Exxon Mobil has announced a significant non-binding lithium supply agreement with South Korean battery components manufacturer LG Chem, marking another strategic milestone in the company’s ambitious push into the electric vehicle battery metal sector.
The proposed deal encompasses up to 100,000 metric tons of lithium to be extracted from the Smackover Formation, an underground brine deposit spanning Florida, Arkansas, and Texas. This agreement represents Exxon’s second non-binding lithium supply arrangement, following a similar deal with SK On in June.
The collaboration enables Exxon to incorporate LG Chem’s specific lithium quality specifications into its project design. LG Chem intends to utilise the lithium at its upcoming Tennessee cathode facility, scheduled to commence operations next year.
Patrick Howarth, head of Exxon’s lithium business, emphasised the strategic importance of developing North American battery supply chain infrastructure. Despite potential policy uncertainties, including President-elect Donald Trump’s campaign pledge to challenge electric vehicle mandates, Exxon remains confident in growing lithium demand.
“We know that the world’s going to need a lot more lithium than it’s producing today,” Howarth stated, underscoring the company’s long-term market outlook.
The agreement arrives amid complex regulatory negotiations, particularly surrounding lithium royalty rates in Arkansas. State officials recently rejected Exxon’s proposed 1.82% royalty rate, with landowners advocating for rates between 8% and 12%, consistent with traditional oil royalties.
Howarth acknowledged the critical nature of these regulatory discussions, noting that excessive royalty demands could potentially prompt Exxon to reconsider its substantial USD 100 million investment in the Arkansas project. Preliminary indications suggest a 2.5% rate might be acceptable, which Exxon considers potentially viable.
Exxon’s lithium extraction strategy leverages the company’s petroleum industry expertise, recognising similarities between brine extraction processes and traditional oil recovery techniques. This approach has attracted other major oil companies, including Occidental Petroleum and Equinor, to explore lithium investment opportunities.
The company remains strategic about its technological approach, currently evaluating multiple direct lithium extraction (DLE) technologies. Howarth confirmed they are “narrowing down the selection” while maintaining flexibility by keeping multiple technology providers under consideration.
Financial terms, including the specific pricing per metric ton, remain to be negotiated in any potential final contract. However, Howarth reported “strong support” from potential customer bases, suggesting confidence in the market potential.
This lithium supply initiative represents a significant pivot for Exxon, traditionally a petroleum-focused enterprise, signalling the company’s strategic adaptation to evolving global energy landscapes and increasing electrification trends.