Worldwide Development of Nuclear Energy and the Strategic Deployment of German Consultancies on the Arabian Peninsula

Table of Contents

List of Figures

List of Abbreviations

1. Introduction and Objective
1.1 Objective of this Master Thesis
1.2 Introduction

2. Geographical, Political, Cultural and Economic Conditions
2.1 Geography and Culture
2.2 Economy and Politics
2.3 Political and Social Stability in the UAE
2.4 Relations between the UAE and Germany
2.5 Relationship between the KSA and Germany

3. Energy Sectors of the Leading Countries on the Arabian Peninsula
3.1 Electricity Generation and Consumption in KSA and UAE
3.2 Water Production and Consumption in the KSA and UAE
3.3 Renewable Energy in the UAE and KSA
3.4 Pending Developments
3.5 Country-specific Organizations and Authorities
3.6 Financing of Power Projects in Arabian Countries
3.7 Summary of Chapter 3

4. Nuclear Energy on the Arabian Peninsula
4.1 Status in the UAE and KSA
4.2 Reasons for Launching a Nuclear Program
4.3 Obligations to Launch a Nuclear Program
4.4 Commitments of the UAE
4.5 Challenges and Potentials of the Nuclear Path
4.6 Global Outlook

5. Preparations for Market Penetration
5.1 Vision and Mission
5.2 Market Analysis
5.3 Strategic SWOT Analysis
5.3.1 Strengths
5.3.2 Weaknesses
5.3.3 Opportunities
5.3.4 Threats
5.4 Five Elements of Realization Strategy
5.4.1 Arenas (market conditions and valuable segments)
5.4.2 Staging and pacing
5.4.3 Differentiators
5.4.4 Vehicles (course of action)
5.4.5 Economic logic
5.4.6 Summary and checklist of foundation

6. Execution of the Initial Phase
6.1 Centralization versus Decentralization of Business Units
6.2 Acquisition of New Permanent Employees
6.2.1 Recruitment strategy for employees without experience
6.2.2 Recruitment strategy for experienced employees
6.2.3 Selection of potential candidates
6.2.4 Recruitment process
6.3 Internal Deployment and Organization
6.3.1 Feedback systems
6.3.2 Development of competencies
6.3.3 Incentives and salary systems
6.3.4 Difficulties with external parties

7. Assessment of Business after “Start-up Phase”
7.1 Reassessment of Recent Years
7.2 Organizational Improvement Measures
7.3 Change Management and the Reorganization of Business and Markets
7.3.1 Strengthen the position in the existing market
7.3.2 Entering new global markets

8. Summary

List of Literature

Affidavit and Copyright Restrictions

List of Figures

Chapter 1
Figure 1-1 Rough Estimated Comparison of Power Generation by Power Plants, Source: Praxisbuch Energiewirtschaft: Energieumwandlung, -transport und -beschaffung im liberalisierten Markt, Autor Panos Konstantin 3. Auflage (in Bearbeitung)
Figure 1-2 Overview of Nuclear Power Plants worldwide in operation and construction.

Chapter 2
Figure 2-1 Main cities in the UAE, Calculation based on 2008, Source: http://en.wikipedia.org
Figure 2-2 Gross Domestic Product per Capita, Source International Monetary Fund (IMF)

Chapter 3
Figure 3-1 Current electricity generation capacity out of primary resources KSA in 2008
Figure 3-2 Electrical generation and distribution in the KSA source Saudi Electrical Company
Figure 3-3 Electrical distribution in the UAE source ADWEA, Source: Abu Dhabi Water and Electricity Company 07th March 2007
Figure 3-4 Installed Capacity by Company in MW, Source PennWell Global Power Review 2010
Figure 3-5 Water desalination and distribution in the UAE, Abu Dhabi Water and Electricity Company 07th March 2007

Chapter 4
Figure 4-1 MENA- States: Members of the Atomic Energy Agency Source MEED GCC Power
Figure 4-2 Source IAEA; Structuring and influences of nuclear power generation, Source Nuclear Generation Company (is wholly owned by Korean Electric Power Cooperation KEPCO, A2/ Stable (Source, 25th March 2009, Credit opinion by Moody’s)
Figure 4-3 Source IAEA, World map of interested countries in nuclear power programs

Chapter 5
Figure 5-1 Nuclear Energy basic principles; Source IAEA
Figure 5-2 Vision Mission and Strategy Source: Person Person international edition, Strategic Management A. Carpenter and G. Sanders
Figure 5-3 Infrastructure development program; Source: Publication of the IAEA, No. NG-G-3.1
Figure 5-4 The business strategic diamond, Source: Person Person international edition, Strategic Management A. Carpenter and G. Sanders, Exhibit 1.5
Figure 5-5 Source IAEA, subsequence of a NPP Project
Figure 5-6 The general approach for project implementation.
Figure 5-7 Determination of potential markets.
Figure 5-8 Sequence of determination of targeted market

Chapter 6
Figure 6-1 KSAO’s – Evaluation of the vacant position
Figure 6-2 Concepts of training measurements, Source: Prof. Dr. Markus Gmür, Modul 14 Human Resource Management page 128
Figure 6-3 Possibilities for Incentives

Chapter 7
Figure 7-1 Influences to continue success, Source W. Chan Kim, Renée Mauborgne, Blue Ocean Strategy: From Theory to Practice, California Management, Review, Spring 2005, Vol. 47

List of Abbreviations

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1. Introduction and Objective

The master thesis….

“Worldwide Development of Nuclear Energy and the Strategic Deployment of German Consultancies on the Arabian Peninsula”

….is chiefly targeted at German consultancy companies so that they can assess their status of strategic deployment and prioritize their activities to enter a new business sector in a foreign market. This publication could also be of relevance for policy makers, investors, suppliers as well as nuclear energy and governmental agencies to identify their need for external advisers to safely operate a nuclear power program;

….provides a guideline for how to enter a new market. Hence this thesis should be considered as an aid to identify hurdles and obstacles that have to be foreseen and so overcome. Potential business fields are also noted as well as important factors that have to be considered to minimize the chance of failure in the new market. Nevertheless, this huge market with its continuously changing constraints and conditions could throw up a lot more obstacles than could be covered in this thesis. Also the internal organizations of individual companies may differ from the one described in the thesis. The objective of this master thesis is thus to set out a set of guidelines for possible approaches.

1.1 Objective of this Master Thesis

The first two chapters present an overview of the current geographical, political, cultural and economic conditions to familiarize the reader with the background information and constraints needed for the subsequent chapters.

The third chapter deals more specifically with the energy market on the Arabian Peninsula, particular in the Kingdom of Saudi Arabia and the United Arab Emirates. This chapter provides information on types of energy, pending developments, country-specific organizations and institutions, as well as means of financing such huge projects.

The fourth chapter is devoted exclusively to nuclear energy, starting with the current status and the motivation of the two countries to launch such a development. This is followed by a description of the legal requirements and other commitments as decreed by the countries’ governments. These specific legal conditions do not just apply within the countries concerned, but companies which do business there are likewise obliged to follow these regulations. Challenges for countries are opportunities for consultants, and identification of these represents is the core content of this chapter.

The content of the fifth chapter is the preparatory measures that are essential prior to entering a foreign market. A company’s vision and mission as well as various analyses are needed to provide a sound basis for taking a decision to proceed. In this context, SWOT analysis is noted as well as an evaluation of M.E. Porter’s “Five Forces” to describe the market and internal organizations.

After the preparatory measures, the implementation phase follows. This and its various stages are described in Chapter 6. It is inevitable that, to ensure success, many measures will have to implemented and subsequently adjusted. This starts with deployment and steering of business units and proceeds to overcoming difficulties with external parties. Recruitment on a permanent basis of employees is also a prerequisite for sustained business success, together with a staff feedback, incentive and salary system.

Chapter 7 sets out methods for evaluating previous years’ activities in the new business. The first couple of years after “start-up” are over and the situation in which the company is now has to be assessed. It is frequently necessary to undertake organizational upgrades, that could amount to a complete reorganization of the business, aided by change management provisions.

The final Chapter 8 summarizes the key information and content, and sets forth the need and reasons for strategic deployment. Changes in the market means that companies will have to re-adjust for economic survival.

Because the nuclear program of the United Arab Emirates is more advanced than that of the Kingdom of Saudi Arabia and information is less available in the latter country, the main focus of this thesis is on the UAE. Nevertheless, the KSA is an emerging nuclear market with great ambitious for a nuclear program and so is worthy of mention when discussing constraints and conditions that these countries have in common.

Other countries that are members of the Gulf Cooperation Council (GCC) do share an interest in nuclear energy but are not yet at the same stage of development as the UAE and KSA. These serve from time to time to support arguments and figures.

1.2 Introduction

A sufficient and reliable energy supply is essential for continuous economic development, contributing also to poverty reduction and health care improvement. If these developments are restricted or lacking, often the result is social conflict that could even lead to civil strife. Examples are rural arid areas in the world where there is no access to potable water. A minor local conflict affects the economic development and population of specific countries and often results in regional instability and interventions from outside. The global energy imbalance has been steadily growing over the past couple of decades. Roughly 1.6 billion people live without electricity, and almost 2.4 billion people rely on traditional biomass to cook their daily meals^[1]. Modern fuels are not available or are restricted to the upper social strata. There is an almost equal share of the world’s population with no access to potable water, so in the struggle for survival the consequences will be social unrest and riots.

In some poor countries of the world, the per capita electricity consumption is as low as 50 kWh per annum, compared to developed countries with 8,600 kWh. Worldwide, the provision of energy is dominated by three major challenges.

1. Energy consumption has tripled in the past half century. If this continues, humankind will consume more energy in the 21st century than in the entire past history. This represents an increase of 53% in global energy consumption by 2030.
2. The main energy resources are now scarce, so to ensure economic development, countries will compete with each other to acquire their own supplies. Each country seeks to protect its existing sources and open up new ones. This will not result in a fair distribution of resources, as poor countries are not able to compete with their developed neighbors and lose out, as has often happened in history.
3. To an increasing extent attention is focusing on environmental impacts. Because of the greenhouse effect, carbon dioxide emissions from burning fossil fuels bring about a rise in global temperatures. The consequences are long-lasting drought, sea level rise, submerging coastal regions and more destructive storms. For these reasons, many governments are reviewing their present energy mixes and are considering alternatives to avert the consequences of energy scarcity, including the renewal of interest in nuclear energy that has been noted in recent decades. Adoption or resumption of nuclear energy is at least one solution for some countries faced with a threat to the security of their energy supplies.

Among others, one benefit of nuclear energy is zero emissions of greenhouse gases during their operating phase and the ability of huge plants to provide electricity reliably and on a large scale. Much engineering effort has been devoted to significantly improving nuclear plant safety in recent decades. Furthermore, although they are finite, there are ample reserves of uranium and, unlike petrochemicals, they are not put to any other use apart from as an energy source. Prospecting is under way for new deposits, as currently in Yemen. The cost of electricity generated by nuclear power is now competitive, but a major concern that has still to be resolved is final storage of down burned nuclear fuel rods. An overview of the economics is provided by a cost comparison of the various electricity generation technologies, as shown in Figure1-1 below. This survey is ongoing in a couple of countries to seek a basis for taking decisions on their energy strategies. The quoted figures are ballpark estimates, with actual values depending very much on local conditions and the current market situation, but they do serve to provide a rough comparison. The outcome of these calculations is that electricity generation from nuclear fuel is, at 91.0US$/MWh, much more competitive than firing crude oil at 133.4US$/MWh. However, a major consideration is the distinction that has to be made between supplying base and peak/cycling load. To meet the demand for base-load electricity, large-scale power plants, like nuclear and those fired with coal and crude oil are more favorable. These need an extended start-up period – ranging from a couple of hours to two or three days – before they can feed power into the grid. Smaller scale plant, like diesel-fired simple-cycle gas turbines and solar power plants are able to rapidly ramp their power output up and down to cover daily consumption peaks. For this reason, nuclear power plants almost exclusively operate continuously at or near peak output to supply base load, together with natural gas-fired combined cycle gas turbine plants and coal-fired power plants. Diesel-fired gas turbines and solar power plants find application for peak and cycling duty. The key factors are listed in the following table, with firstly the operating parameters, which are attributes specific to the various power plant technologies that are taken as basic assumptions for the further calculations. The second sub-heading is key financial constraints, which fix the technology that is more economical. These comprise the capital cost for construction and development as well as long-term costs that are highly cyclical and cannot be so readily predicted as the other costs. The third main distinction is the direct electricity generation costs. These are running costs incurred only during power plant operation and are directly related to the rated power output in MWe. This calculation serves as well to identify companies and utility suppliers for nuclear power generation as well as to broaden the mix of energy supply technologies and reduce dependency on specific primary resources.

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Figure 1-1, Rough estimate for comparison of power generation technologies

*) Price for gas set competitive with coal to obtain the same level of aggregate generation costs. **) For nuclear, surcharge for nuclear fuel waste treatment and disposal ***) Aggregate costs for nuclear include surcharge for nuclear fuel waste treatment and disposal plus reserves for decommissioning.

The following Figure 1-2 depicts all countries with nuclear power plants already in operation or under construction. The first circled figure is the number of power plants in operation while the second circle shows the number of power plants under construction.

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Figure 1-2^[2], Overview of nuclear power plants worldwide in operation and under construction

Specific countries in the Middle East have seen an annual growth rate of more than 5% and additionally they have experienced population increases and economic growth. Mineral resources, like crude oil and gas, on which their current growth is based, are finite and too valuable, based on their quality, to fire to generate power at low efficiency. More and more countries have recently expressed their interest in generating power by nuclear fission to meet the future demand for electricity and potable water. This is a challenging but attainable objective for these countries. The intention is to meet more than 30% of demand in 2030 with nuclear energy, mainly for electricity, seawater desalination, industrial applications and process heat.

2. Geographical, Political, Cultural and Economic Conditions

2.1 Geography and Culture

The Gulf Arabian states constitute the following countries: Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA), and Yemen (membership requested). These countries are also known as the Arabian Peninsula and, in 1981, set up the Gulf Cooperation Council (GCC), whose objectives include a uniform military presence and, among other things, harmonization of trade, finance, customs, and communication.

The greatest part of the Peninsula is covered by Saudi Arabia, with most of the population living in Saudi Arabia and Yemen. The Peninsula is in Southwest Asia, where Asia joins Africa. It is to the east of the Red Sea and the Gulf of Aqaba and northwest of the Arabian Sea (part of the Indian Ocean). To the north, there is no clear border between the Syrian Desert and the Peninsula, but a generally accepted demarcation is the northern border of Saudi Arabia and Kuwait. The prevailing terrain of the Peninsula is desert, except in the northwest, where there are mountain ranges that increase precipitation, so agriculture is possible.

This area of the Middle East plays a critical geopolitical role not only for the Arabian states. The primary reasons for this is that it holds world’s largest oil reserves and contains the two holy towns of the Islamic religion, Mecca and Medina, both located in Saudi Arabia. The fast growing economy and social life have prompted high immigration of foreign nationalities. As the 2008 figures show, the population of the Arabian Peninsula consists not only of national residents. In Saudi Arabia, for example, almost 20% are expatriates, whereas in the UAE 90% of the population are expatriates from over one hundred countries. The total population of the Arabian Peninsula is estimated as almost 78 million.

The two countries, KSA and UAE, are the most representative ones for illustrating the economic development and nuclear aspiration of the Arabian Peninsula. These two countries provide the best opportunities and are therefore described more in detail.

SaudiArabia ^[3] Saudi Arabia is the largest country of the Peninsula, covering an area of 1.96m km², which is six times larger than Germany. Boundaries with Iraq, Kuwait and Jordan were created by a series of treaties in the 1920s. The prevailing landscape is desert with rugged mountains in the southwest; the climate is arid with a broad range of climate variation along the coast and in the country’s interior of the. The capital is Riyadh, which has a population of 4.3m (2006). The estimated population in 2008 is 28m, made up of 22.6m Saudi and 5.4 Mio foreign nationals. The annual growth rate of the population is 1.9% (2008). The ethnic groups are the Arabs with a share of 90% of the native population and the remaining 10% are Afro-Asians.

Saudi Arabia is the holy country of Islam, with the two pilgrimage towns Mecca and Medina. These cities are known as the birthplace of Islam and of the Prophet Mohamed in 632 A.D. Before the 1960s most of the population was nomadic or semi-nomadic. Due to the soaring growth of the economy and urbanization, nowadays 95% of the population is settled and seeking wealth and health.

UAE ^[4] the United Arab Emirates, known as the UAE, is much smaller than Saudi Arabia with an area of almost 82,880km². It is located at the Persian Gulf, bordered by Oman and Saudi Arabia. The capital city is Abu Dhabi with a population of 0.9m, followed by Dubai with 1.77m. The population counted in the entire UAE is 5.7m (2009), with an annual growth rate of 4%. Less than 10% of residents are UAE citizens. The terrain is largely desert but with some arable regions. The climate is hot and humid with a low annual rainfall.

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Figure 2-1^[5], Main cities in the UAE, based on 2008 estimates

2.2 Economy and Politics

The two economies have experienced continuous economic growth, except for a brief slump from the end of 2008 till the end of 2009 due to the global financial crisis.

The gross domestic product per capita in the UAE, as shown in Figure 2-2, has increased at a greater rate but is more volatile in comparison to the German GDP. This is due, firstly, to its much lower population and, secondly, to a relatively greater increase of GDP under the current economic development.

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Figure 2-2^[6], Gross domestic product per capita

For coming years, it is assumed that growth will continue, although at a reduced rate. The growth of the two economies proceeds almost in equal steps, as a result of the two coincident economies. The economic generation and development have similar histories and are currently based on the same constraints and conditions.

SaudiArabia ^[7] The workforce of the country is 6.49m, with a share of foreign workers of 20% (2005). The economic breakdown is 63% governmental jobs, 25% jobs in industry and the remaining 12% in agriculture.

This workforce generated a GDP in 2008 of US$527bn at an annual growth rate of 6.1%, working out to a GDP per capita of US$21,062. This high GDP is mainly a consequence of the rich mineral and natural resources. The main industry is the petroleum and petrochemicals sector that has an export value of US$364bn. The major trading partners are China, France and Germany.

Crude oil was discovered in Saudi Arabia by geologists in the 1930s although large-scale oil extraction did not begin until after World War II. With the increasing amount of extracted oil, Saudi Arabia has been experienced rapid economic growth. Oil wealth began in the 1960s and accelerated spectacularly in the 1970s. Discovered reserves are calculated to be 263 billion barrels, amounting to one quarter of world’s oil reserves. At present, Saudi Arabia’s oil resources are the biggest in the world and it is the world’s leading oil producing and exporting country. Oil is responsible for 90% of the export volume and nearly 75% of the government’s revenues. The government and its parastatal company Saudi ARAMCO have a market share of more than 95% of the oil producing companies. By 2009, Saudi ARAMCO had extracted 12m barrels (1 barrel is equal to 159 liter).

The consequence of the Arab-Israeli war in 1973 was a sharp rise in petroleum revenues, so Saudi Arabia became one of the fastest growing economies in the world. Extensive spending on defense, development and aid for Arab and Islamic countries ensued. In 1999, the OPEC campaign was launched, with Saudi Arabia encouraging other oil exporting countries to raise the price of the oil to its highest level since the Gulf War by throttling its supply and production. A further boost of the economy was the consequence. In July 2003, Saudi Arabia signed a Trade Investment Framework and joined the WTO in December 2005. In order to foster regional economic cooperation and peaceful development, the King established the Gulf Cooperation Council.

The main focus of foreign relations and the government’s intention is to maintain security and the paramount position of the Arabian Peninsula, to promote solidarity among Islamic governments, to defend Arab and Islamic interests, and to ensure cooperation with other oil producing and consuming countries.

The type of government is a monarchy with a Council of Ministers and a Consultative Council. This Council administers thirteen provinces that are governed by princes or close relatives of the royal family. All governors are appointed by the King, political parties do not exist and there are no national elections. The basic constitutional law was adopted in 1992, which declared that the ruling party in the monarchy will be the sons and grandsons of King Abd Al Aziz Al Saud and the holy Qur’an is the basis of Saudi Arabia’s constitution, governed by Islamic law, called Shari’a.

The current situation, according to a Bloomberg article^[8], is that the KSA intends to invest highly in new infrastructure projects with an estimated capital investment of US$400bn in coming years. Wealth and high demand for social amenities will promote this development. The article indicated that the KSA will endeavor to benefit from lower construction costs due to the financial crunch, the assumption being that these will be about 30% to 40% lower than six months before.

UAE ^[9] The governmental system is a federation of the seven emirates of Abu Dhabi, Dubai, Sharjah, Ajman, Fujayrah, Umm Al Qawayn and Ras Al Khaymah, each of which have their own ruler. The seven members of the Supreme Council of Rulers appoint the representing head of the government to deputize for the UAE. There is no other political party. The workforce of the country is 2.968 million, aged between 15 and 64 (2006).

According to the newsmagazine “UAE Interact”, the expected growth of GDP is 2.5% for the 2010 fiscal year. Assuming the construction boom continues in the upcoming years, it is expected to double over the next years. The forecast is for higher investment into the real estate sector. Previously, the workforce generated a GDP in 2008 of US$262 billion with an average annual growth rate of 8.5%, working out to a per capita GDP of US$55,028 per year. The inflation rate calculated in 2008 was 14.4%. The high GDP value is, like in Saudi Arabia, mainly attributable to petroleum products. The revenue from exports in the form of petroleum products was US$207.7 billion in 2008, while at the same time imports of machinery, chemicals and food totaled US$141.1 billion.

The development of the economy started with the first oil exports in 1962, before which economic activity was dominated by pearl production, fishing, agriculture and animal husbandry. The oil price rise in 1973 gave the government the opportunity to undertake large investments. Nowadays, Abu Dhabi is the major oil and gas producing Emirate whereas Dubai is considered to be the commercial center, but the states have become highly interdependent. As of now, the UAE has huge proven oil reserves that were estimated^[10] in 2009 as 98.2 billion barrels, representing 9.5% of the global crude oil proven reserves, and gas reserves of 5.8 billion meters³, 4% of the world total. The second pillar of the economy is the Abu Dhabi Investment Authority, which manages an international investment volume of US$600 billion. The commercial center with the Jebel Ali complex in Dubai accommodates more than 6,000 companies from more than 120 countries. The advantages of this commercial zone are the deep water port and the free trade zone for manu-facturing and distribution, in which all goods for transshipment and re-export enjoy a 100% exemption from customs duties. A further advantage is the global location of the Emirates. A flight from the main trading countries in Asia, Europe and America does not take more than one day and it is possible to enter the country without a complex visa procedure. The UAE belongs to the following organizations: GCC, United Nations, Arab League, World Bank, International Monetary Fund (IMF), OPEC, etc., and has established diplomatic relations with more than sixty countries.^[11]

- Planned infrastructural projects in Abu Dhabi^[12]

The Emirate of Abu Dhabi intends, over the next four to five years, to undertake additional investments of more than US$100billion. This is the estimated total of the following projects: a new airport, a new world-scale seaport and industrial zone in Taweelah, another port and industrial zone at Mussafah, the 11,000-unit Showayba City at Mussaffah, Mohammed bin Zayed City, and construction of several urbanization projects to accommodate the fast growing population.

An Exhibition Center is also projected as further Island Projects like Saadiyat and Yas. Yas Island will be transformed into an experience atoll with a new Formula One Grand Prix race track, with an expected investment of US$40 billion.

To supply these infrastructural facilities, it will be necessary to provide adequate energy generation and water desalination capacity.

· Planned infrastructural projects in Dubai^[13]

In the past couple of years, Dubai has undergone a huge infrastructural development, with growth in all areas of the economy. Some examples that are representative for this development and deserve a mention here are construction of multi-purpose complexes as well as industrial, educational and medical cluster developments, such as Dubai Waterfront, covering 81m m² with plans to accommodate 1.2 million people in ten districts, and Dubai Land, is designed as a popular destination for millions of tourists annually.

2.3 Political and Social Stability in the UAE

The current political and social stability results from the UAE’s formation in 1971, with the existing political structures appearing to suit the society based on clans. Revenues from oil exports bolstered social stability and the provision of infrastructure, enabled high salaries to be paid, and supported a high standard of social services, such as health care and education. The raised standard of living for UAE citizens reduced the likelihood of internal political and socio-cultural strife. The UAE has also undergone a transformation of the human rights stance by the government since its establishment. Due legal process and unbiased courts also contribute to the UAE’s wellbeing.

This high degree of stability in the country was also a prerequisite for increasing domestic and international investment in the industrial sector. Improving relations with many countries of the world, particularly with Western democracies, encouraged liberal political institutions and paved the way for the economic boom in recent years^[14].

2.4 Relations between the UAE and Germany

- Commercial and economic:^[15]

The three aspects of trade, mutual investment and technical cooperation are crucial for economic and strategic cooperation between the UAE and Germany. For Germany, the UAE is the most important export market in the Arab world. Investments and exports have steadily grown over past decades, with a total trade volume in 2006 of €5.4billion, amounting to a quadrupling in the last ten years. A range of German companies can boast affiliations and joint ventures in the UAE. Experiences in education, R&D and governmental institutions will be shared.

- Energy and environment

The expertise in energy generation and environmental know-how of German companies are a competitive advantage over other foreign companies. These foreign knowledge resources are highly important for a country undergoing an infrastructural development like the UAE.

German companies are currently providing consultancy for the highly developed energy sector in the areas of environmental technology and renewable energies, which will be described in more detail in chapters 3 and 4.

- Export controls^[16]

Germany, governed by EU rules on the international level, regulates its exports of armaments and dual use goods. Germany attaches great importance to these regulations, so its trade in other goods is in compliance with the strict trade restrictions. This export policy meshes with the country’s foreign and security policy, which aims to preserve peace.

To ensure compliance, the following four international export controls bodies were established:

- MTCR (Missile Technology Control Regime) – for items relevant for missile systems http://www.mtcr.info/

- Australia Group – for dual-use items relevant for chemical and biological weapons http://www.australiagroup.net

- NSG (Nuclear Suppliers Group) for items in the nuclear area http://www.nuclearsuppliersgroup.org

- Wassenaar Arrangement – for armaments and dual-use items related to the area of conventional armaments http://www.wassenaar.org/

2.5 Relationship between the KSA and Germany

- Commercial and economic:^[17]

The economic relationship between the KSA and Germany is based chiefly on the export of machinery and motor vehicles. The rising demand has been paid for from oil revenues over recent years, and these mean that KSA can increasingly invest in consumer goods.

In 2007, exports from KSA to Germany, mostly crude oil, had a share of 15% of total exports, amounting to €5.33 billion.

- Energy and the environment

The situation in the KSA is almost the same as described in section 2.4 for the UAE.

- Export controls

Relevant export controls are as described in section 2.4 for the UAE.

3. Energy Sectors of the Leading Countries on the Arabian Peninsula

The current energy sector and electricity generation depend greatly on fossil fuels like crude oil and natural gas. Extensive reserves on the entire Peninsula will secure electricity generation in upcoming years, but this is ultimately a finite resource. There is also great potential for renewable energies but at present these have only a minor share in the energy mix. Because nuclear energy is a reliable and competitive electricity generation technology, the trend is in this direction.

3.1 Electricity Generation and Consumption in KSA and UAE

Regarding the energy market, the fastest growing economy on the Arabian Peninsula is Saudi Arabia with an increase in power generation capacity^[19] from 25,790MW in 2000 to 39,242MW in 2008, amounting to 52%. Due to the rise in electricity demand, the distribution network, too, has been extended by 34%, from 29,631ckm to 39,793ckm^[20]. This is a consequence of a sharp economic upturn in the country. The Kingdom’s business environment is becoming increasingly liberal and interesting for investments by foreign companies. This is also corroborated by the number of electricity customers, with an increased of 50% from 3,622,391 to 5,420,810. The Saudi Electrical Company (SEC) predicts an approximate 10% annual growth in national demand for electricity for upcoming years.^[18]

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Figure 3-1, Current electricity generation capacity from primary resources, KSA in 2008

Figure 3-2 below shows the HV transmission links in the KSA. The country is divided into four major areas that are largely self-sufficient. This map was updated on 7 December 2007 by the SEC, but it does not yet show locations for prospective new NPPs and their connection lines. But because NPPs require huge amounts of cooling water, their locations will most likely be along the shores of the Arabian Gulf or the Red Sea.

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Figure 3-2^[21], Electrical generation and distribution in the KSA

Energy consumption in the United Arab Emirates is growing at an average rate of 10% per year, while the worldwide average growth is just 4%. The rise of electrical power consumption last year was 15%. The installed capacity in MW of the entire UAE has evolved^[22] from 1990 with 456 MW to 2008 with 19,979MW (in 2000: 9,157MW).

[...]

^[1] Figures from http://www.iaea.org/NewsCenter

^[2] Source: ATW 54Jg. (2010 Heft 4 / April)

^[3] Source: US Department of state http://www.state.gov/r/pa/ei/bgn/3584.htm

^[4] Source: US Department of State

^[5] Source: http://en.wikipedia.org

^[6] Source: International Monetary Fund (IMF)

^[7] Source: US Department of State

^[8] Source 2010.03.04 Middle East North Africa Financial Network

^[9] Source:http://en.wikipedia.org/wiki/Economy_of_the_United_Arab_Emirates and http://www.imf.org/external/pubs /ft/weo/2009/02/weodata/download.aspx

^[10] Source: http://www.uae.gov.ae/Government/oil_gas.htm.

^[11] Source: 2010.03.04 http://en.wikipedia.org/wiki/United_Arab_Emirates#Economy and Policy of the UAE on the evaluation and potential development of peaceful nuclear energy

^[12] Source: http://www.uaeinteract.com/uaeint_misc/pdf_2007/English_2007/eyb6.pdf

^[13] Source: http://www.uaeinteract.com/uaeint_misc/pdf_2007/English_2007/eyb6.pdf

^[14] Source: Economic development in the UAE by Mohamed Shihab

^[15] Source:EmbassyoftheFederalRepublicofGermanyAbuDhabi http://www.abu-dhabi.diplo.de/Vertretung/abudhabi/en/Startseite.html

^[16] Source: Federal Office of Economics and Export Control BAFA http://www.bafa.de

^[17] Source: http://www.auswaertiges-amt.de

^[18] Source http://www.middleeastelectricity.com

^[19] Source MEE March 2010 Article Saudi Arabia keen to attract investment for Power, SEC Annual Report 2008

^[20] ckm is a circuit kilometer, which is the product of the number and length of transmission lines

^[21] Source: Saudi Electrical Company, Internal and External Customer Relations Dept., 2007.

^[22] Source: UAE Ministry of Energy