Is Big Oil Moving To Big Lithium?

Major US oil companies are shifting their focus to lithium, a crucial component in electric vehicle (EV) batteries. Chevron (NYSE: CVX) CEO Mike Wirth recently revealed the company’s interest in lithium production, citing it as a natural fit for a company with a strong background in oil and gas extraction.

Although specific plans were not disclosed, Chevron is exploring opportunities in this area. This announcement comes after Exxon Mobil (NYSE: XOM) CEO Darren Woods also expressed interest in producing lithium earlier in July.

This shift in focus towards lithium sets US oil majors apart from their European counterparts who have been more aggressive in pursuing renewable energy sources like wind, solar, and power services. In contrast, US companies are focusing on adjacent areas of their fossil fuel business, including carbon capture and storage, hydrogen, and lithium.

Exxon Mobil, in particular, has ambitious plans for a large lithium processing facility near Magnolia, Arkansas, aiming to produce up to 100,000 metric tons of lithium annually, which would account for 15% of current global production. This project is driven by the increasing demand for lithium, driven primarily by the growing popularity of EVs and other technologies that use lithium-ion batteries.

The lithium-rich saltwater brine required for the production of lithium is found in the Smackover formation in South Arkansas, where Exxon has purchased more than 100,000 acres. If successful in scaling up production, this region could become a significant player in the lithium industry.

The business arrangement behind the development is somewhat complex, involving a collaboration between Exxon, Tetra Chemicals, Saltwerx (an Exxon subsidiary), and Galvanic Energy, the latter being the company that originally owned the South Arkansas acres.

Earlier in June, Tetra, a company specializing in chemicals for water treatment and recycling, announced a deal with Saltwerx to develop 6,138 acres of brine deposits in Arkansas known to contain lithium and bromine.

Specific financial terms were not disclosed, and both Exxon and Tetra have yet to provide a production or development timeline, though they will be contributing a total of approximately 2,000 acres and 4,100 acres, respectively, to the partnership. Some additional details still need to be worked out.

For Tetra, the partnership with Exxon presents an opportunity to leverage Exxon’s capital and resources to aid in bromine production, which is used in flame retardants. Currently, Tetra sources bromine from Lanxess to produce a material utilized by Eos Energy Enterprises for battery manufacturing.

For the extraction of lithium from the Arkansas brine, Exxon would need to select at least one direct lithium extraction (DLE) technology, though these technologies are still largely unproven at a commercial scale. It has been reported that Exxon has engaged in discussions with International Battery Metals and EnergySource Minerals about potentially licensing DLE technology. On the other hand, Tetra, as of November, had been exploring various DLE technologies but had not yet finalized any agreements.

Additionally, Tetra had previously agreed to lease over 27,000 acres in Arkansas to Standard Lithium for lithium production, and Standard has already begun initial development work for that project.

Local officials, such as Magnolia Mayor Parnell Vann, are optimistic about the potential economic boom this lithium exploration could bring to the region. However, environmental concerns about lithium and bromine extraction have been raised, with some companies proposing greener extraction methods to address these issues.

In July, lithium carbonate prices reached CNY 300,000 per tonne and remained relatively steady for two months. During this period, supply and demand in the market stabilized, following battery producers’ completion of restocking input materials in late May.

Information for this briefing was found via Bloomberg, Reuters, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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