The spirit of fracking comes to U.S. lithium mining

"Fracking" is an expletive in environmental circles. Yet the spirit of shale is creeping into a business with transformational potential for the energy transition. Schlumberger NV, the industrial giant best known for sucking oil and gas from shale, the seabed (and other places besides), this week announced a breakthrough in direct lithium extraction, or DLE.

Lithium is the essential metal in the batteries that power electric vehicles and store energy on the grid, both pillars of decarbonization. Roughly a third of current production involves pumping lithium-rich brines into giant pools and using natural evaporation to leave concentrated salts. This method, exemplified by giant ponds in the Atacama desert in South America, is cheaper than the other main method, mining (the sun provides free energy for one thing). But it needs a lot of land and water — often in places where fresh supplies are scarce — and is slow. Plus, evaporation typically captures only about 40%-60% of the lithium present in the brine, whereas mining recovers more like 70%.

DLE offers a way to address evaporation’s shortcomings, mainly by speeding things up. Rather than being pumped into big pools for months and months of evaporation, DLE uses membranes, adsorbents and other technologies to directly extract lithium from brines far quicker and with a much smaller footprint. Schlumberger claims its demonstration plant in Nevada captured 96% of lithium from brine 500 times faster than traditional evaporation using only 10% as much land.

Efficiencies of this magnitude have the potential to unlock vast lithium resources in the U.S., ultimately reordering the global playing field in an echo of how shale challenged oil’s power structure over the past two decades.

Addressing the obvious caveat: All Schlumberger disclosed here are some headline figures from a pilot that didn’t include the all-important one of cost. In a lithium industry replete with startups touting this or that game changer, all such announcements should be treated with caution.

Yet Schlumberger is hardly some junior miner trying to raise cash to appraise some godforsaken patch of scrubland. It isn’t a producer at all, but rather a services provider; a facilitator happy to sell you the (complicated) pickax to extract whatever commodity you happen to value. Schlumberger’s DNA is coded with crude but it clearly sees EVs and grid batteries as viable long-term bets and seeks to capitalize on the associated lithium demand.

Any part of the oil complex muscling into transition territory is liable to draw skepticism. Exxon Mobil Corp.’s foray into DLE with the acquisition of 120,000 acres in Arkansas raised eyebrows last year because, well, it’s Exxon. I remember well the oil major’s earlier transition-adjacent project to derive biofuel from algae; not least because Exxon advertised it so heavily and any mention of it in conversation at industry events was liable to draw wry smiles and eye rolls.

Then again, Exxon signed a preliminary agreement with a serious battery maker, South Korea’s SK On Co., in June to begin supplying lithium from 2027. Moreover, oil majors have deep experience in exploration, permitting and licensing — all useful in lithium development, too. And since oil and gas production, especially fracking, involves the movement of copious amounts of water, the oil industry is already in the water management business to some degree by default.

Plus, Exxon has a huge balance sheet. DLE technology has been around for decades, but given the variability of brine concentrations and geology, getting it to commercial scale in the relatively virgin territory of the U.S. requires money, patience and a willingness to experiment with different extraction technologies. As it stands, lithium prices aren’t exactly a capital magnet, currently undergoing a bust as supply predicated on surging EV demand has collided with slowing growth.

Oil majors, and Schlumberger, have some experience with volatile commodity markets and the need to look through near-term volatility to longer-term trends. The proliferation of batteries on grids and in vehicles, either full EVs or hybrids, is unstoppable. The enactment of the Inflation Reduction Act, with its local content requirements for subsidies ratcheting up over time, also means there is strategic value in, and government support for, U.S. minerals production.

The U.S. Geological Survey estimates domestic lithium resources at about 14 million tons, or 13% of the global total. As of today, however, there is only one small U.S. lithium production site in operation, Albemarle Corp.’s Silver Peak brine facility in Nevada, which produces around 5,000 tons per year. A number of other projects are at varying stages of development, including Lithium Americas Corp.’s Thacker Pass mine in Nevada, with phase one, targeting 40,000 tons per year, due to begin producing in 2027.

While DLE as a technique isn’t as homogeneous as fracking, it has the potential to disrupt the current lithium ecosystem centered on China, Australia and South America as shale did with global oil. And like shale 20 years ago, DLE in the U.S. is novel and expensive. But its quicker timelines, smaller environmental impact and higher capture rates offer avenues for refinement that companies such as Schlumberger can work with in order to cut costs and get DLE to a point where it competes with traditional projects. From the perspective of energy transition, the prospect of oil industry dollars fueling innovation, and a deflationary fight for market share, in critical minerals should be welcomed.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Liam Denning is a Bloomberg Opinion columnist covering energy. A former banker, he edited the Wall Street Journal’s Heard on the Street column and wrote the Financial Times’s Lex column.