- Direct lithium extraction technology could bring on a revolution like shale oil and gas, says analysts
- ExxonMobil could be joined by Chevron in shift
Just as Apple (US:APPL) moved into the mobile phone space, a giant disruption could be on the way for the lithium market. ExxonMobil (US:XOM) is aiming to produce lithium in the US within just a few years.
“Lithium is essential to the energy transition, and ExxonMobil has a leading role to play in paving the way for electrification,” said Dan Ammann, president of ExxonMobil low carbon solutions.
The technology of choice is direct lithium extraction (DLE), similar to what Cornish Lithium is proposing. It has not been proved at commercial scale yet so this Exxon project could mark a turning point for the industry. Fellow supermajor Chevron (US:CVX) has also previously expressed interest in the similarities between oil and gas extraction and DLE.
Lithium is now produced using brine ponds and hard rock mines, largely in Chile and Australia, respectively. DLE is where lithium-containing geothermal or salar brines are pumped to the surface, the lithium extracted, and then the water pumped back underground. This is potentially a quicker way to production, as shown by Exxon’s plans. The company will use “conventional oil and gas drilling methods to access lithium-rich saltwater” from reservoirs around 3km below ground. This could lead to a shale-like boom for DLE projects, said Bernstein analyst Bob Brackett.
“DLE alone has the potential to add a vast amount of supply in the middle of the cost curve,” he said. “But even without DLE, we worry about a large amount of lithium projects potentially coming online over the next few years." Brackett also made the point that capital spending by energy giants could easily shift the lithium market. “A bit of capex diverted from oil companies is a significant fraction of the entire lithium business,” he said.
There is further interest in geothermal DLE in the UK. This week, Geothermal Engineering Limited (GEL) announced it would add lithium extraction to its existing geothermal plant in Redruth as soon as next year. This will take a serious investment on top of the wells it has already drilled for energy generation. The Financial Times said GEL would initially try and raise £100mn-£200mn to get to 1,000 tonnes of lithium carbonate equivalent production a year.
Cornish Lithium raised close to £60mn this year to fund its DLE and hard rock projects. The upcoming involvement of US oil and gas giants in this space should have been obvious from Cornish Lithium's DLE pilot plant provider: a subsidiary of Koch Industries, a key supplier to the US onshore sector.
Several UK-listed companies are also using the technology, although the weaker lithium price and the realities of smallcap project funding mean valuations are down. CleanTech Lithium's (CTL) share price has fallen a third this year, even as it gets closer to getting a $2mn pilot plant at its Chilean operations up and running. The next step will be to prove lithium fit for electric vehicle batteries can be produced consistently. It is still some way off production, however.
It's not just Aim juniors working in this space: Rio Tinto (RIO) bought the Rincon project last year and is building a starter plant (one step on from a pilot plant) to get the processing right before committing to a full-scale operation, which Bernstein estimates at around 50,000 tonnes lithium carbonate equivalent a year.
This is not the first rush of excitement after a major player signalled interest in DLE. Berkshire Hathaway (BRK.A) received backing from US President Joe Biden to extract lithium from its Salton Sea geothermal assets early last year, although this project has not yet made solid progress toward commercial production. Even earlier, a company that rebuffed a Tesla (US:TSLA) buyout in 2014, Simbol Materials, collapsed after struggling to find financing.
Berkshire has reportedly struggled with actually making a usable product, so sheer financial firepower as also wielded by Exxon and Chevron, may not be enough to succeed in this space. It will certainly help though.
