According to CB Insights, corporate venture investments by oil and gas corporates have been propelled to highs like never before in 2016 and 2017. It’s quite the turnaround story given the investment dip albeit a marginal one on the heels of the oil price crash in 2014. Many of the investments made were in clean tech startups and tech startups which lend themselves to bettering business and technical operations.
Integrated oil companies – such as the likes of Chevron and British Petroleum - have contributed significantly to corporate venture capital (CVC) investments by the industry over the past decade.
Integrated oil companies are international and state-owned companies with varied operations across the oil and gas value chain. Such companies receive incentives when they invest in technologies that could eventually phase out hydrocarbon-generated energy and decrease the cost of fulfilling existing fossil fuel demand. Such companies are highly susceptible to industry risks environmental, political, and execution-wise in nature.
CB Insights data show that investment activity of a selection of the largest and most active companies across the industry’s value chain stick to a few key areas.
Investments made in clean tech more often than not focus on three areas: alternative energy (in companies dealing in wind, solar, hydro and advanced batteries); alternative materials (companies that develop products that could replace petrochemicals; and environmental impact (companies with technologies which mitigate the environmental impact of burning hydrocarbons — carbon capture, home energy efficiency, and vehicle efficiency).
A second key area of investment was in operational improvement; technologies which offer the potential to enhance operations in the oil and gas industry. Startups in this category offer Internet of Things (IoT), analytics, and reserve replacement and enhancement capabilities. Startups working with conventional energy too received attention from the industry’s behemoths; these companies develop products that use hydrocarbon generated energy.
In 2011, clean tech admittedly had seen investment drop after the much publicized bankruptcy of Solyndra, an event CB Insights reports paved the way for a decrease in funding and public interest in renewables. However interest is rising with CVC investment in clean tech increasing year on year since 2014 to reach record levels in 2017.
In the third quarter of 2017, an integrated oil company from France, Total, claimed a $285 million minority stake in renewable asset operator Eren Groupe valued at $1.2 billion valuation. In the fourth quarter of 2017, BP purchased a minority stake worth $200 million in European solar developer Lightsource.
In 2018, the Anglo-Dutch oil giant, Shell, put in $217 million in a solar energy developer Silicon Ranch in a secondary market round.
Since 2011, investments in operational improvement technologies have increased. Not surprising given the advances made and increased commercial use illustrated for connected devices, IoT, analytics, and automation. Also in the fourth quarter of 2017, Maana, which analyses data generated by industrial operations, raised a $28 million C round from investors which included the VC units of Chevron, Saudi Aramco, and Shell. Chevron and ConocoPhillips Technology Ventures participated in Maana’s series A in 2014.
Integrated oil companies make up 80 percent of those from the industry who participate in funding since 2008. Other industry players making up the remaining 20 percent of those invested include independent exploration companies, oilfield service providers, and independent refiners.