OTM Consulting, London
If you've ever had an idea for a great new invention for the oil industry but wondered how to get the financial backing you need to produce and market it, you should have been in Houston on Feb. 9. If you had attended the Energy Technology Capital Conference (ETCC), you might have gotten answers to some of your questions about commercializing new energy technology.
One group of influential investors representing the Oiltech Investment Network (Oiltech) participated in a panel discussion in which they presented the results of a technology commercialization study conducted among operators, oilfield service companies, investors, and innovators.
Oiltech is a consortium of 10 global investors in upstream oil and gas technologies who joined together in 2010 to form the network. The key objective of Oiltech is to encourage entrepreneurship and maximize the quality of technology investment opportunities within the oil and gas sector. Members of Oiltech collectively have invested over $950 million in more than 70 oil and gas technology companies over the last five years.
Oiltech members include Altira Group, Chevron Technology Ventures, Energy Capital Management, Energy Ventures, Epi-V, Investinor, Lime Rock Partners, SEP, Shoaibi Group, and Viking Venture. They are based in North America, Europe, and the Middle East.
The network collaborated with the Houston Technology Center (HTC) to launch the first of many Oiltech events planned in the US. The ETCC was organized by HTC and attracted more than 250 delegates this year, including entrepreneurs seeking investment funding for more than 40 emerging technologies. Oiltech facilitated one-on-one meetings between its investor members and companies seeking funding, providing an opportunity for companies to showcase their technologies and business plans, discuss their investment needs, and explore potential routes to market.
One of the objectives of the network is to drive innovation by providing a platform to connect operator oil companies to innovative technology providers, and entrepreneurs to energy-focused investors. The network also ran an entrepreneurs' advisory workshop in Aberdeen [Scotland] in October 2010 that connected 29 upstream oil and gas technology companies to Oiltech members. The event provided a platform for entrepreneurial companies to meet with investors to discuss their technology offering in the hope of securing funding. The network hoped to replicate the opportunity by collaborating with HTC at the Energy Technology Capital Conference in the US.
Oiltech Investment Network members at Energy Technology Capital Conference in Houston on Feb. 9. (L to R) Chris Dudgeon, Trevor Burgess, Leif Andre Skare, Dirk McDermott, David Malone, and John Hanten. Photo courtesy of Oiltech.
OTM Consulting, an independent technology management consultancy in the upstream oil and gas sector, manages the Oiltech Investment Network. OTM recently completed the aforementioned technology commercialization study. The study analyzed case histories for more than 40 technologies, and participants were asked to assess key success factors that result in effective uptake of new technologies. The commercialization study findings were a springboard for discussions at the ETCC Oiltech lunchtime panel, which included five Oiltech members. The five ‘top scoring' commercialization success factors identified in the study, were discussed by panel members. These success factors are:
- Business need
- Value articulation
- Developer skills
- Operator engagement — the developer of the technology engages with and understands the real needs of end-users
- Operator involvement — the end-users of the technology are involved throughout the development and testing of the technology, and understand from an early stage the features and benefits of the new technology
Chris Dudgeon, managing director of OTM Consulting, served as panel moderator. He commented, "The study was a great opportunity to understand the key drivers in the uptake of technology within the sector. Technology products associated with oil and gas often take a long time to be implemented, and we wanted to identify why this was and how we could accelerate this process."
The study indicated that new technologies should be seen as a solution to a clearly defined business need. Leif Andre Skare, partner at Energy Ventures in Houston, added, "We closely track customers to ensure we understand their drivers and needs. We also look closely at timing — to confirm that a product can realistically be launched by the time a customer needs it."
The value of the product to the end-user must be clearly articulated and measured, said Trevor Burgess of Lime Rock Partners.
He explained, "No one will buy your product if you can't explain the value it will bring. A major success factor for companies is to show how the product will save end-users money, increase production rates or reduce operational risks. Technology developers need to be specific — how does their product do this? They should define the market areas where their technology adds value, and quantify that value. They should also explain the potential risks, and how these can be mitigated."
Another key success factor is the need for sufficient skills to be available to develop the product or technology within the developer's organization.
"You can't push a technology onto an organization; it needs to be pulled from within. The functionality of the product needs to justify the cost of introducing or replacing the existing technology," said John Hanten, venture executive for Chevron Technology Ventures.
A common pitfall for technology developers is misunderstanding the real needs of the end-user. Developers need to work closely with operators to offer solutions that really provide an answer to a problem that cannot be solved in any other way.
David Malone, chief technology officer for Shoaibi Group commented, "A key factor to success is to develop a sponsor within an end-user who believes in your idea. This will help you to develop your technology so that it becomes a valued product. You can't sell a technology, but you can sell a product."
The final point raised during the discussion was that end-users of the technology need to be involved throughout the development and testing stages. Operators (E&P companies) need to understand from the outset the features and benefits that the new technology will offer.
Dirk McDermott, founder and managing partner of Altira Group, highlighted the importance of domain expertise and knowledge transfer between technology developers and investors.
"Over the past 12 years I have learned the value of expert people within a portfolio company. They can make or break an organization. We invest in people who are experienced in their profession, and this has added value over and over again. Private equity funding can bring many benefits — money, experience, access to advisors, and additional investors. However, it is important to ask the question, ‘Who do I want to partner with over the next 5 to 10 years?' Great business plans don't always proceed in the way we would hope, and so it is important to have the right investor partner engaged to guide you through the tough times and also celebrate your successes."
Technology will play an ever more significant role in meeting increasingly demanding technical challenges and complex economic conditions. Entrepreneurs and innovators are the key to these developments, and the growing levels of investment and commercialization expertise provided by members of the Oiltech Investment Network will be a key factor in realizing the potential of new technologies.
Entrepreneurs wanting to connect with energy-focused investors, and end-users searching for innovative technology solutions should visit www.oiltechinvest.com to learn more. OGFJ
About the author
Jessica Rouse works for OTM Consulting and is manager of the Oiltech Investment Network. She has done extensive market analysis on emerging technologies for unconventional gas applications. She holds a bachelor's degree in chemistry from Cardiff University and a PhD in materials science from the University of Southampton.