Saudi Binladin Group and the French nuclear reactor designer Areva are to sign an agreement on nuclear and solar power, advancing Saudi plans for diversifying the kingdom's electricity supply.
Anne Lauvergeon, the chief executive of Areva, announced the prospective deal in Riyadh on Sunday, saying the companies would sign a partnership agreement to develop both types of power. She declined to give further details.
"We are in a major energy evolution in the region," Ms Lauvergeon told a conference in the Saudi capital. "In the past it was oil and gas, and that was it. Now it's oil, gas, renewables and nuclear.
"We are very excited about this evolution and we would like to be a long-term partner of these developments."
"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," Ms Lauvergeon added on the sidelines of the conference.
A spokeswoman for Areva, reached at the company's Paris headquarters yesterday, said any deal signed in Saudi Arabia would mainly concern solar power. She said Ms Lauvergeon travelled to Riyadh in response to Saudi requests for discussions on possible solar projects and advice on the direction of the kingdom's nuclear programme.
Saudi Arabia has responded to soaring power demand as it pursues industrial development by burning oil in its power plants to supplement an insufficient gas supply. As a result, air quality in its cities has deteriorated, while power cuts remain frequent in summer.
Moreover, Saudi Arabia has burnt increasing amounts of crude oil in its power plants in the past two years, limiting foreign revenue from oil exports as the kingdom has also sought to comply with the output cuts on which Opec agreed in late 2008. It is the only major economy dependent on oil for more than 50 per cent of electricity supplies.
Hashim Yamani, the president of Saudi Arabia's King Abdullah Atomic and Renewable Energy City, said power diversification would free up more oil for export.
"Saudi will need to invest upfront in nuclear energy but the oil saved will contribute significantly to the costs," Mr Yamani told Reuters. "Nuclear and renewable energy will reduce dependence on fossil fuels by 2050."
He forecast that power demand in the kingdom would triple to 120 gigawatts by 2050 from about 40gw last year, when Saudi domestic fuel consumption reached 3.4 million barrels of oil equivalent per day.
By comparison, Saudi Arabia pumped 8.26 million barrels per day (bpd) of crude last November, according to the latest figures available from the Joint Oil Data Initiative, based in Riyadh.
Nearly 20 per cent of that, or 1.64 million bpd, was consumed by the domestic market, down from a summer peak of almost 30 per cent in August.
The Saudi energy diversification drive is similar to the policy adopted earlier by the UAE. Areva, which is 90 per cent owned by the French government, led a group of French companies that was among three international consortia shortlisted to bid on the US$20 billion (Dh73.46bn) contract to build the UAE's first four nuclear plants. The deal was awarded in 2009 to a rival South Korean team.
The UAE also plans large-scale solar power development, and is further advanced with its solar programme than Riyadh.
Masdar, the Abu Dhabi Government's clean-energy company, last year awarded a $600 million contract to the French energy group Total and Spain's Abengoa Solar to build a 100 megawatt solar thermal plant that will be the first ultilty-scale renewable energy development in the GCC.
Masdar also plans to develop a 100mw solar farm employing photovoltaic technology to convert sunlight directly into electricity.
The UAE energy plan led by the Abu Dhabi Government has been a regional catalyst for power supply diversification programmes throughout the GCC.
In a move to co-ordinate nuclear development, the six GCC members recently launched studies to assess potential co-operation in nuclear fuel security, regulation, legal issues, waste management, emergency response, training and research and development.
The studies, led by the US nuclear technology and consulting firm Lightbridge, are due to be completed by the middle of this year.