The oil and natural gas industry has historically played a pivotal role in the economies and political power structures of Saudi Arabia and the other Gulf Cooperation Council (GCC) countries, generating fortunes from the export of these fossil fuels and thus enhancing their international influence. However, as the world shifts toward a cleaner, more sustainable future, the GCC states are also embracing this profound transition, moving from oil wells to power cells.
Opportunities and challenges
According to the International Energy Agency, the global energy landscape is presently evolving at an unprecedented pace. Today, due to technological advancements and scale, solar power has become the most cost-effective means of producing electricity in many parts of the world, surpassing traditional methods; and wind power is similarly experiencing dramatic cost reductions. Concurrently, advancements in battery technology are transforming our ability to store and utilize energy efficiently. Together, these developments have set the stage for a “battery boom,” with Bloomberg forecasting a tenfold increase in global battery demand by 2030, primarily driven by the rapidly expanding electric vehicle (EV) market.
This impending growth in the battery industry presents an array of economic opportunities. The battery sector, however, isn’t merely about manufacturing cells; it’s a complex supply chain, starting from mining raw materials like lithium, nickel, and cobalt, through designing and manufacturing battery cells, to recycling and repurposing spent batteries. The GCC member states, historically entrenched as leading global suppliers of oil and gas, have accrued substantial economic and political clout over the years. Recognizing the inevitability of a global shift away from fossil fuels, these countries must consider the burgeoning battery industry as a strategic pivot. Leveraging their considerable capital and geopolitical influence is essential for them to proactively navigate this energy transition, rather than be passively subjected to it. Investing in the battery supply chain is more than an economic opportunity; it is a critical move to safeguard their political and economic sovereignty in a future where oil may lose its centrality. This transition is not merely an option for these states — it is a strategic imperative to sustain national prosperity and security as the global energy landscape evolves.
Saudi Arabia exemplifies this shift already underway among GCC countries, which have been adopting comprehensive strategies aimed at fostering a more sustainable and diversified economy, a key component of this being the development of a domestic battery sector. As outlined in Vision 2030 and the Saudi and Middle East Green Initiatives, the kingdom is making a concerted effort to reduce its dependency on oil revenues and aims to become a key player in the global renewable energy ecosystem, which complements its goal of increasing power generation from renewable sources. As a result, Saudi Arabia is also investing in the battery industry because batteries are pivotal for storing and managing this renewable energy effectively, making them integral to the country’s ambitions to be a global leader in green technologies. Additionally, the battery industry presents Saudi Arabia with new avenues for export, investment, and job creation, helping to diversify its economy further.
On the other side of the Gulf, in the United Arab Emirates, similar transformations are afoot. Ambitious projects like the Dubai Self-Driving Transport Strategy aim to convert 25% of total trips in Dubai into ones made by self-driving vehicles by 2030. Since this technology tends to be integrated into electric rather than combustion-engine vehicles, the increasingly heavy reliance on EVs naturally fuels significant demand for high-performance batteries.
Despite the considerable potential, the journey from oil wells to power cells is riddled with challenges. Localizing the battery industry requires massive investments in infrastructure, human capital, and technology. For instance, developing the requisite skilled labor force, building manufacturing plants, and facilitating technology transfer from leading global firms will require hundreds of millions to billions of dollars. Ensuring a sustainable and ethical supply chain for battery raw materials — many of which are associated with environmental and human rights issues — is another hurdle. The mining of lithium, for example, requires vast amounts of water, threatening local water supplies in arid regions like the Middle East. Moreover, cobalt mining has been linked with child labor and other human rights abuses in the Democratic Republic of the Congo, the largest global producer.
Saudi Arabia’s strategic vision and investments
Considering Saudi Arabia’s ambitious plans to be a significant player in the global battery supply chain, the job creation prospects stemming from this objective are substantial. According to a report from the international consultancy firm McKinsey & Company, a single battery “gigafactory” capable of annually manufacturing the equivalent of 40 gigawatt hours (GWh) worth of power necessitates more than 2,000 full-time skilled employees on average. If, for example, Saudi Arabia were to establish five such gigafactories, this would translate to approximately 10,000 full-time skilled jobs. Currently, no detailed information exists on how many gigafactories Saudi Arabia plans to construct, nor are any comprehensive plans available. So, while the industry clearly offers job creation opportunities, the exact scope is unclear due to limited public data.
The kingdom has, however, begun implementing several strategies to foster a battery-friendly ecosystem. This includes focusing on education and training to build a workforce capable of sustaining a complex, high-tech battery industry. For instance, several of the country’s universities and technical institutions have partnered with international green technology firms to offer advanced degree programs and professional training in fields like chemical engineering, materials science, and environmental management. Additionally, Saudi Arabia has committed to developing the necessary infrastructure for EVs, such as charging stations and service centers, through public-private partnerships. It is also exploring potential partnerships with global battery manufacturers to set up local manufacturing units, thereby fostering technological transfer and localization.
In addition to these efforts, the Saudi Ministry of Industry and Mineral Resources has issued several mining registrations and licenses for extracting key battery minerals. One notable example from the past couple years has been the awarding of a mining license to Alara Resources Ltd., an Australian-based minerals exploration company, to develop the Khnaiguiyah Zinc-Copper Project.
At the same time, Saudi Arabia is actively taking steps to integrate itself into preexisting global battery supply chains. For example, late last month, Manara Minerals, a joint venture between Saudi Arabian Mining Co. (Ma’aden) and the kingdom’s Public Investment Fund (PIF), invested over $2 billion to acquire a 10% stake in Canada’s Vale Base Metals (VBM) Ltd. VBM’s mission aligns perfectly with Saudi Arabia’s economic-energy transition plan, as the Canadian firm is committed to boosting production of crucial minerals necessary for the shift from gasoline-powered to electric vehicles in the auto industry. VBM currently operates in Brazil, Canada, and Indonesia to mine minerals such as nickel and lithium, critical to the production of battery cells.
According to McKinsey & Company, the battery market, primarily driven by escalating demand from the automotive sector, is anticipated to be valued at between $90 billion and $100 billion by 2025. This has prompted leading battery component suppliers like Panasonic, LG Chem, CATL, and Tesla to significantly enhance their production capabilities. However, the growth trajectory doesn’t stop there. Forecasts suggest an average annual growth of over 20% in the battery cell market until 2030, potentially reaching a total global value of at least $360 billion. In an even more optimistic scenario, the market could surge to $410 billion by 2030 if the battery industry follows the growth pattern of other renewable technologies like solar and wind. This would set off a virtuous cycle, whereby increased scale drives down costs, accelerating the growth of the EV market and spurring additional capacity development across the entire value chain.
While there is no concrete data on the GCC’s potential share of the global battery market, the region holds distinct advantages that could position it as a key player in this growing industry. The GCC countries, particularly Saudi Arabia and the UAE, have substantial financial resources from their oil and gas revenues that can fuel significant investments. Moreover, the region's strategic location between major markets in Europe, Asia, and Africa is a logistical advantage. Finally, although the Arab Gulf doesn’t currently have significant reserves of key battery minerals like lithium or cobalt, the regional countries’ extensive experience in resource extraction from the oil and gas sectors could potentially be leveraged for mining elsewhere in the world and for processing minerals essential to battery production.
Global trends: The US surge in battery technology investments
The momentum isn’t confined to the GCC alone. The United States has seen a surge in battery technology startup investments, underpinned by initiatives like the Inflation Reduction Act Battery Fund. This U.S. government-backed fund offers financial assistance to promising companies developing innovative energy storage technologies, accelerating their growth and encouraging advancements in the field.
The trend toward constructing aforementioned gigafactories — massive manufacturing plants designed for producing batteries on an unprecedented scale — is gaining significant traction in the U.S. to cater to the escalating demand. For instance, Tesla’s Gigafactory in Nevada, which, upon completion, will stand as the world’s largest building by volume, will alone manufacture more lithium-ion batteries annually than were produced globally in 2013. The potential of advanced energy storage has piqued the interest of venture capitalists, who are increasingly funding innovative battery technology businesses. Notable examples include QuantumScape, a solid-state battery company backed by Volkswagen and Bill Gates, and Sila Nanotechnologies, known for its work on silicon-based anodes to enhance lithium-ion battery performance; both are based in California.
GCC states are looking to seize these perceived opportunities as well. Saudi Arabia’s sovereign wealth fund, for instance, is making strategic investments in high-tech firms and has already initiated a number of partnerships with leading global battery manufacturers. Its partnership with Lucid Motors, a California-based EV manufacturer that is now 60.46% owned by the PIF, signals the country’s determination to see the further expansion of the battery industry. Lucid Motors has built an EV factory in Jeddah; although the company’s disappointing first-quarter 2023 revenue numbers suggest the path to developing a robust battery sector will not be entirely straight.
Potential business opportunities notwithstanding, there is no denying that the transition to renewable energy is also raising concerns, particularly among those who worry about its potential impact on the economy. Fossil fuels have underpinned global economic growth for over a century, and their sudden displacement could have severe economic ramifications — particularly for the Gulf petro-states. However, evidence suggests that this transition, if well-managed, could be a powerful engine of economic growth. First of all, investments in renewable energy and battery technology can create jobs, stimulate technological innovation, and usher in a new era of sustainable economic prosperity. Moreover, it’s worth noting that battery manufacturing itself indicates a significant growth opportunity for the petrochemical industry, one of the region’s most developed non-oil sectors, with Saudi Arabia, in particular, among the world’s largest producers of petrochemical products. For instance, lithium-ion batteries require electrolytes, separators, and various other chemical components that could be produced by local petrochemical plants that repurpose existing infrastructure, thereby capitalizing on their established supply chains and technical expertise.
Shaping the post-oil future: Batteries as the new “black gold”
The GCC’s shift from oil wells to power cells is more than just an energy transition — it’s a strategic recalibration. By embracing the potential of battery technology, these nations are not just preparing for a post-oil future but are actively shaping it. The new chapter they write could very well determine the future of global energy. With their vast resources, strategic location, as well as commitment to sustainability, the Gulf hydrocarbon-exporting countries are uniquely positioned to become major players in the global battery supply chain. As the era of oil dominance wanes, batteries are quickly becoming the next “black gold,” redefining the political and economic dynamics of the region in ways we are just beginning to understand.
Dr. Yahya Alqahtani is a faculty member and research scientist at Howard University, in Washington, D.C., who specializes in clean energy and the future of the oil industry in the GCC region.
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