ExxonMobil Signs Lithium Supply Agreement with LG Chem, Expected Annual Supply of 100,000 Tons

According to a report by Reuters, on November 20, 2024, oil industry giant ExxonMobil announced that it had signed a non-binding memorandum of understanding with battery module manufacturer LG Chem for lithium supply. It is reported that this is the company's second lithium supply agreement in the Arkansas project.

Last year, ExxonMobil announced plans to use at least one direct lithium extraction technology to extract lithium from the Smarkever formation. The Smarkever Formation is an underground deposit of salt water that stretches from Florida to Texas. The MOU with LG Chem will require Arkansas officials to determine the rate of lithium royalties, which will enable LG Chem to obtain up to 100,000 tons of lithium over the next few years. With this transaction, ExxonMobil will be able to incorporate LG Chem's lithium quality standards into its plans. LG Chem plans to use lithium sourced from ExxonMobil at its cathode plant in Tennessee, which is expected to begin operations next year.

The financial details of the transaction, including the price per metric ton of lithium, will be negotiated as part of the final contract. In June, SK Innovation's subsidiary SK On signed a non-binding lithium supply memorandum of understanding with ExxonMobil.

Patrick Howarth, head of ExxonMobil's lithium business, said the company expects demand for lithium to grow despite U.S. President-elect Donald Trump's promise during the campaign to remove incentives related to electric vehicles. "We believe that global demand for lithium will far exceed current production," Howarth said. Despite the recent volatility in the lithium market, Howarth said ExxonMobil is "seeing strong support from potential customers."

Earlier this month, Arkansas officials rejected a 1.82 percent lithium royalty rate proposed by ExxonMobil and other companies. Officials have been discussing lithium royalties since 2018, focusing on how to price lithium based on the cost of equipment to filter it from salt water.

"This is one of the key regulatory issues we need to address in order to bring these projects to market," Howarth said. If the rates are too high, ExxonMobil may consider exiting Arkansas. To date, the company has invested more than $100 million in the state.

Officials have suggested that a 2.5 percent rate would be acceptable, and Howarth has said it would be "within the range we can live with." In the near future, ExxonMobil will formally propose a new rate.