EDF and Areva target nuclear reactor sales in Saudi Arabia

French utilities EDF and Areva are poised to enter the nascent Saudi Arabian nuclear market, but face competition from South Korean, Japanese, and Russian bidders.

Saudi Arabia is one of the world's biggest oil producers, with only Russia and the US coming close. However, domestic oil demand is rising at a rate of 8% per annum and unless oil production growth can keep pace - which is unlikely - volumes of oil available for export will diminish.

Saudi Arabia intends therefore to diversify its energy mix towards renewables and nuclear. In May 2012, plans were announced to construct 16 nuclear power reactors with 17GW of capacity by 2032, at a cost of $80bn. In addition, 16GW of solar PV capacity, 25GW of solar CSP capacity, and 4GW of bioenergy and geothermal capacity are planned by 2030.

Although Saudia Arabia has not issued a tender for nuclear power projects, the French government has already expressed interest. In early 2011, EDF and Areva opened a joint office in Riyadh, offering technological knowhow and training to local staff.

However, France faces stiff competition from other potential bidders, including a South Korean consortium led by Korea Electric Power Corporation, a Japanese consortium led by the International Nuclear Energy Development of Japan Co, and Russia's Rosatom.

In France's favor is Areva's expertise in the entire nuclear value-chain, and EDF's experience in building and operating nuclear plants. Against it are Areva's cost overruns and project delays in the Flamanville (France) and Olkiluto 3 (Finland) plants. Areva's previous attempt to enter the Middle Eastern market failed when it lost a $40bn contract to build and operate four nuclear reactors in the UAE in 2009.

The move into Saudi Arabia fits EDF's and Areva's strategy to pursue contracts outside Europe following the French government's intention to reduce nuclear power's share of the generation mix by 25% by 2025.

Areva and EDF's relationship has been a troubled one; however, the two have managed to work together since February 2011 to lead France's nuclear export drive. The fruits of this agreement can be seen in EDF's partnership with China Guangdong Nuclear Power Holding Co to build two EPR reactors in Taishan, southern Guangdong, for which Areva is providing the reactors. Datamonitor expects that their long-term partnership will optimize France's chances of building on its success in China and in winning further major contracts such as that targeted in Saudi Arabia.

Written by Yasmin Valji

Analyst, Datamonitor Energy

email: yvalji@datamonitor.com

Follow Yasmin on Twitter: @YasminV_DMEN

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