LITTLE ROCK – Exxon Mobil Corp (NYSE:XOM) has unveiled a significant shift in strategy, announcing plans to start domestic lithium production aimed at supporting the burgeoning electric vehicle (EV) market in the United States. The company's Low Carbon Solutions division, led by Dan Ammann, is set to harness Arkansas's lithium deposits with the goal of initiating production by 2027.
The strategic move includes utilizing direct lithium extraction (DLE) technology at the Smackover Formation in southern Arkansas, where Exxon owns 120,000 acres of land. The process involves drilling wells into saltwater reservoirs approximately 10,000 feet underground. This method is not only more environmentally friendly than traditional hard-rock mining—resulting in 66% lower carbon emissions—but also negates the need for overseas refinement.
Exxon's venture into lithium drilling is part of a broader ambition to become a leading global lithium supplier. By 2030, the oil giant plans to produce enough lithium to meet the demands of over a million EVs per year. This aligns with forecasts from the International Energy Agency, which anticipates a significant rise in lithium consumption due to the increased use of lithium-ion batteries in EVs and energy storage systems.
The company's commitment to lithium production follows its acquisition of Pioneer Natural Resources (NYSE:PXD) in October 2023 for approximately $60 billion. Despite this heavy investment in fossil fuels, Exxon has refrained from diversifying into renewable energy sectors such as wind and solar power, choosing instead to leverage its expertise in drilling and processing within its core competencies.
Financial firm TD Cowen estimates that Exxon's ambition will necessitate a $2 billion capital expenditure to produce 50,000 tonnes of lithium, potentially yielding $800 million in cash returns. Although the high capital expenditure surpasses expected sales returns, Exxon is banking on a long-term strategy, anticipating a fourfold surge in lithium demand by 2030.
The project is poised to revitalize Arkansas's economy, traditionally centered on oil and gas production. Governor Sarah Huckabee Sanders expressed optimism about the project's potential to reshape the state during a news conference. Local authorities are collaborating with Exxon on infrastructure preparations, with Columbia County Judge Doug Fields predicting significant regional upliftment due to these efforts.
Exxon aims to commence commercial output by 2027 and scale up production to supply enough lithium for one million electric vehicles annually by 2030, enhancing their eligibility for federal EV tax credits and reducing U.S. dependence on Chinese lithium.
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