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20/07/2024
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From oil to lithium: How Saudi Arabia is building a battery supply chain

Saudi Arabia is a step closer to becoming part of the global battery industry after deals to develop lithium processing and anode material projects in the country.

The deals could make Saudi Arabia’s lithium ion supply chain the most developed in the Middle East, which right now has virtually no battery material capacity.

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Saudi Arabia’s ambitions for an electric vehicle supply chain are part of its push to diversify the national economy away from oil, a project guided by the government’s Vision 2030 reform plan announced in 2016.

Although the Saudi government has been investing into the EV sector since 2018, its midstream and upstream segments are still in their early stages. The Saudi advantage lies in relatively low reagent costs and government incentives like tax, land, and capital support, said Benchmark consultant Ahmed Mehdi.

Still, a challenge will be sourcing enough technical labour for complex parts of the value chain, he said. In addition, the plants will have to secure raw material feedstocks from globally competitive markets.

Lithium processing

This month Australian startup European Lithium and Saudi Arabia’s Obeikan Investment Group announced an agreement to create a joint venture to build and operate a lithium hydroxide refinery in Saudi Arabia.

European Lithium said the Saudi processing plant will process spodumene from a mine that the company is developing in Wolfsberg, Austria.

It will sell the lithium spodumene concentrate to the JV at a “reduced rate” with a floor price of $3,000 a tonne and a ceiling price of $7,000 a tonne over the life of the current resource of the Wolfsberg mine. Spodumene prices are currently around $3,650 a tonne, according to Benchmark’s Lithium Price Assessment.

The mine is set to produce 3,610 tonnes (LCE) of lithium per year by 2030, as assessed by Benchmark.

European Lithium said the facility would be developed to “meet the minimum initial capacity and product specifications” to supply BMW.

In 2021, Saudi Arabia became the first Middle Eastern country to establish pipeline capacity in lithium processing by signing an agreement with EV Metals Groups to build a battery chemicals complex in Yanbu Industrial City.

The site could produce 18,050 tonnes of lithium hydroxide by 2030, according to Benchmark’s Lithium Forecast. The project was allocated 123 hectares of land this year as well as energy by the Saudi government.

First anode plant in the Middle East

Saudi Arabia is also developing its anode industry, where it may have a natural competitive advantage.

Earlier this year startup Novonix announced a joint venture deal to build a 30,000 tonne capacity graphite anode materials facility with TAQAT Development, a Saudi energy company. Novonix will own 40% of the JV, and TAQAT the remainder.

It will supply EV and energy storage systems (ESS) markets in the Middle East and North Africa region. Construction is scheduled to begin in 2024 although the precise location has not yet been announced.

A key advantage for the project will be sourcing precursor material from within Saudi Arabia, in the form of petroleum needle coke.

First pet needle coke project in Saudi Arabia

In May, TAQAT Development announced a deal with Chevron Lummus Global to build a 75,000 tonne per annum nameplate capacity pet needle coke plant, with a graphitisation facility to produce synthetic graphite in Rabigh.

TAQAT will use proprietary needle coke technology from Chevron Lummus, an oil refinery technology joint venture between oil major Chevron and refinery technology developer Lummus Technology.

Rabigh Refining & Petrochemical Company will supply feedstock in the form of decant oil.

Benchmark analyst Mehdi says needle coke is a promising venture for Saudi Arabia, as it will benefit from its established ecosystem for making other chemicals.

“Saudi has a lot of decant oil feedstock for needle coke production and given chemical hub of Kingdom, could see interest from other players such as petrochemical players who see battery chemical market as a good hedge to volatile petchem margins,” he said.

Saudi’s EV push

As well as markets in the Middle East, North Africa and Europe, the new facilities will likely sell to Saudi Arabia’s own EV manufacturing industry.

Saudi Arabia’s EV manufacturing sector began to emerge in 2022 when Lucid Motors, a Californian automaker backed by the Saudi sovereign wealth fund, announced it would build its first ex-US factory in the Kingdom. The same year saw the launch of the first Saudi EV brand Ceer, another beneficiary of the government’s sovereign wealth fund.

This month Saudi Arabia also signed a $5.6 billion deal with Chinese EV producer Human Horizons for a joint venture focusing on research and development of automobiles.

The manufacturing projects aim at meeting national EV targets. Saudi Investment Minister Khalid al-Falih said this year that the country aims to produce 500,000 electric cars annually by 2030 while under the Vision 2030 reform plan, there are plans to make 30% of all vehicles on the road in Riyadh electric by 2030.

Limits to competitiveness

Yet as a late entrant to EV production, Saudi’s industrial advantages may only take them so far.

“Saudi just wants a seat at the table of the global battery value chain – keeps them relevant and too important to ignore but despite all talk of Vision 2030, Saudi will be more of a capital allocator,” Mehdi said. “Saudi’s competitive advantage only goes so far.”

Further, oil looks likely to remain central to the Kingdom’s economy.

“Saudi Arabia is still the lowest cost oil producer and the margins on oil exports are extremely high,” Mehdi said.

Oil made up 71% of Saudi Arabia’s total export revenue in 2021, according to OPEC.

 

Source: Benchmark

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