EGYPT AWARDS WORLEY PARSONS NUCLEAR DEAL AFTER TALKS WITH BECHTEL BREAK DOWN
By Jessica Gray
Business Today Egypt
August 2009
Nuclear Ambition
The cool waters of the Mediterranean swell gently against El-Daba’a’s
deserted shoreline. About halfway between Alexandria and Marsa Matruh
on the North Coast, the more than 100 kilometer-stretch of white sand
and vibrant coral reef would be considered prime property for tourism
development, if not for the fact it has been selected as one of five
possible sites for Egypt’s first nuclear power plant. The nuclear
project could also constitute a first for the region, aside from
Israel. Planning for the 1,200-megawatt project, set for completion
in 10 years time, is well underway, according to the plant’s official
consultant, global engineering firm WorleyParsons.
The Nuclear Power Plants Authority (NPPA), a division of the Ministry
of Electricity and Energy, awarded WorleyParsons the LE 900 million
consulting contract two months ago. The parties signed the contract
June 18, more than 50 years after Egypt’s nuclear program was
established.
The decision came as a surprise to industry players as the government
had announced that United States-based Bechtel was its first choice to
carry out the contract in January this year. NPPA Vice Chairman for
Studies and Nuclear Affairs Dr. Mohamed Mounir Megahed says talks
with Bechtel broke down after months of "tedious and difficult"
negotiations earlier this year.
"There were some differences in the terms," says Megahed. "We
were under the impression that they accepted the general terms and
conditions because they said so, but when we started negotiations we
discovered there were some deviations. They wanted changes that would
alter the nature of their bid. I am not at liberty to say more but
this was basically the problem. They were very adamant – they did
not want to compromise."
Representatives from Bechtel’s Egypt office refused to comment on
the failed negotiations, citing a policy that prohibits employees
from speaking to the media.
The nuclear facility is one of many energy projects under construction
to address Egypt’s growing electricity needs, currently met via
numerous steam and combined cycle plants powered by fossil fuels as
well as renewable sources such as hydro power.
The World Bank, a multi-million dollar supporter of several ongoing
energy projects in the country, estimates that Egypt’s energy demands
are growing between 7% and 8% annually. Egypt has a stored capacity
of almost 24,000 megawatts of electricity. Peak usage rests at around
21,000 megawatts. Analysts predict those numbers will jump to 57,000
megawatts and 73,000 megawatts respectively by 2027, driven by heavy
industry and a sharp increase in population.
Aside from meeting energy demand, the nuclear project is also slated
to diversify the nation’s energy sources, making it less vulnerable
to market pressures, creating jobs and perhaps even giving nuclear
engineering graduates from the University of Alexandria a reason to
look for work inside Egypt.
Megahed says the NPPA is pleased with WorleyParsons, which
ranked second out of seven companies vying for the lucrative
contract. WorleyParsons, with over 200 staff members in Egypt alone,
will be responsible for selecting the site and choosing the technology
the power plant will employ, as well as tendering construction and
procurement contracts, training staff and overseeing installation. The
company is currently involved in six nuclear projects around the world,
most of which are in Eastern European countries, such as Armenia,
Bulgaria and Slovakia.
Joe Aikins, the firm’s general manager in Egypt, described the
negotiations as "thorough" and "rather tough," adding that the
country’s more than 30-year history with nuclear technology and
research has given the NPPA a concrete vision of how the project
should be implemented. "The scope is to provide consultancy
services throughout the length of the project. Our goal is to
deliver that project safely, accurately, on time and on budget to
meet the objectives of the Nuclear Power Plants Authority. [] The
basic parameters for developing and executing the project are being
reviewed, discussed and agreed upon. The end result of the initial
meetings is an agreeable, detailed project execution plan," he says.
Phase one of the project will span approximately three years. During
this time WorleyParsons and the NPPA plan to choose the nuclear
technology, evaluate and decide on the official project site,
outline strategic plans including radioactive waste management and
safety operations, and draft and approve engineering procurement and
construction documents to be tendered.
"At the end of the three years we should have the technology
commissioned, the [procurement] agreements negotiated or under
negotiation, the site regulatory approval and the tender documents
solicited and hopefully have some back so we know who will do the
final detailed engineer procurement and installation," says Aikins.
He says there could be an additional agreement between WorleyParsons
and the NPPA to provide services beyond the 10-year period in terms
of regulatory monitoring, maintenance, further staff training and
site or equipment inspection. Phase two will include procurement and
construction to be completed sometime in 2019.
Aikins is not predicting any specific challenges to the project, but
admits there are a number of issues project leaders must plan for,
such as the complexity of the scheme and issues concerning skilled
labor, safety and quality. The fact that Egypt is home to large,
sophisticated gas refineries, chemical plants and natural gas power
plants and has been developing a nuclear program for a long time
means that it can be done, and done well, adds Aikins.
Aikins predicts that the nuclear project’s scope will be clearer by the
end of summer. An international team from the company toured the Daba’a
site at the beginning of July. Ramses Khalil, WorleyParson’s regional
manager of power, says the Daba’a site is the firm’s "preferred"
site due to the continuous stream of data that has been collected
there since it was chosen as a possibile site for a plant in 1980.
"Soon after the Chernobyl accident, Egypt basically put a break on the
development of nuclear power. However, because of the investment at
the site, they maintained some research and capabilities and basically
a very up-to-date lab and a [research] tower that collects a variety
of information – temperature, wind direction and seismic information,"
says Khalil.
The data now has to be studied and processed to decipher whether
the site is in fact the best choice. The other sites – all along
the Mediterranean or Red Sea to provide the plant with water to cool
excess heat – have not been studied as of yet, but that will change
in the next few weeks as project staff begin to collect their own data.
The most important characteristic for a nuclear site, other than
proximity to water, is its seismic activity, says Khalil. Fault lines
and geothermal activity can compromise the integrity of the plant’s
infrastructure. Chinese authorities were accused of unsafe building
practices after a hydroelectric dam, several chemical factories and
a host of power plants were structurally damaged in China’s Sichuan
province during a massive earthquake on May 12 last year that killed
nearly 100,000 people.
Khalil says the plant will consist of three parts: the reactor
building where the nuclear reaction will occur; the turbine building
that typically houses one to three turbines depending on the design;
and the switchyard where the electricity produced by the turbines is
routed to the national grid.
Nuclear waste and depleted fuel rods will be stored onsite in a
dedicated area until it can be disposed of according to International
Atomic Energy Agency (IAEA) standards. "The IAEA, the worldwide
[nuclear] watchdog, has basically given Egypt a green light to obtain
nuclear fuel rods and to manage their disposal," says Khalil, adding
that the nuclear site will have little impact on the environment
around it, other than the construction itself. The delicate ecosystem
around the reefs will also be unaffected because the water used to
cool surplus heat from the reaction will be dispersed in a wide radius
about two kilometers out to sea.
In terms of the technology, Khalil says there are four common nuclear
models: American, French, Russian and Canadian, all of which have a
certain number of subsets and derivatives dependent on the company
that produces each. According to Khalil, all are solid technologies,
but it’s too early for him to suggest which might be best suited to
succeed in Egypt. WorleyParsons has approximately 1,300 engineers
worldwide that are working in some capacity with all four types of
nuclear technology.
Power Hungry Dr. Hafez El-Salmawy, managing director of the Egyptian
Electric Utility and Consumer Protection Regulatory Agency, says
the government must add 1,500, megawatts of power – enough to power
most of Cairo – to the national grid each year simply to keep up with
rising demand. "By 2027, the stored capacity will likely exceed 60,000
megawatts, almost triple the stored capacity now, which represents
a substantial added capacity of over 40,000 megawatts that needs to
be added over the next 18 years," he says.
According to El-Salmawy, the Ministry of Electricity is hoping to
add another 9,000 megawatts to the grid over the next few years with
projects such as the 140-megawatt solar and combined cycle power
plant in El-Kureymat – about 95 kilometers south of the capital –
that is set to begin operations in 2010. The existing plant will be
getting two additional natural gas turbines as well as a steam turbine,
increasing energy production by 750 megawatts. A steam power plant in
Abu Qir is scheduled to be complete on El-Kureymat’s heels in 2012,
adding another 1,300 megawatts.
A third project underway in Ain Sokhna could add another 1,300
megawatts by 2015, using supercritical steam turbines, which burn
hotter and more efficiently than conventional steam turbines. Expansion
programs are also in the works at the Zafarana wind turbine site in
the Gulf of Suez to help increase the percentage of energy produced by
renewable sources from around 10% – the vast majority of which comes
from hydro power – to 20% by 2020. Though the nuclear power plant will
only add another 1,200 megawatts to Egypt’s total, barely covering
Cairo’s needs, there is a definite possibility the government will
consider building more plants on the same site to increase generation
capacity, says Khalil, adding that the NPPA had originally thought
to build four to five plants at El-Daba’a.
The benefits of having nuclear power go beyond consuming fewer
fossil fuels and better protecting Egypt’s power sector from market
fluctuations, such as the incredible rise and just as incredible
decline in oil prices in 2008. Less dependence on natural gas, which
powers the majority of thermal power plants, could also bolster
Egypt’s coffers as it will mean more to sell to international buyers.
The program could also help reverse Egypt’s brain drain syndrome,
offering nuclear engineering graduates a chance to work in their
homeland if the salaries match Western standards, says University of
Alexandria professor and head of the nuclear engineering department,
Dr. Alya Badawi.
"I think a large number of our students are in the US. They have also
gone to Canada and there are a few of our students in Japan, Dubai,
Saudi Arabia, [and] Kuwait. They’re everywhere. I think everybody
is excited [about the nuclear power plant] because our program was
originally designed to provide home-grown experts. I think [whether
graduates will return to Egypt] will probably depend on the economic
situation. If they’re going to raise salaries of engineers working
here, then yes there might be people returning," she says.
The nuclear program at the University of Alexandria debuted in 1963 in
response to Egypt’s plans for a nuclear power plant and the successful
commission of the country’s first of two research nuclear reactors
in 1961. Some 950 students have since graduated with a bachelor of
science in nuclear engineering.
"Egypt was one of the first developing countries to recognize the
importance of nuclear energy in solving energy capacity," says
Megahed. In 1955, the Atomic Energy Committee was formed under late
President Gamal Abdel Nasser. In 1957 it became the Atomic Energy
Authority, whose mandate was to pave the way for Egypt’s impending
nuclear program. Four years later a 2-megawatt thermal power research
rector was commissioned just outside of Cairo.
In 1964, bidders were invited to construct what was to be the first
nuclear power plant in Borg Al-Arab near Alexandria. The project was
cancelled after the 1967 war with Israel. After renewed aggressions
with Israel ended in 1973, US President Richard Nixon offered to
aid Egypt in its nuclear aims and construct a 600-megatwatt plant,
says Megahed, but negotiations with the US collapsed when Nixon’s
government demanded more control over the installation, says Megahed.
In 1983, Egypt tried again, calling for tenders to construct a
1,000-megawatt plant at the El-Daba’a site. Three years later, and
just days before the government announced the tender winner, the
Chernobyl nuclear accident shocked the globe and effectively shut
the doors on Egypt’s nuclear hopes.
According to Megahed, the NPPA and Nuclear Energy Authority spent the
next 20-plus years carrying out extensive studies at El-Daba’a. The
wait was not in vain. In 2006, the government announced it would
revisit the nuclear program. The plan to build a nuclear power plant
followed a year later and a request for tenders was made in February
2008. Megahed says the $1 billion to $2 billion budget will be footed
by the government and likely include loans.
All Eyes on Egypt Egypt’s civilian nuclear program has support
from the US and the IAEA and the country has signed the Nuclear
Non-Proliferation Treaty. US President Barack Obama made a point to
discuss his country’s backing of civilian nuclear programs in his
June speech in Cairo. While the US, Israel and the IAEA watch Iran
closely, Dr. Mohamed Adel Salam, a senior analyst at Cairo-based
think tank Al-Ahram Center for Political and Strategic Studies, says
Egypt doesn’t have anything to worry about because of the nature of
its nuclear program.
"The problem isn’t about the nuclear program, it’s about using the
process of uranium enrichment to form weapons. In terms of Egypt,
there are no intentions, nor any statement from officials here that
they will build any facilities that can enrich uranium [as weapons],"
he says. Though another researcher at the center told bt that Egypt’s
original aim was to counter Israel’s budding nuclear weaponry program
with its own, (See "The Nuclear Option," by Erin Cunningham, March
2009, page 46) Egypt’s goals are entirely peaceful now.
For the time being, Egypt’s nuclear plans have not received much
coverage in Israeli media, which is more concerned with the nation’s
role as a mediator between Israel and the militant Palestinian group
Hamas. Salam says Israel does not directly oppose Egypt’s plans,
despite some rumblings from Israeli think tanks. Salam says that it
is not just Israel watching Egypt’s nuclear progress – other Middle
Eastern and North African countries will also be watching Egypt’s
efforts closely to gauge the nation’s success, something Egypt is
used to, says Megahed. "They look to Egypt for everything else. We
are a poor country but we have large influence in the area," he says.
But influencing the region is not a factor for the NPPA or the
government, according to Megahed. Instead, realizing Egypt’s
50-year-old nuclear vision is about securing the nation’s energy
supply and ensuring the government meets the country’s soaring
power demands that fossil fuels won’t be able to cover. "We
are not a country rich in energy resources. Our petroleum
resources are very limited and so is our natural gas. I think
[the government] realizes that the cost of energy would be
very, very expensive if we cannot find alternatives," he says.