Oman Joins Arab Research and Training Agreement

Nuclear Energy Update

Readers of this blog know that we have been keen to highlight the opportunities presented by Oman’s plans to develop a peaceful nuclear energy program. As we discussed in our “Nuclear Energy in Oman” series, two of the key legal steps in the nuclear development process include joining international agreements and building a nuclear safety framework.

The Sultanate’s recent enactment of Royal Decree 68/2010 suggests that Oman is continuing to make further progress in both of these areas. Pursuant to Royal Decree 68/2010, Oman is acceding to the Cooperative Agreement for Arab States in Asia for Research, Development and Training Related to Nuclear Science and Technology, also known as “ARASIA.” Established in 2002 under the auspices of the International Atomic Energy Agency, ARASIA provides a forum for Arab nations to cooperate in formulating nuclear research, development and training initiatives – not only for nuclear energy production, but also for other applications of nuclear technology such as medical testing. ARASIA hosts training courses on nuclear technology and safety issues, and participates in a range of research projects. In joining ARASIA, Oman takes it place alongside fellow members Iraq, Jordan, Lebanon, Saudi Arabia, Syria, the United Arab Emirates and Yemen.

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Nuclear Energy Development Series (Part 2)

Potential Ownership Structures

Oman’s plans to develop a peaceful nuclear energy program remain an exciting prospect and hold great potential for the Sultanate’s future. In this series of articles on nuclear energy development, we highlight some of the key issues that aspiring nuclear nations typically encounter along the road to developing a nuclear energy program. The past two posts have explored international treaties (such as the Treaty on the Non-Proliferation of Nuclear Weapons) and supportive legal and regulatory frameworks (such as safety and liability measures) that aspiring nuclear nations tend to implement. This article covers another key consideration for developing a nuclear energy program: potential ownership structures for nuclear facilities. The Importance of Ownership Structure Ownership structure is an important consideration for any large infrastructure project, as the proper structure helps to attract private investors and to incentivize the facility operators to run the project efficiently. For nuclear facilities, ownership structure can be especially important. First, the highly sensitive nature of nuclear facilities makes it particularly vital that the facilities be operated efficiently, responsibly and in accordance with the highest standards. Second, the high level of international cooperation typically involved in nuclear programs makes it important for nuclear facilities to be transparent in their operations and their ownership structure; this consideration is particularly crucial for new and aspiring nuclear nations seeking access to other nations’ nuclear technology. The Public-Private Model In considering potential ownership structures for its nuclear facilities, Oman could gain valuable insight from the ownership structure it has already put forward for the privatization and restructuring of the Sultanate’s electricity and related water (i.e., desalination) facilities. Pursuant to the Sultanate’s plan, the sector is divided into three primary functions: generation, transmission and distribution. For generation and distribution, there are multiple companies performing the function. The companies feature partial or full private ownership, but operate under the supervision of the government’s electricity holding company. Such a structure provides several key benefits. First, the combination of government and private-sector involvement facilitates access to the best available equipment and management, both from within Oman and from foreign countries, while allowing the government to maintain high-level supervision over, and responsibility for strategic planning for, the sector. Second, the segmentation of the sector into separate functional areas, and the presence of multiple companies in given functional areas, promotes competition, efficiency and high standards. Segmentation and competition also have two important corollary benefits: (i) promoting transparency and (ii) preventing any one private company from becoming too powerful in relation to the government – an important control in a sector that provides basic public services. Potential Benefits of the Public-Private Model for Aspiring Nuclear Nations Following on its public-private model for the electricity and desalination sector, the Sultanate would be well advised to consider the potential benefits of applying a similar model to its nuclear energy development plans. In particular:

• Offering private companies the opportunity to participate in the ownership and operation of nuclear facilities could help attract investment capital and encourage leading international providers of nuclear technology to develop Oman’s nuclear energy projects.
• Segmenting the nuclear energy program into distinct functional areas (e.g., generation and distribution), and allowing multiple companies to operate in each functional area, could help spur the respective companies to operate more efficiently and to higher standards.
• Introducing segmentation and competition into the nuclear energy sector could help the Sultanate harness the benefits of private sector involvement while maintaining government control over a sector that would be both vital to national security and a provider of basic public services.
• A robust public-private ownership model could help promote transparency in Oman’s nuclear energy program, which could facilitate access to international nuclear technology.

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Nuclear Energy Development Series (Part 1)

Safety and Liability Measures

Oman’s plans to develop a peaceful nuclear energy program are an exciting prospect and hold great potential for the Sultanate’s future. In order to help make its nuclear energy program a reality, Oman would be well advised to consider establishing a supportive legal and regulatory framework. Having the proper legal and regulatory framework in place would help the Sultanate gain access to the technological support from other nations that it will need to develop its nuclear program. As discussed in our March 1 post, the first important step that aspiring nuclear countries usually take is to become a party to the Treaty on the Non-Proliferation of Nuclear Weapons. This article discusses two related steps: developing nuclear safety and liability measures. Although the Sultanate has already acceded to some nuclear safety conventions, it will likely need to implement further measures as it proceeds in developing a peaceful, international-law compliant nuclear energy program. Nations in a phase of nuclear development similar to Oman’s often focus on building a supportive legal and regulatory framework by becoming party to the International Atomic Energy Agency’s (IAEA) major conventions on nuclear safety and putting in place legislation that effects compliance with these conventions. Broadly speaking, building a supportive legal and regulatory framework tends to involve developing and implementing a rigorous safety program that meets IAEA standards and international environmental standards relating to nuclear activity, as well as establishing a competent, independent regulator to oversee adherence to these standards. Two of the most important of these safety programs relate to spent fuel management and to radioactive waste management. These programs normally include management procedures, facilities specifications and emergency plans. Closely linked to nuclear safety is the issue of the liabilities that may arise when safety mechanisms fail. For example, currently Omani law is not equipped to handle potential nuclear liability claims, because Omani compensation law does not cover the unique kinds of damages that can be caused by nuclear-related incidents. Aspiring nuclear countries typically adopt a nuclear liability regime that complies with all relevant major international agreements dealing with nuclear liability. In particular, key features of nuclear liability laws usually include:

• strict liability for the operator of the nuclear facility for damages arising from any nuclear-related incident;
• exclusive jurisdiction for the nation’s courts over claims arising from any nuclear-related incident that occurs within the nation’s territory;
• limits on the amount of compensation to be paid for any proven liability, as well as limits on the time frame during which a claim can be brought, arising from any nuclear-related incident; and
• indiscriminate application of the damage compensation mechanism without regard to nationality, domicile or residence.

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Nuclear Energy Development

When a nation such as Oman decides to develop a peaceful nuclear energy program, the first step in essence will decide the political and economic consequences of the entire process. This first step is to become a party to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT). That step is important because nations that lack the domestic capacity to develop nuclear energy will require technological support from other nations. In order to obtain this technological support, the country seeking to develop nuclear energy will need to join the NPT and fulfill a number of political obligations and related criteria.

Joining the Non-Proliferation Treaty
The NPT came into force on 5 March 1970 and includes 189 signatory nations, including Oman. Oman ratified the NPT in 1997 and therefore already fulfills this basic fundamental criteria. The NPT includes three basic "pillars": non-proliferation, disarmament, and the right to peacefully use nuclear technology. The provisions on peaceful use of nuclear technology are most important for Oman’s current plans, and are addressed in Article 4 of the NPT.

Article 4 of the NPT gives a county seeking to embark on a nuclear energy program the inalienable right to use nuclear energy for peaceful purposes within the parameters laid down by the obligations in the treaty.

A country such as Oman, which lacks the domestic technical resources and capacity for nuclear energy development, may seek to avail itself of Article 4(2) of the treaty. Article 4(2) deals with the exchange of equipment, materials and scientific technical information for the peaceful use of nuclear energy between member states. Article 4(2) also sets out the non-binding moral obligations of member states to support the responsible spread of the use of peaceful nuclear technology.

In practice, Article 4(2) is monitored by a group of forty six nuclear supplier states, including China, Russia and the U.S., that have voluntarily agreed to coordinate their export controls governing transfers of civilian nuclear material and technology to non-nuclear weapon states. This group is known as the Nuclear Suppliers Group (NSG), and was created in 1975 after an incident involving India’s explosion of a nuclear device. This incident demonstrated that nuclear technology transferred for peaceful purposes can be misused. The objective of the NSG is to prevent nuclear exports for commercial and peaceful purposes from being used to make nuclear weapons. Under the NSG structure, members are obligated to refrain from nuclear trade with governments that do not subject themselves to international inspections of their nuclear imports. The inspections are designed to provide confidence that their nuclear imports are not being used to develop a nuclear arsenal.

As Oman will require technical support from the international community in developing a nuclear program, it is important to instill confidence in the International Atomic Energy Agency (IAEA) and the NSG to ensure that the international community understands that Oman’s intentions are NPT compliant. Specifically, a nation in this situation should show its adherence to international instruments and inspections.

Developing Effective Legislation
A country seeking to develop a nuclear program will require legislation to move the process forward. Specifically, nuclear legislation should:

• Ensure control over nuclear materials, facilities and any other radioactive material.
• Ensure that nuclear energy and its applications are used exclusively for peaceful purposes.
• Ensure that nuclear facilities, nuclear materials and any other radioactive material are handled and operated safely and securely through a system of regulatory control.
• Ensure that compensation mechanisms are in place in case of nuclear damage.
  

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Hot Topic: Nuclear Energy in the GCC

Earlier this month, Oman’s Ministry of Foreign Affairs signed a Memorandum of Understanding (MoU) with the Russian Federal Atomic Energy Agency (Rosatom) that deals with cooperation in the peaceful use of nuclear power. The MoU could lead to Russia and Oman engaging in joint research projects and even building nuclear reactors together.

The MoU details Russia and Oman’s plan to establish a working group to promote Oman’s plans to develop nuclear power. The countries also plan to draft an intergovernmental agreement for cooperation in peaceful nuclear energy. Both countries have stated that they plan to cooperate in the following areas:

• • development of nuclear power infrastructure;
• • fundamental and applied research;
• • use of radio isotopes;
• • building and operation of commercial and research nuclear reactors;
• • nuclear safety and control;
• • execution of joint projects on prospecting and mining of uranium;
• • treatment of radioactive waste;
• • provision of nuclear fuel cycle services; and
• • training and professional development of administrative and scientific-technical personnel.

Oman has long had plans to diversify its economy and encourage sustainable economic development policies, and the peaceful use of nuclear power fits in with those plans. Cooperation between Oman and Russia on nuclear power can help the Sultanate develop infrastructure, provide employment opportunities and training, and benefit from Russian expertise and technology.

Oman is not the first country in the Middle East to seek nuclear energy development. Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates (UAE) and Yemen have all expressed their intention to develop nuclear energy. The UAE has already signed a bilateral agreement with the United States on nuclear cooperation and is also talking with France to cooperate on nuclear energy. In addition, the North African countries of Algeria, Egypt, Libya, Morocco and Tunisia have also expressed interest in nuclear energy.

MENA states have a number of motivations for this interest in nuclear energy, such as powering water desalination plants and air conditioning, diversifying beyond oil, and furthering scientific and economic development. Some countries have even stated that they prefer to sell their oil rather than use it to meet domestic demand, and constructing nuclear reactors would enable them to do that.

Energy demand is growing rapidly in Oman and the GCC, with electricity and desalination demands estimated to increase by about 10 per cent annually by 2015. Recently, a GCC-wide electricity grid was introduced which allows GCC states to share power during peak periods. The GCC electricity grid is designed to address what has been labeled a “power crisis” in the region.

GCC states are looking to nuclear and other alternative energy sources as providing potential solutions to the power crisis. Solar energy is another potential resource, with new projects underway. Earlier this month, Abu Dhabi opened the largest solar power grid in the Middle East and North Africa. Oman is also in the process of developing solar energy projects in response to the growing electricity demand.

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