The demand for EV vehicles has been dropping but that doesn't mean that the long-term prospects for plug-in hybrids don't still look great. The latter provides most drivers the op to go all-electric for their daily driving needs and have a gas engine as a backup for longer trips. Plus they don't pollute to produce the way that all EVs do. Ergo, you don't have the 3-5 environmental payback to justify building the car in the first place.
Exxon Makes Lithium Play in Long-Term Bet on EV Demand
Oil company plans to produce battery-grade lithium by 2027 in Arkansas oil fields
By Collin Eaton, WSJ
Updated Nov. 13, 2023
Exxon Mobil XOM 1.06%increase; green up pointing triangle said Monday it is starting to drill for lithium in Arkansas and aims to become a major U.S. supplier for makers of electric-vehicle batteries by 2030.
The Texas-based oil company’s entrance into the lithium business, first reported by The Wall Street Journal in May, is an effort to reposition itself long-term for the advent of EVs and electrification in the transportation sector, which it dominated for decades as one of the world’s largest fuel makers. Lithium is a key ingredient in making batteries for EVs, cellphones and laptops.
Exxon’s purchase earlier this year of drilling rights on 120,000 acres in southwest Arkansas put it squarely in the center of a fledgling lithium industry working out how to profitably scale up technology that extracts lithium from underground saltwater abundant in defunct oil fields there.
The Journal had reported the transaction came in at north of $100 million. A consultant for the seller had estimated the prospect could have the equivalent of 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs.
On Monday, Exxon hinted at its long-term plan for the first time. It said it is drilling its first lithium well in Arkansas’ Smackover region and plans to start producing battery-grade lithium by 2027.
The outlook around lithium has shifted in the past few months.
Smackover formation
This year, lithium prices have plunged more than 60% through early October as new supplies have hit the market, and the growth in EV sales has eased, with some automakers cutting prices amid signs that demand is losing steam.
Exxon made clear it has a long horizon.
By the end of the decade, it expects to supply enough lithium to support the manufacture of more than 1 million EVs a year, and said it would look at how it could expand globally. Its talks with battery and EV makers are continuing, it said.
“Southwest Arkansas, where we’ve established our acreage position, has a very, very significant resource, and we think lithium should be produced here,” in the U.S., said Dan Ammann, head of Exxon’s low-carbon business. He noted that China, South America and Australia dominate the market, and said that Exxon believes its process can achieve good results with a smaller environmental footprint than those mining operations.
“And we’re building what we think will be a profitable and high-growth business for Exxon Mobil,” Ammann said.
Making battery-grade material would require upgrading raw lithium in nearby processing plants that Exxon and others haven’t yet built. In July, the Journal reported Exxon planned to build one of the world’s largest lithium-processing facilities in the region, with a capacity to produce 75,000 to 100,000 metric tons of lithium a year.
Ammann said Exxon’s lithium-processing capacity is likely to reach those levels around 2030 as the company builds modular plants one by one.
China is the world leader in processing lithium and it is making major, risky investments to secure raw lithium in Latin America and Africa. Now, the U.S. is trying to develop its own supply to reduce its reliance on China. Photo illustration: Jamie Leventhal
In August, Exxon said it expects light-duty vehicle demand for internal combustion fuels will peak around 2025, and then slide down to early-2000s levels by 2050. It projected EV sales globally would climb almost 25% and lithium demand would quadruple by 2030.
The lithium industry, if it continues to grow in southwest Arkansas, is expected to bring thousands of jobs to a corner of the state that was in decline for decades after the 1980s oil crash. Thousands moved away as the region’s oil wells dried up and big plants closed.
Arkansas Gov. Sarah Huckabee Sanders said her administration would “continue to cut taxes and slash red tape” to support the lithium industry. By one estimate, building out planned lithium facilities in Arkansas would require some 6,000 jobs and north of 1,600 trucks by 2028.
Exxon isn’t only pivoting into the lithium business. In some ways, it is also returning to it.
In the 1970s, Exxon played a key role in the foundation of the lithium industry. Exxon chemist Stanley Whittingham won a Nobel Prize in 2019 for helping to develop the lithium ion battery while working at Exxon’s corporate laboratory in Linden, N.J.
Exxon began to manufacture the batteries in 1976, but the market ultimately proved too small, so the company ceased making the batteries some years later.
On Monday, Exxon said it would call its product Mobil Lithium.
Write to Collin Eaton at collin.eaton@wsj.com
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