Saudi Aramco, the Oil Giant, Plans to Bet Big on the Future of New Energy Despite Sluggish Lithium Prices

According to media reports, Saudi Aramco, the national oil company of Saudi Arabia, plans to expand its investments in lithium production to establish a supply chain for this critical metal.

Three individuals close to Saudi Aramco revealed that the world's largest oil company is expected to announce this decision later today, as part of its efforts to become a mining hub and diversify its business beyond oil.

Previously, Saudi Arabia's Minister of Industry and Mineral Resources, Bandar Alkhorayef, told the media that the country aims to develop facilities for the commercial processing of this metal within three to five years, with plans for refining and export.

Alkhorayef stated, "Saudi Arabia is in a very advantageous position in the processing sector because we have multiple advantages, including energy competitiveness, industrial cities, and infrastructure such as ports."

Media analysis suggests that recent low lithium prices, caused by a supply surplus, have made the market unprofitable for some Western companies. However, Saudi Arabia, with its strong financial resources and chemical expertise, has the capability to enter this market with significant potential returns.

Source: International Energy Agency

According to the International Energy Agency's (IEA) Net Zero Scenario, demand, including that from EVs, is expected to push global lithium demand in 2040 to seven times its current level.

Notably, Saudi Arabia is building an EV manufacturing hub in King Abdullah Economic City (KAEC) along the Red Sea coast. The country has set an ambitious goal of producing 300,000 vehicles by 2030 and exporting them to neighboring countries.

In 2023, Lucid, a US EV manufacturer majority-owned by Saudi Arabia's sovereign wealth fund—the Public Investment Fund (PIF)—announced the establishment of a factory in Saudi Arabia. Meanwhile, PIF also plans to launch its own EV brand.

Since the launch of the "Vision 2030" initiative, Saudi Arabia has taken a series of measures to vigorously develop its non-oil economy. In 2023, the non-oil sector accounted for 50% of Saudi Arabia's GDP, reaching a historic high.

Last month, Saudi Aramco, Saudi startup Lihytech, and Saudi Arabian Mining Company (Ma'aden) announced that the country had extracted lithium for the first time from brine samples from oilfields and plans to soon launch a commercial pilot project for direct lithium extraction.

However, media analysis pointed out that the "direct lithium extraction" (DLE) process is still in its early stages and has yet to be proven on a commercial scale.

Daisy Jennings-Gray, Head of Pricing at UK-based battery raw materials consultancy Benchmark Mineral Intelligence, noted, "So far, we have not seen Saudi Arabia play a significant role in the battery raw materials or lithium sectors."

Jennings-Gray believes that the challenge for new lithium projects is the "need for vertical integration," meaning producers must have control over raw materials, distribution, and sales to achieve economic feasibility.