Arkansas Lithium Deposits Drive Investment Growth

The United States is struggling to become competitive in global lithium production as demand grows.critical mineral”. Although lithium is a common alkali metal, it is becoming known as “white gold” in the energy and mining sectors due to its central role in batteries. Demand for lithium-ion batteries has grown rapidly and is expected to continue to grow at a steady pace thanks to the technology’s key role in decarbonization efforts, particularly in powering electric vehicles and enabling short-term energy storage.

International Renewable Energy Agency (IRENA) estimates that the demand for lithium for battery production alone will increase tenfold between 2020 and 2030. What’s more, Report 2023 from Popular Mechanics calculated that “an electrified economy in 2030 will likely need between 250,000 and 450,000 tons of lithium.” That’s a staggering sum. By comparison, “in 2021, the world produced only 105—not 105,000—tons.”

The growing importance of lithium to global energy security is opening up new markets for lithium producers, but it also poses new geopolitical challenges, as only a few countries – primarily Australia, Chile and China – currently control the vast majority of global lithium supplies. China alone refines 60% world lithium.

The United States has significant proven lithium reserves of its own. However, there is only one operational lithium plant in the entire country – Nevada Silver Peak FacilityIf the United States wants to increase its capacity to produce electric vehicles and renewable energy without relying on China Due to lithium supplies, the rapid expansion of domestic lithium production will be crucial.

In recent years, both public and private interests have begun to support lithium production in the U.S. The Biden administration has allocated over 407 million dollars for domestic lithium exploration and production under the Inflation Control Act, and now some of the largest oil companies are investing in domestic lithium production as well.

Dan Holton of ExxonMobil recently The Economist said in June that a “significant” portion of the $20 billion the oil giant has earmarked for low-carbon investments between 2022 and 2027 will go to the lithium sector. “By 2030, the company hopes to produce enough lithium to power 1 million electric vehicles a year,” the Economist reported.

The area of ​​interest for ExxonMobil and other lithium prospects is the Smackover Formation, a geological formation that spans the width of Arkansas. The formation is incredibly rich in natural lithium brine and is estimated to contain more than 4 million metric tons of lithium. “The quality of the lithium resource is what really makes this region great,” said Wesley Hamilton, chief technology officer and vice president of research and technology at Albemarle, the world’s largest lithium producer. recently quoted via CNBC. “It comes down to two things: the concentration of lithium and the ability to efficiently extract it from the brine.”

With the capacity to supply enough power for millions of electric vehicles and other lithium-ion battery-powered devices, Arkansas’ Smackover formation is now the site of the 21st century’s white gold rush. Exxon Mobil bought 120,000 acres in the Smackover formation last year and plans to produce battery-grade lithium by 2027. “The company said it will produce enough lithium by 2030 to power more than 1 million electric vehicles per year,” CNBC reports. Koch Strategic Platforms also poured 100 million dollars to Standard Lithium to expand its Direct Lithium Extraction (DLE) facility in El Dorado, Arkansas.

Ironically, all of this investment comes at a time when lithium demand is declining and prices are “falling precipitously” due to overproduction, overestimated EV growth trends, and competition from other battery technologies. Yet investors seem confident that this is more the case than the rule, and continue to invest in lithium by the handful. Once lithium prices correct and market volatility is eliminated, lithium should generate high rates of return for its investors. And Arkansas, for its part, could be in for a windfall.

By Haley Zaremba for Oilprice.com

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