The 123 Agreement signed by Saudi Arabia and the United States last month advances civil nuclear energy cooperation between the two countries and gives American 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 could help the country meet its energy needs through non-oil sources.
Goal of reducing dependence on oil
Electricity demand in Saudi Arabia rose 3.8% year-on-year last year, while almost all electricity generation came from fossil fuels.
Electricity demand is estimated to increase by an average of 3.1% annually between 2026 and 2030. Natural gas is expected to play a larger role in meeting this demand, with 80% of electricity generation projected to come from natural gas in 2030.
Oil’s share of electricity generation is projected to fall from 37% in 2025 to 6% in 2030. As investments in renewable energy continue, the development of nuclear energy capacity is expected to diversify the sources used for electricity generation.
The increase in the share of non-oil sources could reduce Saudi Arabia’s dependence on oil to meet its electricity needs. This could make it possible to direct more oil toward exports.
Nuclear energy’s role in economic growth
Justin Friedman, a former senior diplomat at the US Department of State, said adding nuclear energy to Saudi Arabia’s energy portfolio would increase the diversity of its resources. Friedman said nuclear energy could support domestic economic growth and allow more hydrocarbons to be allocated for export in the medium term.
Friedman described nuclear energy as a carbon-free baseload source that provides uninterrupted power. He said this source could secure Saudi Arabia’s energy supply and noted that nuclear energy could support the greater integration of variable sources such as wind and solar into the grid.
Friedman also said nuclear energy could contribute to the production of carbon-free hydrogen in new economic areas related to hydrogen.
Competition opportunity for American companies
The 123 Agreement, which is required for the US to export nuclear technology and materials to partner countries, opens the way for US companies to compete for nuclear energy projects in Saudi Arabia.
Friedman said Saudi Arabia had postponed its decision on selecting a nuclear power plant supplier several times. He said this could be interpreted as Riyadh preferring to work with US companies rather than consider offers from rival suppliers.
The agreement must be reviewed by the US Congress before it can be finalized. After the text is formally submitted by the US administration, one of Congress’s main areas of consideration will be how to ensure that nuclear cooperation is conducted for peaceful purposes and that commitments to prevent the proliferation of nuclear weapons are upheld.
