Norway recently announced it would open up a substantial area off the country’s far northern coast for drilling, subject to approval from parliament. This promises to create a new dividing line of conflict between the energy sector and environmentalists.

This is not, however, about the search for more fossil fuels. The intention behind the proposal is to locate and then exploit substantial volumes of magnesium and cobalt and a range of rare earth minerals including neodymium and dysprosium.

Many of the minerals identified in a preliminary survey of the area undertaken for the Norwegian government are essential components for equipment related to the energy transition. These include the production of battery technologies for use in electric vehicles, and for magnets used in wind turbines.

The mining and processing of key minerals are concentrated in a very small number of countries.

Chinese control

As things stand, production of the minerals and the associated processing technologies is concentrated in China. According to an authoritative study published at the end of 2023 by the Brookings Institution, 60% of the world’s annual production of rare earth minerals comes from China. For processing, this rises to 85% in the People’s Republic.

The mining volumes involved are, for the moment, relatively small. However, they have become of increasing importance as electric vehicle numbers have increased across the world. As the energy transition moves from discussion of long-term targets to development, this will become more important.

As political relationships between the West and China have deteriorated over recent years this level of dependence has become increasingly uncomfortable. The level of concentration, as well as evidence of accelerating demand, has provoked a response on both sides of the Atlantic Ocean.

Securing supplies

In 2021, President Joe Biden in Executive Order 1407 laid out an extensive series of steps to secure supply chains of key minerals to the US.

In March 2023, the European Commission set out plans to ensure the European Union’s “access to a secure, diversified and affordable supply of critical raw materials”. It aimed to achieve this through strengthening links with “reliable trading partners” and imposing regulatory standards. For instance, it aimed to ensure that the EU would carry out 40% of the necessary processing by 2030.

Limited supplies of the key minerals are available outside China, in areas such as Chile and the Democratic Republic of Congo. However, the volumes available do not match the scale of projected demand.

It is not just North America and Europe working to get in on some of the energy transition opportunities in mining. Middle Eastern states such as the United Arab Emirates and Saudi Arabia have also begun working to deploy capital in this area.

The number of electric vehicle sales worldwide for instance continues to rise each and could reach over 40 million by 2030, according to one recent authoritative study.

Across the EU and in the UK, governments are committed to reducing emissions from new light vehicles to zero by 2035. Such a policy requires a sharp increase in the numbers of EVs over the next decade.

The rapid growth in demand for cars created the need for secure supplies of oil in the 1950s and 1960s. As this transport demand shifts, so the demand for battery driven vehicles and for – more wind farms on and offshore – will drive the requirement for more rare earth mining.

Split needs

Given this context, Norway’s move is an entirely logical response to the growth in demand. It highlights the reluctance of many Western countries and car producers to be entirely dependent on imports from China.

Equally rational is the resistance of environmental groups in Norway and beyond to this mining expansion. The Sustainable Oceans Alliance describes the move as “irresponsible” and as “nailing the coffin on Norway’s proclaimed role as a climate leader”. French President Emmanuel Macron staked out his opposition to deep sea mining in 2022.

Critics of the Norwegian plans believe that this first move could trigger more deep water drilling – threatening natural habitats and pollution. Many also believe that Norway’s initiative could encourage renewed efforts to open up waters beyond national territorial waters in different parts of the world, including the northern Atlantic and the Arctic.

The Arctic is no longer a pristine area. Some 2.6 million barrels per day of oil and gas are produced from fields in the Russian and Canadian Arctic.

Mining surveys and mapping of the geology on the seabed carried out by the Norwegian Offshore Directorate and Norwegian university communities has utilised technology developed by the oil and gas industry. (Photo: Jørgen Vadla/the Norwegian Offshore Directorate) — The surveys and mapping of the geology on the seabed carried out by the Norwegian Offshore Directorate and Norwegian university communities utilised technology developed by the oil and gas industry. (Photo: Jørgen Vadla/the Norwegian Offshore Directorate)

Natural resource

That, however, represents no more than a tiny fraction of the potential. The volume of fossil fuels in the Arctic was estimated some years ago by the US Geological Survey (USGS) to exceed 90 billion barrels of oil and 44bn barrels of natural gas. This is around one fifth of the likely global total of undiscovered fossil fuel resources.

Development to date has been limited, as a result of high costs and environmental opposition.

For instance, Shell halted its exploration work in the Arctic in 2015 citing regulatory uncertainty and high costs. For the moment, other supplies of fossil fuel remain plentiful, particularly in the Middle East. The severe fluctuations seen in the last four years have caused many of the more ambitious exploration projects to be shelved.

The oil and gas industry has never completely abandoned the possibility of developing Arctic resources. As Shell said in 2015, areas such as the Chukchi Sea may in time be of strategic importance to the US.

One instance of this can be seen in continued plans for US LNG exports from Alaska. The challenges are high, but the resource is substantial. While the Biden administration has expressed some hesitation on some fossil fuel plans, it still seems confident in backing Alaskan projects.

Circumstances may now be changing not least because of the changing climate. In the Arctic, climate change is already a reality rather than a prediction for 2050 or later.

Opening up for mining

2023 saw the warmest Arctic summer on record. The Greenland ice sheet lost some 350 trillion pounds of mass between the summers of 2022 and 2023 as the level melting exceeded the accumulation of new ice.

Because of this change, the Arctic is already more open to commercial activity. More ships can sail through the Northern Sea Route and the North West for more months of the year. This can offer a 40% reduction in transit times for goods travelling between Asia and Europe.

Ironically, it is the energy transition that could now trigger more substantial development of the deepwater oceans and the Arctic.

Norway has recognised it needs greater diversity of supplies to support the shift to a lower carbon economy. It is this recognition that drives its willingness to explore for and produce rare earths and other minerals.

That transition has barely begun. But, as the pace accelerates, demand for many different minerals can only grow.

Test case

Numerous nation states are already asserting their interests in the Arctic. Currently, there is a vague arrangement, assigning areas considered to be within the territorial waters of the littoral states. This may lead to various efforts to claim territory or even to begin work on specific projects.

China, which defines itself as a “near Arctic state”, and Russia have initiated the concept of a Polar Silk road. China is engaged in the purchase of assets such as infrastructure in areas within or close to the Arctic.

These plans have been a long time coming. Russia filed a claim in 2001 for a greater share of the Arctic. Russian explorers symbolically planted flags underwater at the North Pole in 2007.

Deep water and Arctic conditions pose many challenges for the energy industry. The focus is shifting from fossil fuels to the search for scarce minerals. They also pose a challenge for those concerned with protecting the environment.

Should the needs of the transition outweigh the desire to preserve relatively undeveloped and unique areas of the world? What happens with the mining plans in the waters between Norway and Greenland will be a test case of what is to come.

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