "Policy of
the United Arab Emirates on the Evaluation and Potential Development
of Peaceful Nuclear Energy." (Complete text online at:
http://www.mofa.gov.ae/pdf/
UAE_Policy_Nuclear_Energy_ENGLISH_E.pdf.) Since then, the UAE has
moved rapidly forward with its plans to develop nuclear power. The
Emirates Nuclear Energy Corporation (ENEC),currently under
formation, awarded the U.S. firm CH2MHill a ten-year managing agent
contract for the nuclear energy program in October.

-- The UAE's interest in developing nuclear energy is motivated by
the need for additional sources of electricity to meet future demand
projections and to ensure the continued rapid development of its
economy. UAEG analysis concluded that national annual peak demand
is likely to rise more than 9 percent annually from 2007 to peak at
40,000 megawatts by 2020. It is expected that peaceful nuclear
power will meet 20-25 percent of this demand.

ENEC, a civilian, publicly held entity, was established with a
capitalization of approximately $100 million. The program's future
costs are likely to be funded through commercial project finance,
depending on applicable financing terms. Ultimately power will be
produced in the Emirate of Abu Dhabi and sold to UAE electricity
providers, such as the Abu Dhabi Water and Electricity Authority.
In August 2008, the UAE made a $10 million donation to the Global
Nuclear Fuel Bank.

-- Key Decision Makers:

- Mohammed Al Hammadi, CEO, Emirates Nuclear Energy Corporation
(ENEC, under formation)

- Hamad Al Kaabi, MFA Special Representative for International
Nuclear Cooperation and UAE Permanent Representative to the IAEA

- Khaldoon Al Mubarak, Chairman, Executive Affairs Authority (EAA)

- David Scott, Director of Economic Affairs, EAA

- William Travers, Director General-designate, Federal Authority for
Nuclear Regulation (FANR, under formation)

-- The UAE is in the process of establishing the Federal Authority
for Nuclear Regulation (FANR). Its authority will be delineated in
the UAE's nuclear law, which is currently being drafted.

-- Once the draft nuclear law is passed, the UAE will finalize a
nuclear liability law and conclude the following nuclear liability
commitments:
- IAEA Vienna Convention on Civil Liability for Nuclear
Damage
- IAEA Protocol to Amend the Vienna Convention on Civil
Liability
- IAEA Joint Protocol on the Application of the Vienna and
Paris Conventions
- IAEA Convention on Supplementary Compensation for Nuclear
Damage

-- As this is a new industry for the UAE, initially most products

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and services are likely to be imported.

-- The UAE workforce has few individuals with nuclear expertise. As
80-90 percent of the work force is foreign, similar statistics are
likely to apply to the nuclear industry. The UAEG broadly seeks to
provide nationals with education, training and expertise that would
qualify them for employment, particularly in knowledge-intensive
sectors.

OPPORTUNITIES FOR U.S. INDUSTRY
--------------

-- Technology tenders are likely to be awarded in 2009. Major U.S.
firms with nuclear expertise are expected to be interested in the
project, including GE (with Hitachi) and Westinghouse (with
Mitsubishi).

-- Pending the finalization of a Section 123 agreement between the
U.S. and the UAE, U.S. firms are likely to be competitive for all
major tenders related to the UAE's nuclear program.

-- The UAE has signed nuclear-related contracts with the U.S. firms
Ch2MHill and Thorium Power. Among the many foreign firms believed
to be interested in the project are France's Areva, Total, and Suez
and Japan's Mitsubishi, Hitachi and Toshiba. Major U.S.
construction firms (such as Bechtel, Flour, etc.) and their foreign
competitors may bid on related tenders.

FOREIGN COMPETITORS
--------------

-- Many foreign companies and governments are interested in the
UAE's nuclear program, the total cost of which could exceed $50
billion. The UAE is pursuing cooperative agreements with most of
the major nuclear powers. Agreements have been completed with the
United States (April 2008 MOU),United Kingdom (May 2008 MOU),
France (January 2008 agreement). Discussions are ongoing with Japan
and South Korea, as well as Germany, Russia and China.
OLSON