Fresh on the heels of buying Dallas based pipeline operator Denbury (DEN) for $4.9 billion, Exxon Mobil is planning to build one of the world’s largest lithium processing facilities in Arkansas according to people familiar with the matter the Wall Street Journal reported Thursday. The plant would have a capacity to produce 75,000 to 100,000 metric tons of lithium a year. This would equate to around 15% of all finished lithium produced globally last year at scale.
Australia is the world’s biggest supplier, with production from hard rock mines. World output was 737,000 tonnes of Lithium Carbonate Equivalent (LCE) in 2022 and is estimated to reach 964,000 tonnes in 2023 and 1,167,000 tonnes in 2024, according to the Resources and Energy Quarterly Report by the Australian Department of Industry, Science and Resources in March.
Back in May the Wall Street Journal reported Exxon had purchased 120,000 gross acres in the area for more than $100 million. A consultant for the seller had estimated the prospect could have the equivalent of 4 million tons of lithium carbonate equivalent. This has been estimated as enough to power 50 million electric vehicles.
For perspective the world’s biggest lithium mines are in Australia.
- Greenbushes in Western Australia, owned by Talison Lithium (a joint venture of Tianqi Lithium, IGO and Albemarle Corp. Current production capacity at 1.34 million tonnes a year of chemical-grade and technical-grade lithium concentrate.
- Pilgangoora in Western Australia, owned by Pilbara Minerals, produces 360,000 to 380,000 tonnes of spodumene concentrate per annum, with two expansions underway that will increase production capacity to one million tonnes per annum.
This would be big move forwards for the United Staes given the rapid growth forecast in output gains in Australia, Chile and Argentina.
The location is known as the Smackover formation, a limestone aquifer that spans across several states in the southern United States, including Arkansas, Texas, Louisiana, Mississippi, Florida and Alabama. It is rich with saltwater brine which contains small amounts of lithium. The formation has been tapped for oil and gas, as well as brine for production of bromine, since the 1950s. Exxon is optimistic they can scale up technologies to extract lithium from brine. There is risk to it as the industry “has been an elusive goal across the industry.”
The attraction to Arkansas is also the legal aspect. The law is in its infancy in most States, with the exception of Arkansas due to bromine extraction. There is a well-developed body of legislation and jurisprudence over the production, processing, and injection of brine in the State. In purchasing the land Exxon would have been well aware of Arkansas’s unique payment structure for bromine production. Producers essentially pay a flat rental per acre to the landowners rather than paying a royalty based on a percentage value for the brine or bromine.
Given the questions around fracking from around the world and the environmental damage from rare earth mining this adds particular strength towards the Arkansas situation. Clearly outside of Arkansas, determining and debating the legal rights and regulatory framework could be time consuming and cumbersome.
The move continues along the line of the energy transition strategy being pursued by Exxon Mobil. The Denbury deal was a move by Exxon to solidify its asset base for transporting and storing carbon as part of its energy transition strategy.
Standard Lithium (SLI) and Tetra Technologies (TTI) are also planning to build capacity in the area. The sheer size of the project would mean it would have to be a staged development. People familiar with the matter told the WSJ modular trains would be constructed together or in separate locations near its future lithium production sites in South Arkansas.
Other companies including Standard Lithium (SLI) and Tetra Technologies (TTI) are planning to build capacity in the area.
Source: WSJ, Energy Law Blog
From the TradersCommunity Energy Desk