What you’ll learn:
- Why oil and gas companies are looking at lithium mining
- What we’re watching to assess if this is going to become a relevant business area
- What companies are likely to get wrong in pilot projects and permitting
Intro
Oil and gas companies—already familiar with the challenges of extracting and processing resources from wells—are well positioned to jump into the lithium-mining fray. Chevron’s CEO, Mike Wirth, articulated his interest in the element neatly enough: Lithium extraction fits within the “core capabilities” of his organization. Oxy and Exxon have already made their big bets. Below, I lay out for you why companies are expanding the range of oil-and-gas-adjacent decarbonization solutions to include lithium, what we are watching to position our clients to succeed, and what’s likely to go wrong in pilot projects and permitting.
Both of these things are true:
- Lithium mining provides a critical path to reducing oil consumption.
- Oil and gas companies are well suited to take an emerging, innovative approach to lithium extraction.
The situation
Projections for lithium demand in support of energy transition efforts have made discussions about likely shortages ubiquitous. Such shortages would be a potential limiting factor for batteries for electric vehicles, wind turbines, and energy storage, among other uses. The International Energy Agency’s (IEA) analysis of critical minerals estimates that (in some scenarios) the demand for lithium may increase 40-fold by 2040. At the same time, IEA warns that we could see lithium shortages as early as 2025.
Today, most conventional lithium mining is done by means of lithium brine extraction—whereby drilling into salt flats and letting the brine evaporate in ponds can take months to years—or hard rock mining—which is overall much more energy intensive and costly. There is only one, relatively small, operational lithium mine in the United States, in Silver Peak, Nevada. The mine, owned by Albemarle, uses a lithium brine extraction process.
But oil and gas companies are exploring a relatively new approach that could cause lithium mining to take off: direct lithium extraction (DLE). DLE takes the extracted lithium brine into a processing unit, which filters out lithium and then reinjects the brine—without the lithium—back into the aquifer. This technology shortens the lithium extraction process to only a few days or even hours. Potential DLE areas in the U.S. include the Smackover Formation (Arkansas), the Salton Sea (California), the Great Salt Lake (Utah), and Permian Basin.
Although there are pilot projects in both China and Argentina, large-scale DLE is still largely an unproven technology. Yet its potential is promising. Goldman Sachs likens the impact of DLE to that of fracking on oil extraction and calls DLE “a potential game-changing technology.” (We like the analogy!) DLE is hotly anticipated for its increased efficiency, including decreased energy rates, higher recovery rates, and conservation of 98 percent of extracted water. The technology can be applied to spent oilfields.
Like any new technology, DLE has some obstacles to overcome. It needs additional pilot studies to ensure true functionality, quantification of the full process’s energy consumption, and increased environmental and general monitoring guidelines. In addition, to maximize lithium mining’s full potential, the process could be used to extract other useful minerals.
Exxon has recently purchased drilling rights for 100,000 acres in the Smackover Formation and foreshadowed drilling for lithium in the coming months. Oxy Low Carbon Ventures created a partnership with All-American Lithium to form Terralithium; the subsidiary combines DLE and direct lithium hydroxide conversion to develop a “cost effective and more responsible lithium hydroxide production approach that’s easier on the land and natural resources.” We expect smaller companies to either participate as junior partners or wait and see before jumping in.
Seize the day
As with all oil-and-gas-adjacent projects, companies will not get a free pass on narrating (1) how the project fits into their business strategies and (2) how they will accommodate community and stakeholder interests. Here are the issues and rules of thumb my team at Adamantine is watching as we advise our clients how to craft their lithium adventures:
- Proof of concept and technology. Although lithium is going to be exciting to watch, it is far from a slam dunk. As we do with all oil-and-gas adjacent innovation, we will be watching for breakthroughs on technology, cost, and scale.
- How stakeholders will weigh in. Oil and gas companies know that no project—not even those tied to decarbonization—will get a pass from interested to concerned stakeholders. Those companies that engage early, collaborating with universities, eNGOs, think tanks, and community partners, will build a much more durable evaluation and execution strategy.
- What’s likely to go wrong. Companies moving forward with pilot projects or permitting processes too quickly will inevitably face community backlash. We’re cheering for oil and gas leaders to show that we know how to engage with a broad array of partners and stakeholders to build confidence in this new business area.
- How companies leverage existing skill sets. As oil and gas companies align their technical skill sets around extraction and production, we want to see how they use their community planning and engagement skills to build durable partnerships and stakeholder buy-in.
Thanks to Laura Horowitz for her help in writing this Both True. Do you need help benchmarking your organization’s most effective innovative investment strategies? At Adamantine, we spend our days doing just that! Please reach out. If you liked this new Both True, please share with three colleagues.
To new frontiers,
Tisha
