Oil giant Exxon Mobil has announced the acquisition of a drill operation in Arkansas that will expand its efforts to enter the lithium production side of the electric vehicle supply chain. The oil and gas company plans on producing lithium, a mineral critical to the development of electric vehicle batteries as soon as 2027.
Exxon Mobil decided to venture into the electric-vehicle battery-metal production segment. The company started by purchasing a whopping 120,000 acres of Smackover Formation, a geological site located in southern Arkansas with rich lithium deposits. It now plans on launching a drilling operation on the massive site that would see it become one of the globe’s leading lithium producers.
The company will begin producing lithium at Smackover Formation within the next four years and hopes to start supplying enough lithium to support the manufacture of a million EVs per year by 2030. According to a statement from Exxon, the oil and gas drilling giant is currently holding discussions with potential customers in the EV and battery manufacturing segments.
Like most companies in the fossil-fuel production industry, Exxon Mobil will have to pivot to a more environmentally sustainable business model as the globe transitions from fossil fuels to cleaner alternatives. Experts predict that the global demand for oil, coal and gas will peak by 2030, meaning fossil fuel companies have limited time to figure out a way forward.
While Exxon is turning to lithium, a critical EV battery metal that’s expected to run into supply issues in a few years, major oil companies such as BP and Shell are instead focusing on renewables, including solar and wind. Exxon will also invest $1.7 billion through 2027 in the reduction of greenhouse gas emissions with a focus on biofuels, hydrogen and carbon capture.
Exxon’s president of low carbon solutions Dan Ammann says increasing local lithium production will be critical to the energy-transition movement. Lithium is a decades-long investment with significant potential for growth, Ammann said, especially now that the United States is actively transitioning toward electric cars.
The Biden administration has provided billions of dollars to help build out the country’s network of public charging infrastructure as well as thousands of dollars in subsidies and tax incentives for electric vehicle purchases. However, even though the country has one of the largest lithium deposits on the globe, it is heavily reliant on nations such as Chile and Argentina for lithium imports.
Heavy investment into building up local production would limit the nation’s reliance on imports, fortify the supply chain against outside factors and ensure a steady supply of lithium for the nation’s growing fleet of electric cars. As lithium and other needed raw materials increase in supply, automakers such as NIO Inc. (NYSE: NIO) could see their production costs dropping. In turn, they can pass those cost savings to their customers. This could accelerate EV adoption in the long-term.
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