Reasons for an oil producer to go nuclear.

This same week I read at Bloomberg's Businessweek that Abu Dhabi, the 7th country in the world by estimated oil reserves, is building a civilian nuclear reactor to go-live on 2017. The article mainly focused on the assertiveness of the United Arab Emirates (UAE) going forward with their plans despite the ongoing events at Fukushima. Nothing exceptional here from my point of view, as there is nothing in common between the Fukushima plant and and what  the UAE is building in Braka together with Korea Electric Power Corporation (KEPCO).  What I am most interested about is the fact that one of the oil-richest countries in the world is going nuclear.

Illustration of the future, 4-reactor nuclear plant.

Internal energy demand is growing fast in Abu Dhabi, but it is still marginal compared with all the oil the UAE is exporting worldwide. We know Abu Dhabi, as every other producer, can have oil for cheap, so its domestic oil consumption would not justify the huge investment a nuclear energy facility demands. We could also consider Abu Dhabi not a front runner in climate preservation, and because of their small population density they do not have to be much worried about their fossil fuel emissions neither. 

So what could be the reasoning behind this ambitious nuclear plan started in 2008. Are their oil reserve estimates too optimistic? Do they prepare for a sooner-than-expected post-oil era? Or are they simply trying to keep their energy independence? Not being suspicious here, just trying to make some sense of such an expensive and (unfortunately) controversial decision.

Abu Dhabi has always been the serious, well-thought and quiet counterpart to the flair and excesses of its neighbor Dubai, so the first reason that comes to mind for this decision is that they are simply planning ahead. Abu Dhabi is very rich in oil, but it would be quite stupid to use their oil as a source to generate electricity. The barrel price plus the wasteful by-products oil produces when burnt made it unsuitable for generation purposes years ago... If we look at the usual electricity generation sources we can see Abu Dhabi does have significant natural gas reserves (but because of the actual prices they sell the most of them), coal is not readily available due to their geographic location and hydroelectric power is not an option for obvious orographic reasons. Looking at the renewable possibilities is not much more encouraging, wind turbines are not suitable to be placed in such a sandstorm-prone region and solar power is not cost-effective enough as a primary source of energy to be a valid option.

Nuclear power has astronomical set-up costs, but it is still the cheapest and more powerful energy source in the long-term, so it is clearly the best bet to maintain their energy independence. It would be a strategic catastrophe to be the world's 7th oil producer and depend on other countries imports for your daily energy. 

All 'western' developed and industrialized countries suffer from a heavy oil-dependence and, in most cases, this dependency has a top influence in the decision-making procedures in the national economy. Economies simply do not work without energy (oil in particular), so every decision, every move, has to keep this dependency in mind. This is a serious obstacle for improvement and growth, but at the same time is the reason that keeps oil producers on a deciding position. They control the supply, they control the price... indirectly they reach a certain degree of control over their clients' energy-junkie economies. And this is key.

Planning ahead
Most oil producers focus almost exclusively on price control. They use their dominant supply position to influence oil price and keep it as high as possible but without strangling their clients to maintain demand. Textbook supply and demand theory. But what to do when they run out of oil? The great majority of oil producers prepare for that situation by using their oil earnings to invest in their client's economies; while this is a good move for a number of reasons, they are simply forgetting about their domestic economy future. Because when they run out of oil, as other sources of energy are somewhat restricted because of their geographical situation (Norway would be a clear exception of this though) they would become the energy-dependent ones. And they know it is not a nice position to be in...

Abu Dhabi seems to be the only one among fellow oil producers to be noticing this inexorable future to come, and by having a long-term energy strategy with their nuclear plant while they neighbors only worry about next month's barrel price they again show they are the smartest of the class.