Opportunity Assessment

At a Glance

  • Where water infrastructure is not available or dependable, extractive companies have little choice but to construct their own, creating opportunities to supply water to surrounding communities.

  • Given their large water needs, mining operations and some kinds of oil and gas projects can serve as anchor customers for water utilities.

  • An appropriate commercial framework can lead to cost savings for extractive industries and simultaneously boost the development of a country’s water infrastructure.

Case Studies

Key Resources

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Topic Briefing

As with other types of infrastructure, water infrastructure may be shared among extractive industries of various types, or with surrounding communities. In this way, extractive industries’ heavy demand for water can be leveraged to develop and improve overall water infrastructure in a country or region.

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As an example, that could be applied to other sectors as well, this section explores three scenarios for leveraging mining-related investments in the development of water infrastructure.

  • A mining company may expand the capacity of its infrastructure—either at the design phase or during an expansion of its operations—to supply treated water to surrounding communities.
  • A mining company may act as an anchor for investments in offsite water infrastructure, which will then supply and/or treat the water requirements of the mining company (or companies) as well as other users.
  • A mining company may source its own water but agree to collaborate with other stakeholders to rehabilitate, extend, or construct required water infrastructure for surrounding communities.

These three examples will now be discussed in more detail.

  1. A mining company expands the capacity of its infrastructure. As mining companies excavate deeper, below groundwater levels, to extract ore and mineral deposits, water ingress poses an increasing challenge. Water from rainfall, mining activities, and groundwater collects in the mine pits; for active mines, this water needs to be drained (“dewatered”) and carefully stored to continue mining activities and to ensure that mine waste in the water does not contaminate ground and surface waters. The costs of dewatering can be mitigated by treating dewatered water through collaboration with other mining companies, local authorities, or other water off-takers, while also supplying water to local communities (with government oversight to ensure sufficient water quality).

When a mining company is required to construct a desalination plant, it also has the opportunity to provide potable desalinated water to surrounding communities, in partnership with a local water authority. For a mining company, the incremental marginal cost of expanding a desalination plant’s capacity to provide additional water to communities may be relatively small when compared with the capital investment of financing the construction of the plant. In some cases, such as with Areva’s former operations in Namibia, the government may require the mining company to provide water.

Mining companies may be able to meet water needs by recycling their own wastewater for reuse. Alternatively, after some primary treatment they can even recycle the wastewater of neighboring communities—and then return any excess treated potable water to the communities.

Wastewater produced by hydraulic fracturing for the extraction of unconventional shale oil and gas is increasingly recycled for reuse in the fracturing process.

2. A mining company acts as an anchor for investments in offsite water infrastructure, which will then supply and/or treat the water requirements of the mining company (or companies) as well as other users. Because mining operations typically have large water requirements, local governments or water authorities can use mining companies as anchor customers to attract investment in water infrastructure. From a government perspective, a long offtake agreement with a credible and credit-worthy mining company may help to secure financing where (i) the local government is institutionally weak, (ii) subsidized water tariffs mean that cost recovery is negative, and (iii) reliable data for projecting consumer demand is difficult to obtain. An anchor customer strategy may also be relevant with onshore petroleum projects that require water infrastructure for their operations.

Case study – A government-company partnership: The Kwinana Water Reclamation Plant in Western Australia is an example of a partnership between a petroleum company (BP), local government, and other partners to develop shared-use water infrastructure.[1] To reduce industrial usage of potable water, a water reclamation plant connected to the local water distribution system was built at BP’s refinery. The reclamation plant treated high-quality industrial-grade water, so BP and other industrial partners could use reclaimed water instead of potable water.[2]

3. A mining company sources its own water but agrees to collaborate with other stakeholders to rehabilitate, extend, or construct required water infrastructure for surrounding communities. In some situations, mines source their own water and/or have no need for an onsite water treatment facility—but the surrounding communities have limited access to safe drinking water. This creates opportunities for rehabilitating, expanding, or replicating the self-supply options to surrounding peri-urban or rural locations. Such water infrastructure investment could be mandated in the mining concession itself or be negotiated as part of a CSR program. This may also be relevant in the context of onshore petroleum projects.

Case study – Drinking water access: The Wayuu indigenous people of La Guajira province in Colombia live in a desert region and have limited access to potable water. Repsol and the UNDP signed an agreement to carry out a Communities Benefit Plan (PBC) in the Guajira Peninsula in the north of the country. The agreement focuses on measures to improve drinking water access for the Wayuu people, through projects including the construction of 2 micro-aqueducts and the maintenance of 4 water reservoirs that benefit more than 1,600 people from 18 communities. The agreement also supports capacity development so local indigenous communities can maintain 1,200 water wells and windmills. This marks the first time that UNDP signed a partnership agreement with the oil industry in Colombia related to UNDP’s agreement with the National Hydrocarbons Agency to ensure that companies develop Community Benefit Plans.[3]

For more information, refer to page 35 in “Mapping the Oil and Gas Industry to the Sustainable Development Goals: An Atlas,” found in the Key Resources.

Case study – Upgrading a community water supply with multilateral support:Fort Dauphin in Madagascar has a population of around 50,000 people, and its water infrastructure is in disrepair; around 90% of the population does not have access to potable water. The water requirements for the Rio Tinto–owned QIT Madagascar Minerals (QMM) project and the expected growth of the town due to the project’s development cannot be supported by the existing infrastructure. While QMM can contribute funds and engineering expertise for upgrading and improving Fort Dauphin’s water infrastructure, it wouldn’t be sustainable for it to serve as the town’s water service provider. QMM therefore initiated a consultative process that led to a collaborative partnership with the World Bank and JIRAMA, the local service provider, to upgrade and extend the town supply and reticulation. Under the agreement, the town supply line is being replaced, and QMM will construct a new treatment plant. The World Bank will assist with financing and engineering to upgrade the town’s reticulation and distribution network, and operations will be managed by JIRAMA. QMM will also assist with the training and management of the treatment facilities. [4]

View footnotes

[1] United Nations Development Programme (UNDP), International Finance Corporation (IFC), and International Petroleum Industry Environmental Conservation Association (IPIECA), Mapping the Oil and Gas Industry to the Sustainable Development Goals: An Atlas (N.p.: UNDP, IFC, and IPIECA, 2017), 35

[2] Water Technology, “Kwinana Water Reclamation Plant,” accessed 14 September 2018, https://www.water- technology.net/projects/kwinana/.

[3] UNDP, IFC and IPIECA, Mapping the Oil and Gas Industry to the Sustainable Development Goals, 35.

[4] Toledano et al., A Framework to Approach Shared Use of Mining-Related Infrastructure (New York: Columbia Center on Sustainable Investment, 2014), 63–65.