The calls for change and transition in the industry are ubiquitous and emanating from within and outside of the industry. The wide spectrum of the changes and the speed of implementation being demanded are dizzying and point to an undeniable but not insurmountable challenge: a need for balance.
Is there room for change? Certainly. Mitigation of flaring and emissions, attention to sustainability, and technologies for more-efficient exploration, production, and operations are among the many advances continually being researched, developed, and applied. And, some would argue, the pace is too slow.
Innovations arise from fresh ideas and move the needle on how our business is conducted. Digital technologies touch every aspect of exploration and production. Improvements in drilling and in understanding the dynamics of reservoirs led the wave of recent emerging innovations.
The question now becomes where will the funding come from to push the needle further? Is it the case that the “easy” solutions have been developed and that the efficiencies sought now require the equivalent of scaling Mount Everest in innovation and adoption?
Achieving a balance is necessary to produce fossil fuels with improved efficiencies and environmental stewardship—while relying on a lower price/bbl. Operators, large and small, have tightened their budgets and shifted priorities, and the economic slowdown has generally crippled global investment budgets. What’s left for R&D, new ventures, and startups?
From 2006 to 2011, venture capital (VC) firms spent over $25 billion funding clean energy technology startups and lost more than half of that money, according to an MIT report in 2016. MIT concluded that cleantech companies developing new materials, hardware, chemicals, or processes were poorly suited for VC investment because they had long development timelines, required significant capital, and were unable to attract acquirers.
Startups developing software solutions fared better. As a result, VCs have shifted investments in this sector from hardware and materials to software. A November 2019 JPT article highlighted investments by large producers and upstream venture firms of at least $70 million over a few months in seven emerging innovations. Of these, five were software products. A JPT article in January reported that from October 2019, a handful of startups raised a sum nearing a quarter of a billion dollars—the majority involved in software applications.
In a recent SPE Live, Barbara Burger, the president of Chevron Technology Ventures, emphasized that technologies that can bring clear value to Chevron by improving its understanding of the subsurface, drive efficiencies in drilling, or ensure asset integrity have a chance of earning the company’s investment. She added that current market conditions are limiting new funding and leading CTV to … “prioritize more.”
Investors are setting defined priorities to guide startups in identifying critical technology gaps. And startups are becoming judicious in their valuations and planning. Innovation and industry are redefining a balance to move both forward in achieving the goals of both.
