Hello from Houston, and welcome back to Energy Source.
A story plug to start: in this Big Read, Jamie and I take a deep dive into the boom in offshore drilling. Companies will spend more than $100bn plumbing the depths for oil this year — the highest level since 2016.
I flew out to Shell’s new Vito platform in the Gulf of Mexico to see the deepwater renaissance firsthand. The industry says its new model for offshore drilling is cleaner, safer and more efficient. New technology is allowing it to drill deeper into the earth’s crust and pump oil from previously unreachable wells.
Environmentalists, meanwhile, are worried about another catastrophic spill similar to the Deepwater Horizon disaster of 2010. They also say pumping billions of dollars into long cycle oil production means locking in carbon emissions for decades to come.
Elsewhere, Donald Trump is rapidly building out his energy team, nominating oil boss Chris Wright to be his energy secretary.
But the topic of today’s newsletter is graphite. We take an exclusive look at a new facility opening in Malaysia, as countries battle to compete with China for a crucial battery material.
Any thoughts? You can email me at [email protected]
Thanks for reading. — Myles
The scramble to take on China in graphite
A new graphite facility will open in Malaysia today — with a novel approach to creating the battery material — as the world scrambles to break China’s stranglehold on the industry.
Nasdaq-listed Graphjet Technology is starting up what it touts as the first commercial-scale “green graphite” facility using palm kernel shells to create a synthetic version of a material in which China reigns supreme.
“China actually dominates the whole world on graphite materials,” said Aiden Lee, chief executive of Graphjet. “And graphite is such a critical raw material for batteries.”
“China is so smart that the government has spent hundreds of billions of dollars just to fund their . . . government-linked companies to dominate the world.”
China produced the vast majority of natural graphite and almost 70 per cent of the world’s synthetic graphite in 2022, according to Benchmark Mineral Intelligence.
Last October Beijing imposed export controls on the material — as it has done with a host of other battery minerals — in response to US restrictions on technology sales to Chinese companies. It now requires special export permits for three grades of graphite.
Additionally, the US has imposed new rules to force manufacturers to stop sourcing from China in the coming years just as demand is expected to soar.
That has turbocharged a scramble to produce graphite — used in the anode side of lithium-ion batteries — in other parts of the world.
But creating new supply chains, almost from scratch, is not easy. The chief executive of Albemarle, the world’s largest lithium producer, warned last week that it was not economically viable to build a western supply chain that could wrest control of critical minerals from China.
To date, much of the effort to reshore battery materials production has focused on the cathode side — including increasing western lithium production — while anode generation has received less attention.
“In North America and any part of the [world] we can easily source cathodes,” said Lee. “But without anodes you can’t produce a good battery.”
China’s growing export curbs have focused minds — but the construction of new facilities is taking time. Graphjet argues its lack of reliance on traditional coking commodities, due to its novel production method, leaves it less exposed.
The new facility in Malaysia will produce 3,000 tonnes of graphite per year, just a fraction of China’s vast 1.5mn tonne capacity.
Graphjet plans to move into the US, with plans to build another facility outside Reno, Nevada, though it did not say when. It wants to produce 50-100,000 tonnes per annum within five years.
Shifting US policy on clean energy complicates matters, however. Donald Trump has vowed to gut the Inflation Reduction Act, President Joe Biden’s landmark climate legislation, when he takes office — including tax credits designed to boost the electric vehicle industry.
But at the same time the president-elect’s animosity towards Beijing will probably encourage companies looking to undercut reliance on China for battery materials.
Lee said he was unconcerned about any immediate shifts in policy — and hopes Tesla boss Elon Musk’s role within the administration will play a part in encouraging support for raw material industries such as graphite.
“It doesn’t matter whether Democrats or Republicans take over the White House, I think the EV industry still has to move on,” he said. “But it’s just a matter of timelines and how quick the changes are — and how are we going to mitigate the risk of trade war between the US and China.” (Myles McCormick)
Power points
Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.
Read the full article here