From OPEC to OMEC: mined metals can enable energy transition

KPMG

Energy is at the center of the new economy and geopolitical landscape with mined metals to play a key part according to a global report from KPMG and Eurasia Group.

  • Mining must play a key part in the circular economy
  • Geopolitical and geographical constraints can impact global supply chains

Resourcing the Energy Transition: Making the World Go Round looks at the impacts of the energy transition on demand for raw materials in the Energy and Natural Resources (ENR) sector – and how effective risk and supply chain management can ensure they are a part of a circular economy. And it examines the ways in which geopolitical power could shift from oil-dominated countries to include critical metal-dominated countries.

KPMG posits the concept of a transition in influence from “oil producing” – as represented by Organisation of Petroleum Exporting Countries (OPEC) – to “metals/mineral producing” – whereby we may see the emergence of the Organisation of Metals/Mineral Exporting Countries (OMEC).

“Mined materials are used to construct basic infrastructure to generate, transmit and store power,” says Trevor Hart, KPMG Global Mining Leader. “They enable the production of existing green technologies such as electric vehicles, solar panels, and wind turbines – and the development of new ones to address the urgency of climate change. Futher, industries will deploy new technologies to reduce their own emissions making plant redundant sooner thus placing further demand on commodities.”

“We believe such a transition highlights an underappreciated risk to the energy transition: the supply of clean energy depends on mined natural resources,” says Mr Hart.

He says that net zero agendas adopted by energy-intensive economies will necessarily require large-scale roll-outs of renewable energy technologies to eliminate emissions from power generation and decarbonise the world’s manufacturing and transport sectors that currently rely on coal, oil and gas.

“At the very beginning of the energy transition supply chain is the sourcing of metals, minerals and abiotic materials (‘resources’). We need to ensure this doesn’t turn out to be the weakest link,” says Trevor Hart. “The core issue is not necessarily one of quantity of the minerals; global known reserves are in fact likely sufficient to meet current projections of demand for many of these resources. Rather, it’s about risk and supply management.”

According to the KPMG report, future supply faces two key risks:

  1. Increasing ESG scrutiny – extraction and production will face increasing demands from downstream industries, investors and the public over environmental, social and governance (ESG) issues.
  2. Access issues -access to these ‘strategic resources’ will be politicised in the name of national security given the centrality of their use to broader economic development and technological innovation, as well as the energy transition.

A circular solution?

Mr Hart says that unlike the ‘old’ energy sector, a circular solution will emerge and also play a part. “The redesign of products alongside the reuse, recycling, and repurposing of these resources can relieve some pressure on commodity supplies to meet demand – aiding the rapid pace of the energy transition, transformation of related industries, and reduction in temperature rises globally.”

Top Five Metals

KPMG highlights the World Bank 2020 focus on five metals: lithium, cobalt, vanadium, indium and graphite.

“These five have been chosen as they are expected to experience the greatest growth in demand (in percentage terms) from energy technologies by 2050. However, we need to be careful that geographical and geopolitical constraints don’t bottleneck supply chains,” says Trevor Hart.

The KPMG report also highlights several key caveats. That some level of new resource extraction will be a given – and that there will be ongoing challenges for the expansion of the circular economy in areas such as cost, design and technical issues.

Mr Hart emphasised the challenge that every mining company understands: the unique complexity to consistently find, mine, and deliver product to market.

“Governments, investors, mineral producers, corporates and end users each have a part to play in the shift in energy mix and resource availability. A society keen to accelerate the energy transition must now prioritise working with the mining sector to help it deliver,” he concluded.

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