The world is undergoing a profound energy transformation that favours the transition to a low carbon future with renewable energy sources. However, this shift will require advanced clean energy technological infrastructure.
According to the World Bank and International Energy Agency, “the energy transition is significantly mineral intensive and there is expectations for a substantial increase in demand for several critical minerals and metals to manufacture renewable energy technologies: solar panels, wind turbines, advanced batteries and electric vehicles”.
Covid-19 has left no one behind, Gulf Cooperation Countries (GCC) are dealing with the dual impact from the pandemic and lower oil prices affecting fiscal states budgets. The latter events further emphasize the need for finding new means for diversification to maintain economic growth and support job creation in the GCC countries through industrial and climate strategies to shift to a low carbon integrated energy mix future. Harnessing the momentum, GCC countries can revise and update their mining laws, encourage Foreign Direct Investment (FDI), support public-private partnerships to accelerate the development across the mining value chain.
According to the Fraser Institute’s annual mining survey ,the most attractive and active mining jurisdictions to invest in are: Western Australia, Europe, United States and Canada. GCC countries do not even rank in the latter survey as desirable destinations for capital inflow for the mining sector; that’s because historically, GCC countries were driven more towards developing oil and gas resources leading to the under exploitation of non-hydrocarbon mineral wealth.
However, the latter does not mean that mining industry in the GCC is inactive orthat industrial and manufacturing capabilities along the mining value chain do not exist. For instance, Aluminum and Copper are two critical metals, are heavily needed in the clean energy race are available in the GCC countries. As Aluminum and Copper are among Wood Mackenzie’s big five transition metals list, this gives a signal for the GCC countries to join and benefit from the energy transition race.
Aluminum is considered a key economic driver for GCC countries. The GCC holds strong positioning and possess a competitive advantage in smelting within the Aluminum value chain due to: strong government-backing, cheaper energy costs, economies of scale from installed infrastructure with room to increase spare capacity and the most advanced smelting technologies compared to other producers.
The top five primary aluminum smelters in the GCC countries are: Aluminum Bahrain (Alba) which is the second largest outside china, Emirates Global Aluminum (EGA), Qatar Aluminum (Qatalum), Sohar Aluminum in Oman and Maa’den Aluminum in Saudi Arabia. Collectively the latter five nations in the region make up 10 percent of the total world production of primary Aluminum where 40 percent of total production is absorbed by the downstream aluminum industry in the gulf and the remaining is exported worldwide.
Aluminum is a critical raw material input especially, for solar technologies, which accounts for 85% of most photovoltaic (PV) frames that hold the solar panels together. The United Arab Emirates has become the first country in the GCC and the world to produce Aluminum using solar power. The latter demonstrates a potential model to replicate in other GCC countries of integrating renewable energy to produce metals and intermediary inputs needed to manufacture low carbon technologies.
Apart from Aluminum, Copper is another key metal with untapped potential for development within the GCC for clean energy technologies. Copper is a key enabler of decarbonization and the best conductor of heat and electricity. Oman and Saudi Arabia are the only two active countries from the GCC group involved in the copper mining sector. Whether Oil and gas or mining, GCC business models for projects in resource industry and other sectors traditionally tends towards forming private-public partnerships due to the costly investment requirements and the expectation for the state to holds an interest in its natural resource along the value chain.
For example, Oman’s mining and processing of copper is currently covered by the combined efforts of the state owned mining company and one local private sector company. In Saudi Arabia, copper is produced by a joint venture partnership between the state owned mining company Maa’den and Barrick where each party holds 50% interest in the jabal al sayad underground copper mining project.
Kuwait is not a major producer, processor or manufacture of aluminum or copper as the rest of its counterparts in the region. However, like the rest of the countries in the GCC, there are many factors contributing to Kuwait’s suitability to join the call of shifting to an integrated low carbon future. For example, the strong renewable energy resource base, robust financial liquidity of private and central banks, rising energy demand, economic diversification plans and desire for technological innovation.
Despite the intention and business readiness to shift to a low carbon future, legislation revolving around the mining-value chain must exist. According to a legal overview conducted by DLA Piper, Saudi Arabia has one of the most modern and developed mining laws in the Middle East and Northern Africa region (MENA).
In Oman, The Ministry of Commerce and Industry regulates the mining sector in accordance with the Mining Law, by Royal Decree No. 27/2003. Qatar has no detailed legislation related to mining but through its The Natural Resources Law provides that all-natural resources be deemed state property.
The Minister of Energy and Industry can grant a license for the extraction and exploitation of natural resources Law No. (3) of 2007, Exploitation of Natural Wealth and Resource (the Natural Resources Law) is the main statute that regulates the exploitation of natural resources in Qatar. Bahrain, Kuwait and the United Arab Emirates have no specified legislation to the mining sector.
It is important to bear in mind that to have sustainable and economically viable mining industry depends on the geology of the natural resources endowed within the country.
If you cannot mine it, then the alternative is to process raw materials or manufacture products. This raises the question does the GCC region have the potential to become a processing/manufacturing hub for intermediary inputs that go into producing low carbon technologies?
It is an opportunity for the GCC member states to share their experience and work together towards embracing a regional shared mining, industrial and manufacturing vision that will enable Arab Gulf nations to join the global clean energy race towards an integrated energy mix amid transition to a carbon-constrained world.
Jamil Hijazi : Jamil is a Mineral Economist and Energy analyst who holds a Dual Master’s Degree from the University of Dundee Centre for Energy,Petroleum,Mineral Law and Policy (CEPMLP). His expertise and research interests are in Supply Security of Critical Raw Materials, Energy transition, Local Content and Development in the Extractives Industry.
Eaman Aman: Saudi researcher, specializing in Energy& Climate Change Policy. Her research interests and expertise are around energy economics and natural resources law and policy as well as issues related to climate change mitigation, environmental justice, energy security and sustainable development.
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