DUBAI (Reuters) - The United Arab Emirates denied on Tuesday that it was days away from awarding the largest ever energy contract in the Middle East for the development of a nuclear power plant.
The denial was issued after industry sources told Reuters that the UAE was on the verge of naming a winner for the contract to build at least four reactors, which consultancy Eurasia Group estimates may cost as much as $40 billion (24 billion pounds).
A government official familiar with the negotiations said “the UAE is not days away from awarding this contract. The process is still ongoing.”
The consortium from France, which includes nuclear group Areva CEPFi.PA, GdF Suez GSZ.PA, and Total TOTF.PA, is in pole position to win the contract, sources familiar with the negotiations said earlier.
“We think we are still well positioned to win it, we have the nuclear expertise,” a source from the French group said.
“The winner will take it all, the bid was for two reactors originally but then they (UAE) wanted four and maybe six, whoever wins gets the whole package.”
The other bidders include a consortium comprised of General Electric GE.N and Japan's Hitachi, and another of Korea Electric Power Corporation, Hyundai Engineering and Construction 000720.KS and Samsung C&T Corporation 000830.KS.
“Emirati leaders have historically valued France’s nuclear experience,” the Eurasia Group said. “And a major deal with the French government would fit within the UAE’s diversification plans in terms of both energy and security.”
President Nicolas Sarkozy was in the UAE in May to open a military base, and some analysts saw the visit as enhancing the French consortium’s prospects of winning the contract.
“Sarkozy’s visit was clearly to promote the French bid and this is a natural process that France always goes through when it comes to commercial deals,” said Christian Koch, director of international relations at the Gulf Research Centre.
“France is already a major partner to UAE in the defence area and I wouldn’t be surprised if they are leading in the bid now.”
Record oil revenues have driven an economic boom that has strained domestic power grids in the UAE, and to keep the export cash coming in, Abu Dhabi is looking to nuclear energy to help cap fuel burnt for power at home, analysts said.
“Right now the country only burns fossil fuels, bringing in nuclear energy will help it to free that (gas) up for industrial or for international exports,” said Raja Kiwan of PFC Energy.
“This is part of the leadership’s plans to develop a more well diversified and long-term strategy for energy use throughout the country.”
The UAE anticipates its electricity requirements to rise from 15.5 gigawatts (GW) in 2008 to 40 GW in 2020, the Eurasia Group said.
The proposed nuclear plant will likely provide about 3 percent of the power supply to the market in the UAE by 2020 with the start-up of about 1 GW of nuclear power, and by 2025 nuclear power will supply about 15 percent to the market, consultancy Wood Mackenzie said.
The UAE’s plans have the blessing of the United States. But even so, atomic development in the emirates could complicate attempts to halt Iran’s nuclear work.
The West suspects Tehran is using its programme to build nuclear bombs, while Iran insists it needs nuclear energy to meet domestic generation requirements.
“It will confuse rather than clarify the diplomatic argument with Iran over its nuclear programs,” said Simon Henderson, an analyst with The Washington Institute for Near East Policy.
“If the UAE has civil nuclear plants, and a Saudi official said in August that they should have them as well...why can’t Iran?”
Nascent nuclear programmes in the UAE and other countries in the Middle East have fuelled concern of a regional arms race.
The UAE has pledged to buy the fuel it needs for reactors to avoid enriching uranium, the fuel for nuclear power plants, which if further refined can be used to make nuclear bombs.
Taking enrichment out of nuclear programmes reduces the possibility of weapons development.
Additional reporting by Simon Webb, John Irish, Stanley Carvalho in Abu Dhabi and Marie Maitre in Paris; editing by Sue Thomas and Anthony Barker
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