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UAE: 'Days of Easy, Cheap Oil are Gone'

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ABU DHBAI - The United Arab Emirates is planning to get up to 25% of its power from nuclear energy by 2021 as it looks to reduce its domestic reliance on fossil fuels and ensure it has enough oil to export as its economy expands, the country's new energy minister said Monday. 

"Nuclear energy is expected to account for between 20% to 25% of power production by 2021 through the operation of four nuclear power plants," Suhail Al Mazrouei told an energy event in Abu Dhabi. 

U.A.E. is also planning to up its production capacity to 3.5 million barrels per day by 2017 from around 3 million barrels per day, said Mr.Mazrouei, who was appointed oil minister last month in a cabinet reshuffle aimed at accelerating the pace of economic development in the Gulf state. 

Mr. Mazrouei said the days of easy, cheap oil are gone and finding new discoveries is becoming difficult and costly, while global oil demand will increase by one million barrels per day until it reaches 105 million barrels per by 2030. 

Emirates Nuclear Energy Corp., or ENEC, last year secured permission to construct two nuclear power units--the first in a string of civilian power plants planned in the Persian Gulf region. The firm is building the nuclear plants in the Gulf state, a member of the Organization of the Petroleum Exporting Countries, and said in March it has applied to the country's nuclear regulator for a license to build a third and fourth nuclear reactor in the western area of Abu Dhabi. 

Several Gulf states, including top oil exporter and fellow OPEC member Saudi Arabia, are looking at nuclear power after failing in recent years to develop enough gas production to meet their rising electricity demand, especially during the summer when use of electric-powered air conditioning soars. 

The U.A.E, which produces around 2.6 million barrels per day of crude, is one of the world's top five power consumers per capita. Currently, around 80% of the country's power is generated from burning natural gas, while the rest comes from oil, which the Gulf state wants to preserve for lucrative crude exports. 

ENEC signed in August contracts worth $3 billion with six international companies, including Russia's Tenex, Rio Tinto PLC and France's Areva SA, to supply nuclear fuel, conversion and enrichment services for its four South Korea-designed advanced pressurized water reactors. Each of the four planned reactors is capable of producing 1,400 megawatts of electricity. 

The contracts, which cover the first 15 years of the reactors' operations, will provide ENEC with long-term security of supply, and favorable pricing and commercial terms, the company said. ENEC said it expects to return to the market again when conditions are favorable to strengthen its supply position. 

ENEC has already started construction of the first unit in Barakah, in western Abu Dhabi, and is expected to start building its second reactor this year. 

The U.A.E. is investing billions of dollars in developing alternate sources of energy as part of plans to diversify its economy away from hydrocarbons. Its planned nuclear reactors are set to be the first in a string of civilian power plants in the Middle East, potentially including Egypt and Saudi Arabia. 

Unlike nearby Iran, the U.A.E. is committed to not enriching uranium itself nor reprocessing spent fuel. 

Hamad al-Kaabi, the Gulf state's national representative to the International Atomic Energy Agency, the United Nations' nuclear watchdog, has previously said that the U.A.E. hasn't yet finalized a strategy for managing spent fuel from the reactors, but a national waste strategy document is in advanced stages of negotiation. 

Copyright (c) 2012 Dow Jones & Company, Inc.

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