Saudi mining city brings diversity
Saudi Arabia’s new mining city will provide security with the chance to diversify from oil. Ceri Jones reports.
Saudi Arabia is hedging its bets on energy exports by launching a US$22.7bln (£17.7bln) mining city project, called Wa’ad Al-Shamaal.
The 440km2 area in the isolated north of Turaif, Saudi Arabia, was inaugurated by King Salman on 22 November 2018, as a way to grow the country’s mineral market and to create thousands of jobs.
Saudi’s Energy Minister Khalid Al-Falih said at a mining conference in Cairo, Egypt, ‘We are seeking to develop the mining sector through the implementation of a comprehensive strategy [...] and raise its contribution to GDP from US$17bln to US$64bln, with the generation of 160,000 additional jobs by 2030’.
According to Reuters, Saudi Arabia plans ‘to build an economy that does not rely on oil and state subsidies’, and the mining city is a crucial part of the kingdom’s strategy – collectively named Saudi Vision 2030 – to diversify its export wealth, currently reliant on hydrocarbons, by tripling the mining market’s contribution to GDP to reach 3%.
In the build up to the launch, Al-Falih gave reasons for the decision, saying the kingdom has long focused on oil yet is rich in untapped mineral resources, thought to be worth around five trillion riyals.
Plans for a robust mineral portfolio include excavating copper and bauxite for aluminium production, both vital materials to support the electric age, as well as uranium and phosphate. Initial reserves estimate the land to contain 500 million tonnes (Mt) of phosphate ore alone.
At present, Saudi has only one operating mining company, Ma’aden – a firm majority-owned by the Public Investment Fund – which is keen to expand operations to process all of these materials, but retain its established focus on phosphate. Stage three of the plan, called Phosphate 3, recently started construction and will see Ma’aden increase its phosphate production levels with the aim to ramp-up to 9Mt a year. If the target were reached, this would place Saudi Arabia as the second-largest phosphate producer in the world, after Morocco.
Ma’aden President and CEO Darren Davis called Wa’ad Al Shamal the ‘cornerstone’ of Saudi Arabia’s phosphate reserves and integrated strategy. ‘With our local and international partners,’ he said, ‘we’ve built state-of-the-art facilities at Wa’ad Al Shamal which deliver competitive production costs and efficient logistical links to world markets. Upon this strong foundation, Ma’aden and Saudi Arabia will become leaders in the phosphate industry, while also delivering long-term sustainable economic development to communities in the north of the country.’
The mining project will invite foreign investment, a rare decision for Saudi Arabia, a kingdom famously closed and protective of its assets. But new legislation has been introduced specifically to drive foreign investment in this project, with Al-Falih saying there are ‘many incentives and facilitating measures, and we have worked to build a safe investment environment’, though he declined to elaborate on the nature of these.
However, this is certainly more than a notion, as it is also set out in the Saudi Vision 2030 growth plan, which reads, ‘We will form strategic international partnerships and raise the competitiveness and productivity of our national companies. This will boost their contribution to the sector’s growth, as well as to the localisation of knowledge and expertise.’ And more money is sorely needed.
Wa’ad Al-Shamaal city has been under construction since 2013, and will encompass residences for workers, offices and retail parks, as well as essential amenities including water and sanitation. The site forms part of the larger mining complex known as the King Abdullah programme, which incorporates the major mining operations, a railway to transport commodities, and a port to supply fertiliser to the global market.
Work is being managed and delivered by engineering and construction firm Bechtel. The firm will oversee the development of infrastructure for both industry and residential builds, road construction, setup of power supplies and the Ma’aden phosphate project. As a lasting legacy, the project will also establish the National Mining Institute and Saudi Mining Polytechnic, where locals will be able to access training for the mining and construction industries.
A slick approach
Saudi Arabia is the largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), recording around 11 million barrels per day, and holding a very strong influence over governance.
While the country will remain a major producer and exporter of oil for as long as it is profitable, this shift to secure alternative revenues is a poignant moment for the global oil and mining industries, and the energy sector as a whole – and it is sure to intrigue and unsettle.
Reassuring others that this is not a precursor to flooding the market, Al-Falih said, ‘We will not sell oil that customers don’t need […] We will not make the market get anxious the way it did in May or in June , but at the same time, we make it clear that it is not in anybody’s interest to create a glut similar to what we saw a few years ago’.