March 2015
In the last few years, interest in the deep sea mining industry has increased, spurred on by technological advances and an increase in the global demand for metals. If the industry becomes commercially viable, interesting opportunities may present themselves for investors and operators in the offshore market.
Although exploitation of minerals from the deep oceans is not a new notion, recent developments have enhanced the interest from private companies and governments alike for the concept of deep sea mining. Technological advances, alongside an increased demand for metals, have raised the question of whether utilization of minerals from polymetallic nodules on the seabed could be established as a commercially viable industry. The European Commission suggests that by 2020, 5% of the world’s minerals, including cobalt, copper and zinc could come from the
seabed, which could rise to 10% by 2030. This could lead to a global annual turnover growing from virtually nothing to EUR 5 billion in the next ten years and up to EUR 10 billion by 2030.
REGULATORY FRAMEWORK
The exploitation and mining of minerals, other than sand and gravel, from the sea have just started. Most current activity is in shallow water within the jurisdiction of the relevant coastal states. Mining outside of the exclusive economic zone is regulated by the International Seabed Authority (“ISA”) pursuant to the United Nations Convention on the Law of the Sea (“UNCLOS”). UNCLOS defines the international seabed as the common heritage of mankind. ISA was established in 1994 to organize and control all mineral-related activities in this area and to
distribute proceeds from such activities in a manner equitable and beneficial to all.
Any company wishing to conduct exploration of the international seabed need an exploration contract from the ISA, which in turn requires an application sponsored or partnered by a country being a party to UNCLOS. With a multilateral system of access in place, the industry may be particularly interesting for countries short of natural resources, as an opportunity to secure future supply of minerals. For example, China, the world’s largest consumer of metals, is believed to be one of the most interested in exploring this industry. At the end of 2014, the number of exploration contracts granted by the ISA had reached 26, covering a total area of 1.2 million square kilometres of the seabed.
Irrespective of the legal framework for mineral exploration being in place, the overall regulatory regime for the international seabed (referred to as the “Mining Code”) is far from complete and does not currently include exploitation of the seabed. The ISA predicts that such a framework, which is a vital condition for the development of the industry, will take between two to three years to complete, and is aiming to finalize it by 2016. As the framework’s objective is to benefit man-kind as a whole, it remains to be seen whether it will be able to provide sufficient returns to achieve this.
FUTURE PROSPECTS
Even though the development of a deep sea mining industry is in its initial stages with commercial mining activities being between five and ten years away, this could prove to be a sector with great potential. If the industry progresses in line with the predictions mentioned above, offshore companies with experience from deep water operations in harsh conditions are well positioned to enter this new market. Wikborg Rein has already seen examples of this first-hand, having acted for a mining company in the negotiations of a construction contract with a Norwegian shipbuilder for the construction of a unique deep water mineral exploration vessel.
If and when exploitation of the inter-national seabed actually takes place will largely depend on the development of the Mining Code, technological advancement, access to finance and trade prices for minerals. In the mean-time, this remains an industry to be kept on the radar for companies and investors in the offshore sector.