Securing the supply chain ranks high on the list of oil and gas industry priorities year after year. As oil and gas companies play an increasing role in shaping a lower-carbon future, the supply chain has expanded to include critical minerals.
One of five trends highlighted in Deloitte’s 2024 Oil and Gas Industry Outlook is participation in the energy transition by securing a position in the critical mineral supply chain to tackle perceived end-market risks.
Growth in renewable energy “is driving a surge in demand for critical minerals, with lithium demand tripling between 2017 and 2022, and cobalt and nickel demand increasing by 70% and 40%, respectively, during the same period,” Deloitte said, citing International Energy Agency data.
A July 2023 Deloitte survey of 150 industry executives showed that “to strengthen their control over the supply chain, nearly 80% of surveyed [oil and gas] executives are considering securing clean energy manufacturing and critical mineral rights, thereby leveraging their expertise in subsurface and reservoir management and their regulatory knowledge.”
The finding was part of Deloitte’s 2023 Critical Minerals Market Review. Further, Deloitte said, “participating in the clean energy supply chain can allow companies to continue participating in commodity markets, instead of taking on additional risks in end markets.”
Drilling down in the critical minerals space, lithium demand—expected to double over the next 20 years—is contributing to interest in lithium extraction from brine, an oil field byproduct, “which offers higher margins compared to conventional hard rock minerals,” Deloitte said, citing the International Renewable Energy Agency.
ExxonMobil Corp. is one oil and gas company looking to economically produce lithium at scale. The company acquired rights to Smackover formation—known to hold significant lithium deposits—in early 2023 (OGJ Online, Nov. 14, 2023). By November, it had begun work on the first phase of its North American lithium production in southwest Arkansas.
ExxonMobil plans to leverage upstream oil and gas skills, including geoscience, reservoir management, and efficient drilling to access lithium-rich saltwater from reservoirs about 10,000 ft underground. Downstream capabilities in fluid processing and extraction will be used to separate the lithium from the brine. The lithium will then be converted onsite to battery-grade material and remaining saltwater reinjected into the underground reservoirs. First production is targeted for 2027.
Occidental Petroleum Corp.—another oil and gas producer with aims in various alternative energy spaces—is working in brine-based lithium extraction through TerraLithium, a joint venture of Occidental subsidiary Oxy Low Carbon Ventures and All-American Lithium LLC.
Elsewhere, Element3, a critical material extraction company specializing in oil and gas wastewater, expects to begin a commercial demonstration of its lithium extraction operations later this year after successfully pulling lithium chloride from oil and gas wastewater at a Double Eagle Energy subsidiary’s produced water recycling plant in the Permian basin.
The results aligned with Element3’s expectations to recover more than 85% of the lithium contained in wastewater with a concentration of less than 40 ppm lithium. The company said third-party testing verified the lithium chloride produced has the concentration and purity required to create battery-grade lithium carbonate.
The development “is pivotal to enable America to establish its own stable, domestic lithium supply chain,” said Andrew Lackner, managing director of Energy Innovation Capital, a venture capital fund backing Element3.
For all the promise of capturing upside potential in the critical minerals space, risk mitigation strategies must be considered, even in an “all of the above” energy transformation. For this slice of its trends outlook, Deloitte countered opportunities with specific risks to consider, including low water resources, high lead times, lack of diverse supply sources, delays in permitting processes, and changing demand patterns.
