Buffett's energy investment journey: partnering with Occidental Petroleum, a major holding, to establish a company and increase investment in lithium

Recently, the new energy industry has received major news: the stock god Warren Buffett is significantly increasing his investment in lithium, a key material in the upstream of the new energy vehicle industry chain. Buffett's Berkshire Hathaway company announced a joint venture with Occidental Petroleum, focusing on lithium extraction.

Lithium resources are known as "white oil," and its importance in the new energy industry cannot be ignored. Occidental Petroleum stated that they will utilize Berkshire Hathaway's geothermal brine resources in California and employ advanced Direct Lithium Extraction (DLE) technology for the commercial production of high-purity lithium compounds.

It is understood that Occidental Petroleum's wholly-owned subsidiary TerraLithium holds a patent for DLE technology, which can convert lithium-containing brine into high-purity lithium. BHE Renewables, a subsidiary of Berkshire Hathaway Energy, operates multiple geothermal power plants in the Imperial Valley of California, which can process large amounts of lithium-rich brine per minute to produce clean energy.

The joint venture has initiated a project at BHE Renewables' geothermal facilities to verify the feasibility of producing lithium using TerraLithium's DLE technology under environmentally friendly conditions. Upon the success of the pilot project, BHE Renewables plans to construct, own, and operate commercial lithium production facilities in the Imperial Valley of California. Additionally, the joint venture aims to expand this technology to other regions and develop more commercial lithium production facilities.

Buffett has been paying attention to the potential of geothermal lithium extraction for several years. The geothermal power plants operated by BHE Renewables not only provide a large amount of clean energy locally but also process geothermal brine rich in lithium elements. In 2019, BHE Renewables began promoting geothermal lithium extraction projects; in 2020, the project received approval from the California Energy Commission. If the project is successfully verified, commercial operations are planned to commence this year.

Furthermore, Occidental Petroleum is a major holding of Buffett, with a current stake exceeding 34%, making Berkshire Hathaway the largest single shareholder of Occidental Petroleum. It is reported that Buffett first invested in Occidental Petroleum in 2019 and began significantly increasing his holdings for three consecutive quarters starting from the first quarter of 2022. In early February this year, Buffett increased his holdings in Occidental Petroleum for three consecutive trading days, purchasing a total of 4.3 million shares.

Berkshire Hathaway's Class A shares fell 0.48% to $614,500 during Wednesday's trading session.

Occidental Petroleum's US stock fell 0.13% to $59.13 during trading.

According to reports, direct lithium extraction technology has significant advantages over traditional methods. This technology does not require complex ore mining and processing processes, extracting lithium directly from geothermal brine, greatly reducing energy consumption and environmental pollution. At the same time, it can ensure that the extracted lithium compounds have extremely high purity, meeting the demand for high-quality lithium in industries such as electric vehicles.

According to a report by Goldman Sachs, direct lithium extraction technology is considered a "potential technology that changes the rules of the lithium supply game." Once scaled up, this technology can shorten the extraction time of lithium from months to days, with extraction rates reaching 60% to 80%, making lithium-poor brine areas also valuable.

With the continuous growth in global demand for lithium, more and more oil giants are entering the lithium resource development sector. The International Energy Agency predicts a significant increase in the use of lithium batteries for electric vehicles and energy storage in the next twenty years. The World Economic Forum has forecasted a rapid increase in global lithium demand in the coming years.

In addition to Occidental Petroleum, U.S. oil giant ExxonMobil has also entered the lithium extraction industry. Last year, ExxonMobil announced the launch of a lithium production project in Arkansas, planning to achieve large-scale lithium production in the coming years to provide lithium resources for a large number of electric vehicles.

Furthermore, the national oil companies of Saudi Arabia and the United Arab Emirates also plan to utilize lithium resources in brine to achieve economic diversification and profit from the global electric vehicle market. Saudi Crown Prince Mohammed bin Salman is driving economic diversification by investing in the construction of an electric vehicle hub, with this foray into the lithium industry being a key part of his economic diversification strategy