The 123 Agreement signed with the United States has opened a new phase in Saudi Arabia’s plan to meet its energy needs through non-oil sources. Signed last month, the agreement enables civilian nuclear energy cooperation between the two countries and gives US companies access to Saudi Arabia’s nuclear energy program.
US Energy Secretary Chris Wright and Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud signed the agreement. The US Department of Energy said the arrangement would give US companies access to Saudi Arabia’s nuclear energy program and help the country meet its energy needs through non-oil sources.
Oil’s share of power generation to decline
Electricity demand in Saudi Arabia rose by 3.8 percent last year. Power generation, meanwhile, relied almost entirely on fossil fuels.
Electricity demand in the country is expected to increase by an average of 3.1 percent annually between 2026 and 2030. Natural gas is expected to play a larger role in meeting this demand, with the fuel projected to account for 80 percent of power generation in 2030.
Oil’s share of power generation is projected to fall from 37 percent in 2025 to 6 percent in 2030. As renewable energy investments continue, the development of nuclear energy capacity is intended to diversify the energy sources used for power generation.
An increase in the share of non-oil sources in power generation could help Saudi Arabia reduce its dependence on oil while meeting its energy needs. This could allow more oil to be directed toward exports.
Nuclear capacity could contribute to growth
Justin Friedman, a former senior diplomat at the US Department of State, said incorporating nuclear energy into Saudi Arabia’s energy portfolio would increase the diversity of its sources. Friedman said the step could support domestic economic growth and allow more hydrocarbons to be allocated for export in the medium term.
Friedman described nuclear energy as a baseload source that provides uninterrupted power without carbon emissions. He said this source could help secure Saudi Arabia’s energy supply and added that nuclear energy could support the greater integration of variable sources such as wind and solar into the electricity grid.
Friedman also said nuclear energy could create new economic opportunities in the hydrogen sector and contribute to the production of carbon-free hydrogen.
US companies will be able to compete for projects
Friedman said Saudi Arabia had postponed its decision on selecting a nuclear power plant supplier several times, adding that this could be interpreted as Riyadh favoring cooperation with US companies over offers from competing suppliers.
The 123 Agreement, which is required for the United States to export nuclear technology and materials to partner countries, allows US companies to compete for nuclear energy projects in Saudi Arabia. The agreement must be reviewed by the US Congress before it can be finalized.
After the agreement is formally submitted by the US administration, one of the main issues Congress will consider will be how to ensure that nuclear cooperation is carried out for peaceful purposes and that commitments to prevent the proliferation of nuclear weapons are upheld.
