Occidental Petroleum (NYSE: OXY) isn’t your average oil company. While it currently makes most of its money producing fossil fuels, it has grand ambitions to help lead the transition to lower-carbon energy. Through its Oxy Low Carbon Ventures subsidiary and other endeavors, it has invested heavily in several emerging lower-carbon energy technologies.
The oil company’s upside to the clean energy transition is one of the many factors that caught the eye of Warren Buffett. His company, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), which currently owns 28% of the oil company’s outstanding shares, is no stranger to investing in clean energy. Berkshire is now partnering with Occidental to commercialize lithium, a key ingredient for electric vehicle batteries. Here’s a look at their new partnership and why energy companies are turning to this metal to help power their future growth.
The perfect partnership
Occidental Petroleum is forming a new joint venture (JV) with BHE Renewables, the renewable energy subsidiary of Berkshire Hathaway Energy. They formed the JV to demonstrate and deploy TerraLithium’s Direct Lithium Extraction (DLE) and associated technologies to extract and produce lithium from geothermal brine. TerraLithium is a wholly owned subsidiary of Occidental that patented DLE technologies.
BHE Renewables operates 10 geothermal power plants in California that process 50,000 gallons of lithium-rich brine per minute to produce 345 megawatts of emissions-free electricity. The companies will seek to process this brine to extract the lithium. If they successfully demonstrate the commercial viability of this process, BHE Renewables will build, own, and operate a commercial lithium production facility in California. The two companies will leverage their expertise, including Occidental’s experience in managing and processing brine in its oil and gas and chemicals businesses and BHE Renewble’s geothermal expertise, to commercialize a more sustainable form of lithium production.
The world will need a lot more lithium in the future. It’s a crucial component for batteries used in electric vehicles (EVs), consumer electronics, and energy storage. According to the International Renewable Energy Agency, demand for the metal will grow tenfold by 2030, driven by the accelerating efforts to decarbonize the global economy through electrification.
Big lithium?
Occidental and Berkshire Hathaway Energy are among the many companies seeking to capitalize on the accelerating demand for lithium. Oil giant ExxonMobil (NYSE: XOM) plans to become a leading lithium supplier for the EV market by 2030. The company is taking a slightly different approach to Occidental and Berkshire.
Last year, Exxon acquired the drilling right to over 120,000 acres in the Smackover Formation in southern Arkansas, which holds significant lithium deposits. The lithium-rich saltwater is in reservoirs about 10,000 feet below the ground. Exxon plans to use conventional oil and gas drilling methods to produce lithium-rich saltwater. It will then use DLE technology to separate the lithium from the saltwater and convert it into battery-grade material. Exxon is targeting its first production in Arkansas by 2027. It’s also evaluating other potential lithium production sites around the world. The oil giant aims to produce enough lithium by 2030 to help supply the needs of over 1 million EVs per year.
Rival oil giant Chevron (NYSE: CVX) is also exploring opportunities to produce lithium. The company believes lithium fits within its strategy and capabilities. Like Exxon, it has a lot of experience using conventional oil and gas drilling methods and processing brine in its upstream and chemical operations. Chevron could seek to follow Exxon’s strategy and organically build a lithium business. Another option is to acquire a company with lithium resources and expertise. Chevron has made several acquisitions in the lower carbon space in recent years to expand its capabilities, including biofuels producer Renewable Energy Group and the world’s biggest hydrogen storage plant in Utah.
Lithium powered growth
Oil companies can see the writing on the proverbial wall. That’s leading them to seek ways to participate in the global transition to cleaner energy. While they’re taking an “all of the above” approach by investing broadly in lower carbon energy, lithium is emerging as a key focus area. They could help solve a huge problem, given the amount of lithium the world needs to meet future demand. It could also provide power so that these energy companies can continue growing even as demand for fossil fuels starts to plateau and decline in the decades ahead. That makes their lithium investments something investors should monitor since it could be crucial to their long-term sustainability.
Should you invest $1,000 in Occidental Petroleum right now?
Before you buy stock in Occidental Petroleum, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Occidental Petroleum wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $713,416!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of June 3, 2024
Matt DiLallo has positions in Berkshire Hathaway and Chevron. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
Occidental Petroleum and Berkshire Hathaway are Teaming Up to Help Solve a Huge Problem was originally published by The Motley Fool
Signup bonus from
