Exxon Joins Hunt for Lithium in Bet on EV Boom; Oil giant quietly laid plans this year for producing mineral in Arkansas

Exxon Mobil is bracing for a future far less dependent on gasoline by drilling for something other than oil: lithium.

The Texas oil giant recently purchased drilling rights to a sizable chunk of Arkansas land from which it aims to produce the mineral, a key ingredient in batteries for electric cars, cellphones and laptops, according to people familiar with the matter.

Lithium is far removed from the fossil-fuel business, which has powered Exxon's profits for more than a century, and signals the company's assessment that demand for internal combustion engines could soon peak , the people said. It would also mark a return for the company to an industry it helped pioneer almost 50 years ago.

Exxon bought 120,000 gross acres in the Smackover formation of southern Arkansas from an exploration company called Galvanic Energy, according to some of the people. The price tag was more than $100 million, people familiar with the matter said, a relatively small transaction for a company of Exxon's size.

The new venture doesn't amount to a significant strategic shift for Exxon, which has said it is confident that oil and gas will be needed for decades. But Exxon is looking to gain a foothold in a region believed to contain vast lithium reserves, both to produce the mineral and to test the viability of extraction technologies.

Exxon could begin drilling on the prospect in the coming months, people familiar with the matter said, and could expand its operations if it proves profitable.

Galvanic said last year that a third-party consultant it hired estimated the prospect could have 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs. Extracting lithium from brine involves drilling for, piping and processing liquids, processes in which oil-and-gas companies have long developed expertise, making them well suited to produce the mineral, lithium and oil executives said.

Exxon projected last year that light-duty vehicle demand for internal combustion engine fuels could peak in 2025, while EVs, hybrids, and vehicles powered by fuel cells could grow to more than 50% of new car sales by 2050. The company has also projected the world's fleet of EVs could climb to as much as 420 million by 2040 , up from 3 million in 2017.

Exxon Chief Executive Darren Woods said last year that fossil-fuel demand would remain robust for decades, driven by the production of chemicals and heavy transportation and industry.

Lithium production would also diversify Exxon's portfolio and expose it to a rapidly growing market. The company is positioning other parts of its business to accommodate electric vehicles. Exxon executives have said many of its chemical products supply EV manufacturers, whose cars are made with plastics and other petroleum products.

The auto industry's shift to EVs has triggered a race to lock in supplies of lithium and other materials core to battery making, much of which are currently mined and processed outside the U.S. Tesla CEO Elon Musk has said the lack of a steady pipeline for processed lithium is a major obstacle.

The Biden administration is seeking to encourage domestic production of the metal, despite opposition from environmentalists and others. The Inflation Reduction Act signed by President Biden into law last year includes tax credits covering 10% of the cost of producing critical minerals, including lithium.

The U.S. once was the world's largest lithium producer, but its output has plummeted, and it is now dependent on other nations such as China for its supply of the mineral. Producing lithium from regions such as Arkansas could help the U.S. meet its domestic needs as well as compete globally, analysts said.

In the 1970s, Exxon played a key role in the foundation of the lithium industry. Exxon chemist Stanley Whittingham won a Nobel Prize in 2019 for helping to develop the lithium ion battery while working at Exxon's corporate laboratory in Linden, N.J. Exxon began to manufacture the batteries in 1976, but the market ultimately proved too small, so the company ceased making the batteries some years later.

Exxon has plans to spend $17 billion through 2027 on cutting carbon emissions and developing low carbon technologies. Unlike BP or Shell, which are investing heavily in renewable energy, Exxon has said it would limit its clean-energy investments in technologies that hew to its core oil-and-gas business, such as hydrogen and carbon capture. Exxon has never publicly proposed producing lithium as part of its investment plans.

Other large oil producers have been looking at the lithium business. Occidental Petroleum is developing technology to extract lithium from subterranean brine through its subsidiary TerraLithium.

The prospect of EVs dominating public transportation in the coming decades provides a strong incentive for oil-and-gas companies to get in on the lithium business, said Pavel Molchanov, an analyst at investment bank Raymond James. "It's a classic hedge against the prospect of eventually declining oil demand," he said.

Southern Arkansas in recent years has emerged as a potential future lithium hub. Smackover brine, a rich broth of saltwater and minerals, has long been known to contain relatively high concentrations of lithium, but new technologies have recently made it possible to extract the metal from the brine in warehouse-size facilities.

The region also offers a favorable permitting framework and existing infrastructure companies can capitalize on, lithium executives said. Over the last century, oil producers drilled thousands of wells in the region to extract crude oil. Special chemical companies, such as Albemarle, have been producing brine suffused with bromine there, a valuable chemical used in agriculture and sanitation.

Canadian company Standard Lithium has been operating a lithium demonstration plant in the region since 2020 at a site owned by German chemical company Lanxess.

So-called direct lithium extraction technologies have yet to be deployed at scale, and it could be years before plants start churning out the mineral commercially, analysts said.