ExxonMobil enters the lithium race

By Asif Aydinli

The American oil corporation ExxonMobil and South Korea’s LG Chem have signed a preliminary agreement to supply lithium from a project in Arkansas for LG Chem’s cathode plant in Tennessee. This development highlights global shifts in energy and resource policies, with lithium emerging as a cornerstone of the transition to a low-carbon economy.

The agreement between ExxonMobil and LG Chem outlines the supply of up to 100,000 tons of lithium over several years. ExxonMobil's lithium extraction project, based in Arkansas, leverages Direct Lithium Extraction (DLE) technology. This method extracts lithium from underground brine, closely resembling traditional oil extraction processes. Exxon plans to fully finance the project, adhering to LG Chem's stringent quality requirements for raw materials.

LG Chem intends to use the supplied lithium to manufacture batteries at its Tennessee facility, scheduled to open in 2025. This collaboration underscores the companies' commitment to establishing a sustainable North American battery supply chain, aligning with global trends toward localization and securing critical raw material production.

ExxonMobil is actively entering the lithium market, recognizing the metal’s soaring demand. The head of ExxonMobil’s lithium division, P. Howarth, stated, “The world will need much more lithium than is being produced today.” The agreement with LG Chem marks Exxon’s second major lithium supply contract, following a similar deal with SK On in June 2024.



For ExxonMobil, lithium extraction is a natural extension of its traditional business, as the processes of extracting lithium from underground brine are analogous to oil production. This allows Exxon to utilize its existing expertise and infrastructure. Moreover, diversifying into the lithium sector aligns with its broader asset diversification strategy, a critical move in the context of the energy transition.

Lithium demand is largely driven by the booming electric vehicle (EV) industry, which accounts for a significant share of consumption. However, the campaign promise of U.S. President-elect Donald Trump to roll back policies supporting EV production poses certain risks to the market. Despite this, ExxonMobil remains confident in the resilience of lithium demand, citing global trends such as stricter environmental standards, increasing EV adoption, and the expansion of renewable energy sources.

The partnership between ExxonMobil and LG Chem reflects key global trends in the critical materials industry. First, there is a consistent rise in investments in lithium extraction, as the metal becomes indispensable to the energy transition. Oil companies like ExxonMobil, Occidental Petroleum, and Equinor are increasingly venturing into the lithium market, recognizing its strategic importance. Second, localization of supply chains is gaining traction, with nations and companies striving to establish domestic production and logistics systems to ensure stable supplies of critical materials. The North American supply chain being developed by ExxonMobil and LG Chem is a prime example of this strategy. Lastly, technological innovation plays a vital role. The use of DLE technology reduces the environmental impact of lithium extraction, making projects more sustainable and compliant with modern standards. This agreement underscores how sustainable development and technological leadership are becoming fundamental to thriving in the new energy landscape.

While financial terms of the deal are still under discussion, the potential value is substantial given the high demand for lithium. Analysts estimate that lithium prices remain elevated, making such projects highly lucrative. Additionally, the infrastructure investments in Arkansas and Tennessee are expected to boost local economies by creating jobs and increasing tax revenues.

Despite its advantages, the project faces several challenges. Political instability, particularly potential shifts in U.S. policy regarding EVs , could impact the lithium market's stability and raw material demand. Regulatory hurdles are also significant: determining royalty rates in Arkansas requires approvals that may delay the project. Moreover, technological aspects are critical. Although DLE technology holds great promise, it remains in the development phase and demands significant financial investment. These factors pose risks that the companies must navigate to realize their ambitious goals successfully.

The agreement between ExxonMobil and LG Chem highlights the growing importance of lithium in the global economy and its role in the energy transition. This contract represents a pivotal step in creating a robust North American battery supply chain. Amid rising demand for EVs and battery technologies, such projects pave the way for traditional oil giants to become key players in the green economy.

However, the initiative's success will depend on the companies’ ability to overcome political, technological, and market challenges. ExxonMobil and LG Chem are demonstrating their readiness for a long-term partnership, setting a potential benchmark for other industry players in this rapidly evolving sector.

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