Technology Network

As the probe into the Gulf of Mexico oil spill continues, a number of organizations headed to boardrooms to brainstorm about consortiums, drilling regulations and safety game plans, all in the name of avoiding a repeat of the incident.

Eventually, initiatives from the sessions began to emerge. In July, Exxon Mobil Corp., ConocoPhillips, Chevron Corp. and Royal Dutch Shell revealed plans to build and deploy a rapid-response system that will capture and contain oil in the event of a future well blowout in the deepwater Gulf.

Also, in early July, several global energy investors joined to form the Oiltech Investment Network, which aims to provide a platform to connect oil and gas technology entrepreneurs with prospective investors and customers. Oiltech will also provide opportunities for E&P and service-company technology managers to engage with portfolio companies that are supported by the network members.

Current venture-capital investors include Chevron Technology Ventures, Energy Ventures, Epi–V, Lime Rock Partners, SEP, Shoaibi Group and Viking Venture. The network is managed by OTM Consulting. The initial members have invested more than $950 million in more than 50 oil and gas technology companies in the past five years.

Chris Dudgeon, managing director of OTM, says, “We believe the Oiltech Investment Network is the first of its kind in the world and has been established after we identified a need to bring together investors and the next generation of oil and gas technology entrepreneurs.”

Greg Herrera, partner, Energy Ventures, adds, “The network provides a crucial link between entrepreneurs, investors, service providers and end-user E&P company customers, and will facilitate increased dialogue between all parties who have an interest in developing products and services that create long-term value for the industry.

“Energy-venture specialists have been working on this idea for years,” Herrera adds. “We wanted to develop a vehicle that would encourage technology entrepreneurship in the oil and gas market, using the weight of our gross funding to create a platform for the best critical mass of new technology that could assist operators in development and exploration plans.

“We were also hoping to maximize the quality of technology-investment opportunities in the upstream space.”

Oiltech plans to host several entrepreneur sessions where companies and technology developers can meet member execs and get advice about what they’re trying to accomplish. An advisory workshop for potential entrepreneurs was held in Aberdeen, Scotland, this fall, and a technology showcase is also in the works.

“The oil and gas industry is very slow to adopt new technologies; typically, it can take up to 30 years for a new technology to become standard. One of the challenges is that our industry is not configured to drive the adoption of new technologies because of the perceived risk involved. The way to go forward is to develop new technology with funders that are appropriately developing it in conjunction with the operators.

“We hope to create an information and funding portal through events and the Internet for operators that are having difficulty developing their assets. If we can do that, we can accelerate the technology-adoption process and reduce the hurdle rate for oil and gas developments, with the goals being safer, low-cost production.”

In terms of environmental and safety regimes, the network is investing in companies that are product-based in addition to some that are knowledge-based.

“When looking at events like BP Macondo, ultimately was that a failure of technology, process or simply an accident of nature? We may not know until much later, but in identifying areas where advanced technology could provide an early sounding system, this is definitely an example of where it can help mitigate risk in the future.”

During industry downcycles, more pressure is placed on service companies and operators to meet forecasts. The OIN hopes to bridge the funding gap that can result, by creating a platform where technology investment can always move forward, in spite of market conditions, Herrera says.

“We have a huge job to do in terms of marketing the network as the go-to place for the operator community to get involved in the development of new upstream technologies without taking too much risk.

“But we have almost $3 billion of investment firepower, so the capital is there along with the technological ideas. We just need the industry to help get these technologies adopted.”

—Bertie Taylor