Total makes $1.1bn battery bid for foothold in the new oil

French oil and gas conglomerate, Total, has made a bid to acquire Saft, the Paris-based battery specialist for $1.1bn.

The news, broken by Bloomberg, is the first major foray by a fossil fuel producer into what is emerging as a major new growth industry.

Saft is a specialist producer of a variety of different battery types including lithium ion technologies in aerospace, utility and transport applications. The French company invested $76m into battery R&D in 2015, the equivalent to 9% of its sales.

Mass producing lower cost and denser lithium ion batteries is the key to cracking the renewable energy conundrum that has failed to take off since developments began in the late-1990s.

The battery industry has only seen serious investment in R&D over the last three years, however Benchmark Mineral Intelligence is now tracking at least 12 lithium ion megafactories due to come online by 2020.

Committed investment into new lithium ion battery capacity is in excess of $15bn – a figure that does not include any recent acquisitions such as Dyson’s purchase of Satki 3.

Total is seeking to use the acquisition of Saft to partner with its SunPower division, a producer of solar modules for solar energy capture, a business it purchased in 2011.

Lithium ion batteries are at the centre of a real convergence of three multi-billion dollar industries: energy, auto and technology (see chart).

Covergance Trend

Solar energy is expected to be the biggest beneficiary of the energy storage revolution, a trend which is being aided by improving economics.

Production cost of solar cells have fallen from $5/wh to 30 cents in 2016. Meanwhile the cost of producing lithium ion battery cells has dropped from $1,200/kWh to $250-300/kWh in the same time period.

While the solar industry has gone through its boom, bust, and real growth cycle, lithium ion batteries are just getting started.

Both technologies are widely tipped to go hand in hand, a strategy that a number of tech-industrialists are seeking to follow, including Tesla Motors’ Elon Musk who owns Solar City in California.

Total follows Rockefeller, Gates

Total’s ambition to enter the battery industry echoes a new policy from The Rockefeller Family Fund to exit all investments in the fossil fuel industry.

The $4bn fund that built its fortune from oil and was created by descendants of the grandfather of the global oil industry, John D Rockefeller, announced in March that it will divest from all fossil fuel holdings “as quickly as possible”, of which ExxonMobil is the highest profile.

It also follows the move by Microsoft founder, Bill Gates, to launch the Breakthrough Energy Coalition (BEC) in November 2015, a new initiative that will invest in the low carbon economy supply chain.  an industry that includes lithium ion batteries and precursor raw materials such as lithium, graphite and cobalt.

This sector includes lithium ion batteries and precursor raw materials,  supply chains for which must develop and increase capacities at a rate never seen before in order to feed the world’s growing hunger for batteries. For example, Benchmark estimates that the battery grade graphite sector will need to grow at least three fold in four years to keep pace with demand.

The BEC has a team of 28 of the world’s wealthiest individuals, with a collective wealth of over $400bn, including Facebook’s Mark Zuckerberg, Virgin Group’s Sir Richard Branson and Alibaba’s Jack Ma.

While Total has made no statements on the future of the oil industry, its strategy is clear with a multi-billion dollar bet that energy storage becomes the new oil.

Now watch the rest of the oil majors follow.

2 thoughts on “Total makes $1.1bn battery bid for foothold in the new oil

  1. Hi
    I read with interest you blog post projecting the growth of the battery grade graphite sector at up to 40% CAGR over the next 4 years. This may be low. LG predicts growth of 70% this year
    and of course Telsa pulled forward their production target of 500K cars to 2018.
    I agree that this is the evolution of a major new energy source, and similar to the invention of the microprocessor 50 years ago, this inflection point for batteries will enable completely new industries to evolve.
    The caveat you mentioned as a factor which may impede growth: “barring supply constraints” is a good one. I think this will have to be solved by the market fairly quickly.

  2. This is another sign of diversification in the oil industry. Saudi Aramcco is following same tactic. It will take some time. Those primary fossil fuel corporations starting earliy. will meet success.

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