Big energy dips toes in oily waters

There is a bookshelf in my office reserved for works of clean energy prophesy that are only a decade old but that now seem more out of date than Baden Powell’s 1908 ‘Scouting for Boys’. It includes the Hydrogen Economy, the End of Oil and the Last Oil Shock. This shelf serves as my shrine of ‘reality check’.

I mean no disrespect to the authors. Many shared their dreams, egged on perhaps by BP’s 2003 ‘Beyond Petroleum’ re-branding, which suggested that some in the hydrocarbon establishment might participate in their own overthrow. Very few foresaw the transformational impact of shale gas or the considerable progress of enhanced oil recovery and unconventional oil.

A decade on, though BP is still committed to advanced biofuels, it is selling out of wind and solar, and has decided to stick to its knitting in oil and gas. The same could be said of BP venturing. In 2011 BP Alternative Energy Ventures became plain BP Ventures. The name change reflects a renewed focus on technology that meets the needs of the core oil and gas business, which is symptomatic of the latest corporate venturing from ‘big energy’.

But that doesn’t mean that clean-tech is down and out. On the contrary, if you have superior water technology, BP and every other energy major’s corporate venturing units will be very keen to hear from you. Their water needs are growing considerably as they move into more water scarce regions, expand into unconventional resources such as shale gas and oil sands (which are much more water intensive), and as new regulations are introduced on their treatment of waste water.

“Our venturing is driven by the need for technology access. It’s not just about financial returns, though they should also be good,” says Dr Sandra Eager, BP Ventures Technology Manager, who spent last year consulting widely within the company before writing what is referred to internally as its ‘water investment thesis.’

“Seven key areas have been identified. Recycling and reuse is top because regulation is going to get tighter,” she says. “But EOR [enhanced oil recovery – using water and chemicals to recover less accessible oil] is equal top, which explains our interest in desalination technologies. Low salinity water is much more effective in EOR.”

At the time of writing, BP Ventures has a water treatment company in due diligence, has a “healthy pipeline” of other investment opportunities, and is prepared to invest across all stages (including seed funding).

New venturing units set up over the last two years by Statoil, Saudi Aramco and Shell also have an express interest in water. The venture teams at Total, Cenovus and Chevron have been around slightly longer and have made water technology investments.

High efficiency desalination technologies (such as forward osmosis) and advanced contaminant removal (such as electrocoagulation) are emerging as hot sub-sectors. Companies that enable water solutions without being water technologies themselves (such as new water-light chemical fracking fluids) will also get a good hearing.

Investment models are beginning to emerge which see corporate and institutional investors working together with industry partners. NanoH2o, a pioneering Californian desalination technology company, is a good case in point. Its investors include chemicals giant BASF, oil and gas major Total and Silicon Valley venture heartthrob Vinod Khosla. Veolia Water Solutions and Technologies is also involved, but as a partner, not an investor.

“[BP] will be happy to invest with other oil majors and alongside institutional investors. We have common interests and complementary skills,” says Dr Eager. “And we’ll be happy to see the likes of Veolia, GE and Schlumberger also involved. They are, after all, a natural exit for these companies. We just want access to the technology.”

I am reluctant to make prophesies, particularly about the future. But I am confident that good water technology companies have investors that want to talk to them.

Disclosure: Veolia sponsors LEIF and Global Corporate Venturing’s reports on ‘Water Innovation in Oil and Gas’.

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