Exxon Initiates Lithium Production to Meet High Battery Demand

ExxonMobil is set to embark on lithium production by 2027, signaling a significant strategic shift for the major western oil producer as it aims to leverage its drilling and processing expertise to become a key player in the burgeoning battery metal market. The company recently initiated efforts to extract lithium from underground brines in Arkansas, where it has secured rights to 120,000 acres of land in the Smackover formation. This moves underscores Exxon's confidence in building a profitable and enduring business, aligning with its existing knowledge and capabilities.

According to Dan Amman, the head of Exxon's low-carbon solutions business, the company is drilling wells 10,000 feet underground into saltwater reservoirs, a process well within its established skill set. This strategic foray into lithium production comes at a time when the energy transition is driving a surge in the demand for battery metals. The International Energy Agency predicts a substantial increase in lithium consumption, driven by the widespread adoption of lithium-ion batteries for electric vehicles and energy storage, with estimates suggesting a more than 40-fold growth between 2020 and 2040.

Exxon's move into lithium production is a notable departure from its traditional focus on oil and gas. The company did not disclose the exact investment figures for this new venture, but Amman mentioned that the investment would "ramp up into the billions over time." The timing of this announcement comes on the heels of Exxon's $60 billion deal to acquire Pioneer Natural Resources, positioning the company to further invest in fossil fuels.

This shift into lithium production marks a first for an oil supermajor, distinguishing Exxon from its industry peers. Other companies exploring similar ventures into the battery metal market include Koch Industries, Occidental Petroleum, and Norway's Equinor. Exxon is banking on its drilling, pumping, and processing expertise in oil and gas to provide a competitive advantage in lithium extraction from salty brines.

While European oil majors like BP and Shell have made strides in renewable energy, Exxon and its U.S. rival Chevron have remained focused on their core capabilities in oil and gas. Exxon's previous clean energy spending has centered on technologies closely related to its traditional business, such as carbon capture, hydrogen, and biofuels. Lithium production from brine water is seen as an extension of the company's current capabilities in its upstream operations.

Exxon plans to utilize a novel method called direct lithium extraction (DLE), involving drilling into deep saltwater reservoirs, extracting brines, and using chemical processes to separate lithium before reinjecting the water underground. This method can potentially transform lithium production, speeding up the process and improving recovery rates compared to traditional brine extraction. However, DLE remains unproven at scale.

The company aims to achieve commercial output by 2027 and scale up production to supply enough lithium for one million electric vehicles, or around 100,000 tonnes of lithium carbonate equivalent, annually by 2030. Exxon sees this venture as a significant opportunity, intending to play a major role in the evolving battery metal market on a global scale.