Some of the biggest names in oil and gas have started to turn their attention towards the burgeoning lithium markets in pursuit of potential investment opportunities.
Companies such as ExxonMobil (NYSE: XOM), Occidental Petroleum (NYSE: OXY) and Equinor (NYSE: EQNR) are looking to take advantage of lithium’s oversupply and low prices.
ExxonMobil signed a preliminary agreement last month to send lithium to South Korea-based SK On, a battery maker building plants to supply Hyundai and Ford in the United States. This agreement follows ExxonMobil’s USD$100 million purchase of drilling rights on 485 sq. km of lithium brine assets in Arkansas’ Smackover Formation from Galvanic Energy. In a pilot project, ExxonMobil has already produced some lithium.
In June, Occidental Petroleum announced it is forming a joint venture with a unit of Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B) to produce battery-grade lithium from the brine of 10 geothermal power plants in California. It has begun feasibility testing.
Meanwhile, Chevron (NYSE: CVX) said it is exploring lithium extraction, and is in discussions surrounding licensing its brine technology with International Battery Metals (CSE: IBAT) (OTC: IBATF).
Furthermore, in May, Norwegian state oil company Equinor (NYSE: EQNR) announced it could pay up to USD$133 million for a 45 per cent stake in Standard Lithium’s (TSXV: SLI) projects in Arkansas and Texas. In April, Standard Lithium started a commercial-scale demonstration plant.
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Oil companies choose brine over hard rock projects
Oil companies are exclusively investing in brine projects, rather than hard rock projects, and may use direct lithium extraction (DLE), which resembles crude pumping in some aspects. They are leveraging their core capabilities in subsurface exploration, drilling, and chemical processing.
With much deeper pockets and market values that dwarf their mining counterparts, oil companies are diversifying into green metals. This diversification can help rejuvenate the mining sector, which had attracted stock market investors when metal prices were high but has since seen those investors depart.
The move into lithium makes sense for these large international energy companies, according to Rhidoy Rashid, a senior associate at London-based data and analysis firm Energy Aspects.
“Unlike some other niche metals, lithium is relatively abundant, so the resource needed to match rising demand for batteries is there, it just needs to be efficiently extracted,” said Rashid.
ExxonMobil aims to supply enough battery metal to power 1 million vehicles by 2030. The company has announced that a “material” part of its $20 billion budget for low-carbon projects through 2027 will be spent on lithium.
Lithium brines are often found in depleted oil wells, such as the Leduc field in Alberta, where E3 Lithium (TSXV: ETL) (OTC: EEMMF) is advancing its $2.5 billion Clearwater project on Canada’s largest resource of the battery metal. A prefeasibility study issued on June 26 indicates that the project between Calgary and Edmonton could produce 32,250 tonnes of lithium hydroxide monohydrate annually for half a century.
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Direct Lithium Extraction is gaining support
Outside of China, there is only one commercial DLE operation because companies have struggled to reduce costs and improve technologies. Arcadium Lithium plc (NYSE: ALTM) (ASX: LTM) has been using DLE at its Hombre Muerto operations in Argentina since the 1990s.
Albemarle Corporation (NYSE: ALB) and SQM (NYSE: SQM), the world’s two largest lithium producers, uses traditional evaporation ponds, as does Lithium South Development Corporation (TSXV: LIS) (OTCQB: LISMF) (Frankfurt: OGPQ) which operates the Hombre Muerto North project in Argentina.
However, DLE is starting to gain supporters because its enhanced production opportunities. It can produce lithium in hours or days instead of months or years.
US Magnesium is using DLE from International Battery Metals for a project in Utah, and CleanTech Lithium (AIM: CTL) has started a DLE pilot plant in Chile. In Canada, besides E3, Volt Lithium (TSXV: VLT), EMP Metals (CSE: EMPS) (OTC: EMPPF), and LithiumBank Resources (TSXV: LBNK) (OTC: LBNKF) have all begun DLE testing.
However, some experts have expressed concerns about the environmental impact of oil companies extracting lithium. Marco Tedesco, a climate scientist at Columbia University, has highlighted high water usage and potential pollution linked to DLE. Some environmentalists have criticized oil companies for greenwashing their operations.
“It pains us to even cover a company like ExxonMobil, as its history in environmentalism is as filthy as the oil it drums up,” wrote Scooter Doll at energy transition website Electrek.
“While this is welcomed news to an extent, it’s not difficult to see the motive behind ExxonMobil’s expansion into lithium, and it sure as hell isn’t about saving the planet.”
Lithium South Development Corporation is a sponsor of Mugglehead news coverage
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