Exxon Mobil has announced a non-binding lithium supply agreement with LG Chem, marking its second deal to provide lithium from its proposed project in Arkansas. The oil giant aims to extract lithium from the Smackover Formation, a brine deposit that extends from Florida through Arkansas to Texas, utilizing direct lithium extraction (DLE) technology.
Exxon, alongside other oil companies like Occidental Petroleum and Equinor, is increasingly investing in lithium projects, viewing the extraction process as similar to petroleum extraction. The agreement with LG Chem involves supplying up to 100,000 metric tons of lithium over several years, contingent on Arkansas officials establishing a state lithium royalty rate.
This partnership allows Exxon to align its lithium production with LG Chem’s quality specifications for its upcoming Tennessee cathode facility, set to open next year. Patrick Howarth, head of Exxon’s lithium business, emphasized the importance of building relationships with companies that share ambitions for expanding the North American battery supply chain.
Despite uncertainties in the lithium market, Howarth expressed confidence in rising lithium demand, stating, “We know that the world’s going to need a lot more lithium than it’s producing today.” Financial terms, including the price per metric ton, will be negotiated in a final contract.
Arkansas officials recently rejected Exxon’s proposed lithium royalty rate of 1.82%, with ongoing discussions about how to value the metal given the costs associated with extraction. Landowners are advocating for higher rates, typically between 8% and 12% for oil royalties. Howarth indicated that a 2.5% rate might be acceptable for Exxon to proceed, as the company has invested over $100 million in the state.
The annual production capacity for lithium in Arkansas remains unspecified, as it will depend on the chosen DLE technology. Howarth noted that Exxon is evaluating multiple providers for this technology.