The Oil and Gas Majors’ Quest for Lithium: Diversifying Beyond Fossil Fuels
As the world shifts towards cleaner energy and the demand for electric vehicles (EVs) continues to rise, oil and gas majors are stepping up their efforts to break into the lithium market. Lithium, a key metal used in the production of EV batteries, is expected to play a vital role in the energy transition. ExxonMobil, Schlumberger, Occidental Petroleum, and Equinor are among the companies exploring how their expertise in pumping, treating, and reinjecting underground fluids can be employed to process lithium from unconventional brine resources.
Why Lithium?
Lithium is an essential element in the production of EV batteries, which are integral to the decarbonization efforts of the global automotive industry. As countries progressively ban the sale of new gasoline-powered cars and diesel vehicles, the demand for lithium is expected to skyrocket in the coming years. The oil majors’ interest in lithium is driven by the need to diversify their portfolios and stay profitable in the face of shrinking demand for fossil fuels.
The Potential of Lithium Brines
Lithium brines, found in South American salars and other underground sources, offer a promising opportunity for oil companies to enter the lithium market. Unlike charging grids and wind farms, where their skills are limited to project management, oil companies have the expertise in pumping and handling underground fluids. The potential push for lithium is a natural evolution for them.
Current Activities and Investments
Although oil companies have shown interest in lithium, their activity in the sector has been relatively small compared to their investments in fossil fuel production. ExxonMobil recently acquired brine containing lithium from oil fields in Arkansas, while Equinor acquired a stake in Lithium de France. Occidental Petroleum jointly owns TerraLithium, a lithium technology group, and Chevron’s CEO has expressed interest in the battery metal. These investments, however, are still speculative and limited to acquiring rights to potential lithium resources.
The Game-Changing Potential of Direct Lithium Extraction (DLE)
The future contribution of lithium brines to the market and oil majors’ involvement in lithium extraction depends on the commercial development of Direct Lithium Extraction (DLE) technology. DLE selectively extracts lithium from brines, using membranes, filters, or spheres, making it a potentially game-changing technology comparable to fracking for oil. DLE could significantly speed up lithium extraction and increase recovery rates, making lower concentrated resources economically viable.
Opportunities for Oil Majors
Oil majors see potential in utilizing DLE technology for lithium extraction from wastewater in oil fields and geothermal energy projects. The Permian Basin in Texas and New Mexico, which is already the world’s most prolific oil field, has significant potential for lithium extraction from wastewater used in shale fracking. This untapped resource alone could produce 225,000 tons of lithium carbonate annually, worth billions of dollars in revenue.
Obstacles and Considerations
While oil companies can leverage their expertise in lithium extraction from brines, there are obstacles to be considered. The complexity of obtaining automaker-approved battery materials and the relatively small size of the lithium market compared to the oil market may deter some companies from making significant investments. However, with the projected growth of the lithium market, opportunities for expansion and profitability exist.
Beyond Brines: Geothermal Brine Extraction
Oil companies are also keeping a close eye on technology and market developments for lithium extraction from geothermal brines. Geothermal energy is another renewable energy sector that oil companies are looking to invest in. Collaborations between lithium producers and oil and gas companies in geothermal and DLE projects are already underway.
Looking to the Future
While the oil majors’ current activity in the lithium market is relatively small, early-stage developments could pave the way for more significant production of the battery metal in the future. The potential for mergers and acquisitions, greenfield projects, and expanded water assets indicates a growing interest in establishing a foothold in the lithium space.
Conclusion
The oil and gas majors’ quest for lithium represents their commitment to diversify beyond fossil fuels and stay relevant in the face of the energy transition. As the demand for EVs and lithium batteries continues to surge, oil companies are exploring opportunities to leverage their expertise in extracting and handling underground fluids to process lithium from unconventional brine resources. The commercial development of Direct Lithium Extraction technology holds the key to unlocking the potential of brine resources and oil majors’ involvement in the lithium market. Collaboration between lithium producers, oil and gas companies, and renewable energy sectors could lead to significant advancements in the production of battery metals and the overall decarbonization of the automotive industry.
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The oil and gas majors are stepping up efforts to break into lithium to diversify beyond fossil fuels as hopes grow for a technological breakthrough to produce the key metal for electric car batteries.
ExxonMobil, Schlumberger, Occidental Petroleum and Equinor are exploring whether their core competencies in pumping, treating and reinjecting underground fluids such as oil and water could be employed to process lithium from unconventional brine resources, helping to alleviate projected shortages of a material that should be vital for the energy transition.
“There are a number of oil and gas majors who spend a lot of time and attention on how they can make it big in lithium,” said Brian Menell, chief executive officer of TechMet, a U.S. government-backed mining investment fund. TechMet has a stake in EnergySource Minerals (ESM), a lithium developer backed by oil services giant Schlumberger.
“It’s a natural evolution for oil companies. Lithium brines are obvious since, unlike charging grids and wind farms, where they have no skills beyond project management, they are adept at pumping and underground fluids.
The potential push for lithium comes as makers Exxon and Chevron in the US, Equinor and BP in Europe look to stay profitable amid a global effort to cut emissions and switch from fossil fuels to cleaner energy.
The push by the oil majors towards lithium would reassure automakers who currently rely on small, unproven miners to supply the large quantities of lithium needed to electrify their vehicles over the next decade as Western countries ban the sale of new gasoline-powered cars and diesel and how electric vehicle usa fly to china.
But the oil companies’ activity to date has been speculative, involving a small fraction of the capital spent on fossil fuel production each year and limited to buying rights to potential lithium resources, taking minority stakes in lithium companies through risk weapons and licensed mining technologies.
ExxonMobil recently paid more than $100 million in cash to buy brine from lithium-containing oil fields in Arkansas’s Smackover area, spurning the interests of Schlumberger and Equinor, according to two people familiar with the matter.
Equinor acquired a stake in developer Lithium de France in 2021, while US shale producer Occidental jointly owns TerraLithium, a lithium technology group, and Chevron’s chief executive has also expressed interest in the battery metal.
Lithium supply growth in recent years has been driven by rising Australian and Chinese hard-rock resources, adding to Latin American brines that are the other key source of the battery metal.
However, the future contribution of the brine – and the involvement of the oil majors – hinges on the commercial development of direct lithium mining (DLE), an unproven large-scale technology that selectively extracts the silvery-white ore from brine mixes using membranes, filters or spheres.
Currently, the lithium found in the brine beneath the salt-encrusted earth, known as salar, in South America is extracted through evaporation ponds which effectively eliminate every element other than lithium.
DLE does the opposite, and Goldman Sachs says it’s a “potentially game-changing technology,” the lithium equivalent of fracking for oil. It would speed lithium extraction from months to days, while average recovery rates of 60 to 80% versus 40 to 60% for ponds could make lower concentrated resources economically viable.
The success of DLE, which has been used in Argentina by Livent since 1998 and in a handful of projects in Qinghai, China, would open up the possibility for oil majors to extract lithium from wastewater in oil fields and geothermal energy projects that they have brine on site.
Oil consultancy Enverus recently detailed the “potential multibillion-dollar gold mine” awaiting DLE investors in the Permian Basin in Texas and New Mexico, which is already the world’s most prolific oil field. In one section alone, the wastewater used in shale fracking could produce 225,000 tons of lithium carbonate annually, worth $19 billion in revenue, Enverus calculated.
DLE projects are also underway in Nevada and Utah. In oil-rich Alberta in western Canada, Imperial Oil, majority-owned by Exxon, has joined a DLE venture with E3 Lithium.
Investors in US lithium mining and processing would qualify for subsidies included in the Inflation Reduction Act passed last year. Canada has also given generous tax breaks to the fledgling industry.
Despite the natural transfer of oil company expertise to such resources, the complexity of obtaining automaker-approved battery materials and the small size of the market may not be worth it.
Even on optimistic growth and price assumptions, lithium could grow to $150 billion a year by 2030 compared to the current $2.6 trillion oil market, according to Financial Times calculations.
With the exception of Rio Tinto, the small size of the market has even been an obstacle for the mining majors who have made a big bet on the lithium sector. The potential market for the oil majors would be a swath of the total lithium market.
Ahmed Mehdi, a consultant at Benchmark Mineral Intelligence who consults oil and gas companies on their lithium strategies, said the DLE’s contribution to lithium supply could grow from 10% today to 15-20% by 2030.
Some industry insiders predict that early-stage activities could pave the way for a bigger leap towards significant production of the battery metal.
“There are a couple of companies looking to establish a much stronger foothold in the lithium space through mergers and acquisitions, greenfield projects, or doubling the produced water assets they have,” said Eric Spomer, chief executive officer of ESM. , which plans to supply Ford.
The interest of oil companies goes beyond the brine produced as a by-product of oil production. Equinor said it was “closely” following technology and market developments for lithium extraction from geothermal brines, another renewable energy business that oil companies want to invest in.
Vulcan Energy Resources, backed by Peugeot owner Stellantis, is developing a lithium geothermal project in Germany’s Rhine Valley and is in talks with oil and gas companies to collaborate on the geothermal and DLE parts of the project.
“Whether it’s BP, Shell, Eni, Exxon or Equinor, they’re all watching it,” Vulcan deputy chief executive Cris Moreno said, referring to the lithium sector.
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