Belcher: The Growing Nexus of Nuclear, Oil and Gas

An important trend has been developing over the past couple of years: nuclear energy is making a comeback, and it could be a significant development for the oil and gas industry.

In recent weeks there have been two major nuclear energy announcements.

First, Constellation Energy, the owner of the Three Mile Island nuclear power plant in Pennsylvania, announced a 20-year power purchase agreement with Microsoft to restart Three Mile Island and support the company’s data center electricity needs.

Second, Holtec closed a $1.5 billion loan with the U.S. Department of Energy to restart operations at its Palisades Nuclear Power Plant in Michigan.

The reopening of these traditional nuclear facilities is largely being driven by a surge in load demand, much of which is coming from the proliferation of data centers and other artificial intelligence (AI) needs. At the same time, coal-fired power plants continue to be decommissioned, and while many new sources of wind and solar are coming online, they lack the reliability and dispatchability attributes of coal and natural gas.

 On the other hand, nuclear has a capacity factor of 92.5%, the highest of any source of electricity, not to mention near-zero greenhouse gas emissions.   

Another factor driving a nuclear renaissance is the development of smaller reactors, including small modular reactors (SMRs) that can produce 20 megawatts (MW) to 300 MW of power and microreactors, which can produce up to 20 MW of power. These units could be deployed to provide power to manufacturing facilities, data centers, refineries and chemical plants and oil and gas operations. Moreover, they could be placed behind the meter to provide onsite generation or operated by an independent power producer to provide power to multiple users.

At the federal level, President Joe Biden recently signed into law the ADVANCE Act, which directs the Nuclear Regulatory Commission (NRC) to quickly develop guidance and regulations for microreactor designs and eliminate costs for pre-application and early site permits for the deployment of small reactors at DOE and other locations.

The State of Texas is playing a leading role in enabling the use of SMRs to address the state’s surging power demand and need for dispatchable, reliable and sustainable power. The Advanced Modular Reactor Working Group, commissioned by Texas Gov. Greg Abbott and chaired by Texas Public Utility Commissioner Jimmy Glotfelty, recently presented its recommendations to the governor.

The group has focused its effort on identifying and overcoming barriers to SMR development, including market design, and siting and safety challenges. Securing approvals from the NRC was identified as the primary regulatory challenge to deploying new and advanced reactors, and the group is working to identify ways the state can work with the NRC to address those challenges.

A big part of the effort in Texas is to build a nuclear supply chain in the state, something that the oilfield services (OFS) sector could play a major role in ensuring. Relevant to this opportunity, in October the Energy Workforce and Technology Council (EWTC) had Commissioner Glotfelty address its Energy Technologies: Advancing Sector Capabilities seminar in Houston, where representatives of the nuclear energy industry, OFS and energy finance community also convened to discuss the promises and challenges of nuclear energy in Texas and the growing nexus between nuclear and the oil and gas sector.

The participants discussed how Texas is taking a leading role nationally and globally on nuclear energy development, and creating the regulatory atmosphere, financial climate and fiscal terms necessary to encourage investment in and deployment of nuclear energy facilities.  

An example of this progress is the generation IV molten salt reactor that Natura Resources is developing at Abilene Christian University. Natura has obtained the first-ever construction permit from NRC for a liquid-fueled advanced reactor.

Natura Founder and President Doug Robison is a third-generation oilman and a co-founder, president and executive chair of Permian Basin producer ExL Petroleum. His vision is to bring nuclear power to the oil and gas sector to provide reliable, dispatchable, zero-carbon power to operations, including treatment of produced water.

Last summer, Natura entered into a partnership with the Produced Water Consortium at Texas Tech University to explore the deployment of Natura’s liquid-fueled molten salt reactor (LF-MSR) technology to power the Permian Basin.

As part of the Texas Working Group’s efforts to build on this work, incentivize and build the nuclear supply chain in Texas and a corresponding workforce, it is focusing on several areas. The group’s focus includes the construction of facilities and components, mining and enrichment of uranium (low-enriched uranium and high-assay low enriched-uranium) and other fuel sources, disposal and recycling of nuclear waste and maintenance of nuclear facilities. Given its technical and manufacturing capabilities, the OFS sector is uniquely situated to play a significant role in meeting these supply chain needs, and is already positioning itself to do so.

OFS powerhouse NOV recently established Shepherd Power to provide the benefits of reliable, baseload, emissions-free nuclear energy to traditional energy companies and other companies in the industrial sectors. All of these companies face the “triple mandate” to satisfy the growing demand for energy, provide competitive returns to their investors and reduce greenhouse gas emissions.

NOV/Shepherd intends to make fleet purchases of technologies that can satisfy these demands, own and operate reactors, and sell power through structured energy purchase offtake agreements. This is particularly attractive to oil and gas producers who are increasingly facing pressure to secure reliable sources of power for operations in an increasingly constrained market while meeting low-carbon goals.  

Additionally, Diamondback Energy has signed a letter of intent with California-based small modular reactor developer Oklo Inc. to explore a 20-year power agreement for powering its Permian Basin operations from zero-carbon nuclear fission.

 Nuclear power is also being considered to power offshore oil and gas operations. For example, U.K.-based Viaro Energy has signed a memorandum of understanding with nuclear technology provider Newcleo for the future deployment of lead-cooled SMRs in North Sea operations.

Abbott is set to determine what specific legislative and public policy nuclear energy priorities will be presented during the upcoming session of the Texas Legislature. Coupled with the commercial nexus between nuclear energy and the oil and gas industry clearer than ever, Texas is poised to lead the way on nuclear development.