Major energy producers, ExxonMobil (NYSE: XOM) and LG Chem, entered into a non-binding memorandum of understanding (MOU) for a multiple year lithium offtake agreement.
The agreement, announced on Friday, means ExxonMobil will supply up to 100,000 metric tons of lithium carbonate from its planned U.S. project to LG Chem’s cathode manufacturing facility in Tennessee. This is anticipated to be the largest of its kind in the U.S. once completed.
The agreement aims to strengthen domestic energy security, support manufacturing, create jobs, and contribute to emission reductions.
The company will extract the lithium using Direct Lithium Extraction (DLE) technology. This is a method that ExxonMobil states aligns well with its expertise in subsurface exploration, drilling, and chemical processing. ExxomMobil expects to have substantially lower environmental impacts, with approximately two-thirds less carbon intensity compared to traditional hard rock mining.
“ExxonMobil is proud to lead the way in establishing domestic lithium production, creating jobs, driving economic growth, and enhancing energy security here in the United States,” said Dan Ammann, president of ExxonMobil low carbon solutions.
The final investment decision for this project will depend on various factors, including the establishment of commercially competitive regulatory frameworks. LG Chem’s Tennessee plant, which broke ground in December 2023, is expected to have an annual production capacity of 60,000 tons. This facility will play a key role in producing cathode materials for electric vehicle batteries, aligning with the growing demand for sustainable energy solutions.
This collaboration represents ExxonMobil’s second lithium offtake MOU, following a similar agreement with SK On, another South Korean company, signalling ExxonMobil’s strategic push into the lithium market to support the electric vehicle industry’s growth.
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Exxon plans to self-fund the Arkansas project
Exxon and other oil companies, including Occidental Petroleum (NYSE: OXY) and Equinor ASA (NYSE: EQNR), are increasingly investing in lithium projects.
The company plans to self-fund its Arkansas project and is incorporating LG Chem’s lithium quality specifications into its design plans. South Korea-based LG Chem intends to use this lithium at its Tennessee cathode facility, scheduled to open next year.
“Building a lithium supply chain with ExxonMobil holds great significance,” said Shin Kah-cheol, LG Chem’s CEO.
“We will continue to strengthen LG Chem’s competitiveness in the global supply chain for critical minerals.”
In 2024, the global lithium market is grappling with a supply glut that has placed significant pressure on prices. An accelerated expansion in lithium mining and processing capacities has led to oversupply.
Key producers in Australia, South America, and China have increased output. Meanwhile, new entrants from regions like Africa and North America are adding further competition. This oversaturation has outpaced demand growth, leading to price corrections from the record highs seen in recent years.
The supply glut has created challenges for lithium miners and refiners, particularly those with higher production costs. Smaller and newer companies, which rely on elevated lithium prices to sustain operations, are finding it difficult to remain competitive.
Meanwhile, established players with more efficient operations or vertically integrated business models have positioned themselves better to weather the downturn. However, the oversupply has not only impacted miners but also slowed new project development as companies reassess timelines and scale back investment in exploration.
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