Saudi Aramco Expands Investment in Lithium Production for Electric Vehicle Batteries

Recently, Saudi Aramco, the world's largest oil company, announced plans to significantly increase its investment in lithium production, aiming to establish a robust supply chain for the lithium needed in electric vehicle batteries. Currently, approximately two-thirds of the lithium processing market is concentrated in China, but more Western and Middle Eastern companies are investing in developing their own supply chains.

By 2027, Saudi Aramco plans to collaborate with state-owned mining company Ma'aden on projects that will commercialize the production of rare earth metals. This proposed joint venture will focus on energy transition minerals, including extracting lithium from high-concentration deposits and advancing cost-effective Direct Lithium Extraction (DLE) technologies. This initiative is part of a broader strategy to diversify its operations beyond oil and position itself as a mining hub.

Saudi Arabia anticipates that lithium demand in the country will grow twenty-fold from 2024 to 2030, potentially producing 500,000 electric vehicle batteries and generating 110 gigawatts of renewable energy. Bandar Alhorrayef, the Minister of Industry and Mineral Resources, highlighted Saudi Arabia's advantageous position in processing due to its energy competitiveness and infrastructure, including industrial cities and ports.

Despite a significant decline in lithium prices due to oversupply, which has made it difficult for Western companies to compete with China, Saudi Arabia aims to leverage its financial resources and chemical expertise to penetrate this lucrative market. According to the International Energy Agency, global lithium demand is projected to increase seven-fold by 2040, driven largely by the demand for electric vehicles.

In addition to lithium production, Saudi Arabia is constructing an electric vehicle manufacturing hub in King Abdullah Economic City along the Red Sea. The U.S. electric vehicle maker Lucid Motors, which is majority-owned by Saudi Arabia's sovereign wealth fund, began assembling cars in the country in 2023. The Public Investment Fund (PIF) plans to launch its own electric vehicle brand and has signed agreements with Hyundai to build a factory in King Abdullah Economic City.

Saudi Arabia also aims to expand its mining and metals sector as part of a broader plan to diversify its economy and reduce reliance on oil revenues. Last month, Saudi Aramco, along with the lithium startup Lihytec and Ma'aden, announced the country's first successful extraction of minerals from oilfield brine. This mineral, while abundant in the earth's crust, is also found in the brine produced alongside oil extraction.

Daisy Jennings-Gray, pricing director at Benchmark Mineral Intelligence, noted that Saudi Arabia has yet to make a significant impact in the battery materials or lithium sectors. She pointed out that new lithium projects face challenges, including the need for vertical integration to control raw materials, distribution, and sales for economic viability.

Saudi Arabia is currently planning two lithium processing plants. European Lithium recently announced a partnership with Obeikan Investment Group to build a lithium hydroxide plant in Saudi Arabia, processing lithium ore mined in Austria. Additionally, EV Metals Group plans to establish a lithium plant in Yanbu Industrial City, supported by private equity firm RCF.

Energy companies are naturally suited to develop lithium production from brine, as many core technologies used in oil production—such as pumping, processing, and reinjecting liquids underground—are also crucial for extracting lithium. Some oilfield brines naturally contain significant amounts of lithium.

However, the technology for extracting lithium from brine, known as Direct Lithium Extraction (DLE), is still in its infancy and has yet to be validated at commercial scale.