ENeRgize - Energy And Natural Resources Update - Spring 2014

This Spring edition of Energize demonstrates the diversity of our cross office and cross disciplinary ENR practice; from mining in Saudi, to onshore oil and gas drilling in the UK, to smart cities worldwide.

I have just returned from Houston, Texas, where I was attending the Annual Oil & Gas practice Group Meeting of our legal network, ALFA International. The principal subject of this year's meeting was shale gas drilling and production. Fracking is nothing new to Texas and the process was invented there in the 1950s. Nor is it particularly controversial. The key concern of the North American delegates was the huge pressure on infrastructure by the abundance of shale oil supply and the need and benefits of more pipeline development, including the controversial Keystone XL project.

This contrasts starkly with the situation in the UK where we are still at the drawing board in relation to shale oil & gas exploration. However, pressure is mounting for legislative reform to kick start the onshore shale industry. As Lord MacGregor (Chairman of the House of Lords Economic Affairs Committee) concluded in its recent report on the shale opportunity in the UK; "The Committee strongly supports the decision to go "all out for shale"(...) Developing a successful shale gas and oil industry should be a national priority."

My partner, Mark Howard, discusses the challenges currently facing onshore drilling activity in the UK in his article below.

We hope that you find this Spring edition of ENeRgize of interest and do contact any member of the team should you wish to discuss any of the articles or any of the services the team offers.

DEVELOPMENTS IN MINING IN SAUDI ARABIA

By Clive Hopewell

The article below was first published in "Materials World" in January 2014

The Kingdom of Saudi Arabia may be renowned for its vast reserves of 'black gold', but it is by no means the only variety of 'gold' beneath its deserts. The country benefits from an abundance of mineral reserves, which it has increasingly sought to exploit as it looks to diversify its oil-dependent economy. Exciting developments are gathering pace, bringing a fresh wave of opportunity to the mining sector.

Past Developments

From its inception in 1932, the modern Kingdom of Saudi Arabia has looked to capitalise upon its bountiful natural resources. Following a government commissioned geological survey, both oil and gold were discovered in the country.

Whilst the former has been at the forefront of the Saudi economy ever since, the latter has, until recently, remained largely peripheral.

The same can be said for much of the Kingdom's mineral wealth. The country contains large deposits of not just gold, but bauxite, silver, copper, iron, tin, zinc and lead, as well as non-metallic minerals like phosphate and tantalum. Although there has been plenty of exploration undertaken (spearheaded principally by the Deputy Ministry for Mineral Resources ('DMMR'), the state regulator of the mining sector), there has been correspondingly little in the way of extraction and processing. Some public-private partnerships have arisen over the years, but this has not precipitated much growth in the domestic mining industry.

Nonetheless, this has begun to change with the advent of the Saudi Arabian Mining Company, Ma'aden. Established in 1997 by the government, Ma'aden is responsible for regulating mineral exploration and mining. It has acted as a catalyst for investment and delivered vital commercial impetus to the mining sector, particularly following Ma'aden's partial privatization in 2008. In its brief history, it has pursued strategic partnerships both at home and abroad, with the aim of exploiting what has already been explored and discovered. Much of its work has entailed creating the necessary infrastructure that can facilitate extraction and processing, as two of its current flagship projects demonstrate.

Current Developments

(1) Al-Zabirah Mine (Bauxite)

After discovering significant deposits of bauxite in north-eastern Saudi Arabia, Ma'aden has formed a $10.8 billion joint venture with America's Alcoa to create what it describes as 'the largest and most efficient vertically integrated aluminium complex in the world.' It is envisaged that ultimately the mine will produce 4.0 million tonnes of bauxite per annum, which will then be transported around 600km by rail to a processing plant, in order to be refined into alumina. The 1.8 million tonnes of alumina generated will then be smelted to produce 0.74 million tonnes of aluminium. Up to half of this aluminium can then be processed by an adjacent rolling mill to produce 'sheet, end and tab stock for the manufacture of cans and other products including auto, construction and foil applications.'

At present, the refinery is still under construction and is expected to be completed in 2014. In the interim period, alumina is being supplied by Alcoa (via import) for smelting. Once the complex is fully operational and thus integrated, it is anticipated that the aluminium produced will undercut global prices and thus be much sought after by the markets.

Ma'aden is responsible for implementing the project infrastructure. This extends beyond mining operations per se and encompasses an ambitious cooperative project with Saudi's water and electricity utility...