A ‘Geologic Freak’ in Arkansas Is Big Oil’s New Lithium Bet

The world is electrifying at an unprecedented pace, and it’s only going to keep speeding up. COP 31, the latest iteration of the United Nations’ annual climate conference, kicked off today in Antalya, Türkiye, and achieving 35 percent global electrification by 2035 is going to be one of the event’s most central agenda items. Until extremely recently, this target likely would have seemed overly ambitious, but experts say that a number of factors, including volatile oil and gas markets stemming from the war in Iran, paired with enormous advances in clean energy technologies, have now put that goal within “striking distance.”All of that electrification is going to require a whole lot of lithium. Over the course of this decade alone, lithium demand has already skyrocketed by more than 400 percent on a global scale to top 1.5 million metric tons per year. Projecting out to 2035, the year featured in COP 31’s proposed electrification pledge, global demand could reach approximately 4 million tons. In the International Energy Agency’s Global Critical Minerals Outlook 2026, no mineral is expected to see bigger demand growth.This is leading to increased competition over global lithium supply chains as nations rush to shore up their own future supplies to ensure long-term energy security in a rapidly changing energy landscape. But even as a diverse array of countries try to establish homegrown lithium production and refining sectors, one nation is expected to maintain an extreme degree of control over global supplies: China. Beijing controls an estimated 72 percent of the global lithium-ion market, and Chinese companies control a quarter of the world’s lithium mining capacity. This control runs up the supply chain as well: in 2024, more than 80 percent of battery cells on the planet were made in China, raising major concerns about geopolitical precarity and market resilience in clean energy supply chains. By 2030, Beijing is expected to control 39 percent of the world’s lithium production, according to a recent report from Wood Mackenzie. “Lithium production and lithium ownership are increasingly diverging, and it is reshaping the global critical mineral supply chains,” said Allan Pedersen, research director, energy transition & battery materials – lithium at Wood Mackenzie. “While production growth is becoming more geographically diverse, ownership remains concentrated among a relatively small group of companies, mostly led by China.” By comparison, the United States produces just barely over 1 percent of the world’s lithium supplies, a large share of which comes from a single mine: Albemarle’s Silver Peak mine in Nevada. But that could all change thanks to an enormous, virtually untapped lithium reserve in southern Arkansas and East Texas known as the Smackover Formation. “It’s a geologic freak with its very high lithium concentrations,” Standard Lithium CEO David Park told Fortune. “We believe that our lands alone have the potential for over 150,000 tons per year of production.”Standard Lithium is expected to authorize its South West Arkansas Project (SWA) late this year, breaking ground on its initial 22,500-ton phase in the first quarter of next year. In late August, battery giant LG Energy Solution Ltd. signed a decade-long deal to buy 8,000 tons of battery-grade lithium carbonate annually from Smackover Lithium starting in 2029.Standard’s primary competitor, Texas-based EnergyX (short for Energy Exploration Technologies), already opened up a 250-ton pilot plant earlier this year, and aims to begin construction on its 15,000-ton Project Lonestar commercial facility by the end of 2027.And now, Big Oil is following in these clean energy companies’ footsteps. ExxonMobil established its position in the Smackover three years ago, and now boasts the single-largest holding in the formation at over 400,000 net acres, with plans to start a pilot project in 2027. Chevron also bought a 125,000-acre plot last year.While lithium demand is set to grow exponentially, lithium spot prices have been extremely volatile in recent years. And brand new operations at the Smackover Formation will have a long way to go before they are able to compete in well-established global markets. As a result, not all economists agree that these investments are the slam-dunk they may seem to be at first glance.“In theory, there are huge amounts of lithium in the Smackover. It’s yet to be proven if it’s economic to do so,” Max Yerrill, a critical minerals analyst at BMO Capital Markets, told Fortune. “But I think it makes sense. You’re not planning for one year out. These are 25-year projects. You have to look way down the road.”By Haley Zaremba for Oilprice.com More Top Reads From Oilprice.comOil Prices Plunge Below $92 as Trump Signals Restraint on IranChina Is Buying Oil Again After Months of Living Off Its StockpilesTribunal Hearings Begin in UK-Argentina Row Over Falklands Oil Project