January 23, 2011 / 3:59 PM / 7 years ago

UPDATE 2-Saudi to sign nuclear deal, cut fossil fuel use

* Kingdom to reduce use of fossil fuels as demand rises

* Areva to sign nuclear deal amid high interest in region (Adds quotes, background)

By Reem Shamseddine

RIYADH, Jan 23 (Reuters) - Top oil exporter Saudi Arabia wants to cut fossil fuel use within the next several decades, it said at an industry event where nuclear reactor maker Areva CEPFi.PA is set to sign a major deal with a Saudi partner.

Although it sits on the world’s largest oil and gas reserves, Saudi Arabia is struggling to keep up with rapidly rising power demand as petrodollars have fueled a Gulf-wide economic boom as well as a rapid population growth.

Anne Lauvergeon, chief executive of the French nuclear reactor company, told reporters that Areva will sign a partnership agreement with Saudi Arabia’s Binladin Group for nuclear and solar energy. She gave no specific figure.

“We think that on solar thermal in Saudi Arabia there’s an important market and we are partnering with Saudi Binladin Group to develop this,” Lauvergeon said.

The agreement with Areva, which is 90 percent-controlled by the French government through direct and indirect holdings, was due to be signed on Sunday.

Saudi Arabia wants to cut domestic oil consumption within the next several decades as it diversifies its energy mix including nuclear, Hashim Yamani, president of the King Abdullah City for Atomic and Renewables Energy, told reporters.

“You want to have an energy mix to save oil, and this oil we can leverage prices so we can sell it abroad to build these facilities,” Yamani said.

“Nuclear would be adequate for the base load, we’ll use renewables to add more capacity, there are some variations -- gas and oil will have to continue to help,” he said.

Total Saudi power demand is expected to triple to 120 gigawatts (GW) by 2050 from around 40 GW in 2010, said Yamani.

“Nuclear and renewable energy will reduce dependence on fossil fuels by 2050,” Yamani said, adding that nuclear and renewable energy would free up more oil for exports. “Saudi will need to invest upfront in nuclear energy, but the oil saved will contribute significantly to the costs.”

Given the high costs of developing nuclear energy, one rule of thumb in the industry has been that nuclear becomes a viable proposition when oil is $90 per barrel, where current prices hover around for U.S. crude CLc1.

In 2010, Saudi consumed 3.4 million barrels per day of oil equivalent, Yamani said, but declined to comment on when the first nuclear power plant would be built. By 2028, Saudi Arabia would be consuming more than eight million boepd, he added.

There has been high interest in nuclear power on the Arabian Pensinsula.

A consortium of EDF (EDF.PA), Areva, GDF Suez GSZ.PA and Total (TOTF.PA) lost a $40 billion nuclear deal in Abu Dhabi to a South Korean consortium in December 2009. (Reporting by Ulf Laessing and Reem Shamseddine; Editing by Amena Bakr, Humeyra Pamuk and Bernard Orr)

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