Oil & Gas Innovation Summit Surfaces Three Key Themes for the Sector
Cleantech Group convened its first official Oil & Gas Innovation Summit on May 8-9, 2013, in Calgary, Canada, in partnership with the Government of Canada, Cenovus Energy, General Electric, and Sustainable Development Technology Canada (SDTC). This small, invite-only gathering brought together some of the most important companies in the Canadian Oil Sands and a number of the world’s Oil & Gas majors to discuss the evolving ecosystem of venture-driven innovation in the sector, as well as to evaluate eight early-stage startups that we handpicked to present to the audience on diverse topics including upgrading, water treatment, and pipeline technologies. Based on strong feedback in favor of reconvening this group annually, if not more frequently, we are already planning a second Summit in 2014 and are exploring new formats to create additional value for the attendees.
Over the course of this two-day event, three key themes stood out – together they point toward an overarching need to develop a collective vision for external innovation in the Oil & Gas sector and to build deeper alignment between all constituents within the ecosystem.
- Corporates must continue to clarify their strategic objectives. In these relatively early days of corporate venture capital (CVC) activity in the sector, corporates highlighted the need for critical introspection: “Why are we here? What are we trying to do?” The consensus appeared to favor prioritizing project deployment over technology sourcing, but with only 17% of O&G deals in the last 5 years made in early-stage companies, balancing pipeline development with commercial acceleration will remain a long-term challenge if unaddressed. (That rate decreased 26% from 2007-2009 to 2010-2012.)* By internally reconciling their roles versus traditional vehicles of organic growth—R&D and M&A—CVC units may facilitate greater collaboration with external parties (e.g., peers, VCs, entrepreneurs, government) who will better understand how to effectively align their interests with CVC priorities.
- Calgary has an opportunity to be a leading innovation cluster (if it can open and expand its ecosystem). Oil & Gas innovation in Calgary traditionally resembles a “blackbox” of personal, relationship-driven deals, a dynamic that poses major barriers to entry. Corporates (and VCs) have responded by increasing their local presence, but they recognize that external innovation will deliver more strategic value through an ecosystem approach: sharing best practices between peers to increase efficiency (e.g., how to best enlist support from operational units); establishing strategic partnerships to provide multiples of leverage to each investment dollar; and aligning on a common messaging platform to more clearly articulate pain points to entrepreneurs and investment criteria to VCs and other potential partners. A successful model would be compatible with Calgary’s unique characteristics while facilitating greater two-way exchange with external ideas and markets.
- Adjacencies are critical to strategic growth for Oil & Gas. Corporates and others acknowledged a strategic imperative to mine adjacent markets for breakthroughs, failing to do so at risk of obsolescence in the face of new competitive forces (e.g., US shale gas production). (Peter Tertzakian, Chief Energy Economist & Managing Director of ARC Financial Corporation, hammered this home in brief remarks before the audience.) The Oil & Gas industry must first collectively determine and communicate the areas where it sees the most potential value before being able to collaborate with adjacent industry leaders at scale, be it in materials, automotive, or big data. At the same time, there are bound to be intra-sector opportunities to explore new applications for existing technology (e.g., oil sands to offshore, Canada to South America, or vice versa). For now, policy engagement is seen as non-critical to catalyzing innovation in Oil & Gas, though that need may grow as the innovation ecosystem becomes less industry- and/or region-bound.
In addition to keeping tabs on these themes, Cleantech Group will continue to assist in providing insight and research on innovation in the sector, particularly through our new conventional fuels taxonomy in i3, which now captures Oil & Gas deal activity more effectively than before. According to Cleantech Group’s research*, industry participation by Oil & Gas in cleantech-related deal flow in 2010-2012 increased 29% compared to 2007-2009, second among all industries in that timeframe by growth rate. This year, global venture investment in conventional fuels sustained solid quarter-on-quarter deal flow for the first time in two years, with 12 deals closed in 4Q12 (totaling $33.1 MM) and 13 deals closed in 1Q13 ($47.5 MM), compared to fewer than 3 on average in the preceding seven quarters.
We believe that deal activity in the sector will increase further as Oil & Gas players look for more resource-efficient, cost-effective, and environmentally sound ways to capture value from unconventional energy resources. The role of innovation in the development of these market opportunities will only expand, and we at Cleantech Group will continue to play a lead role in advising and convening leaders on innovation in the sector.
Companies in attendance:
BASF Venture Capital, Chevron Technology Ventures, ConocoPhillips Technology Ventures, Enbridge, Encana Corporation, Hatch, Newalta Corporation, Saudi Aramco Energy Ventures, Schlumberger, Statoil Technology Invest, Suncor Energy, Altira Group, Braemar Energy Ventures, Chrysalix Energy Venture Capital, Energy Ventures, EnerTech Capital, Rockport Capital, and Export Development Canada