This interview is an extract from the 2014 LEIF Brief on Water Innovation in Oil and Gas, in association with Global Corporate Venturing, which will be published on November 12th.
Total Energy Ventures (TEV) is the corporate venture arm of French oil and gas major Total. Its investments support the development of companies with innovative technologies and business models in areas such as energy efficiency, energy storage, smart grid, renewable and alternative energies, industrial water, gas monetization, waste upcycling, greenhouse gas reduction, oil and gas, sustainable mobility. Initiated in 2008, it has performed 18 investments (as of October 1st 2014), including 15 direct investments.
1. How focused is Total Energy Ventures on water-tech?
We have been actively looking into this sector for several years, reviewing over 150 prospects, including a dozen with in depth evaluation. Our water deal flow remains very active, as the challenges associated with water production and usage are stimulating many entrepreneurial initiatives to bring innovative solutions. TEV’s first water deal is NanoH2O, with investment in series C in the spring 2012. It is also our first exit, earlier this year with the sale to LG Chemicals. We are currently reviewing several water opportunities.
2. How does Total’s water-tech needs differ from region to region,between sectors (unconventional and conventional) and from upstream to downstream?
Indeed, water is a global topic with very local specificities across geographies. Key challenges are water availability and more stringent regulations. All activities of Total are faced with water-related issues (exploration and production, refining, chemicals, marketing and new energies) , but with very different situations. Main challenges are to design and operate water solutions to handle more complex water streams (with high variation of flow, composition and concentration) to meet more severe specifications while minimizing fresh water uptake in the natural environment, energy consumption and wastes disposal. From a technology view point, it is very much a tool box approach to tailor solutions to specific needs. The tool box encompasses conventional physical, chemical, and biological treatments, with emerging novel processes, equipment and new combinations of equipment and processes. The trend is clearly to enlarge the tool box and develop system
engineering capability. There is also interesting activity in water analytics and sensors, to improve overall efficiency and reliability of water related operations.
3. What are the particular challenges of commercialising watertech that is focused on the oil and gas industries (and other giant conservative industries)? What are the right investment strategies for this industry?
As in other capital intensive industries, whose billion dollars assets are expected to operate without compromising safety and reliability, innovations must bring clearly measurable and proven added value without compromising safety and reliability. Hence for technology developers and marketers, it is critically important to understand the specific requirements of the overall industrial environment in which their innovation is expected to be deployed. Innovators’ ambitions should be to solve serious pain points while minimizing initial disruption for oil and gas operators, to gain acceptance and market traction. Another critical aspect to take into account is to understand how the different actors involved along the value chain (OEM, system integrator/water solution designer, EPC, operator, asset owner…) will manage their respective risk/reward exposure to the innovation.
4. How does Total work with Total Energy Ventures’ portfolio companies? How does it help them commercialise?
Each portfolio company is different and calls for tailored support, ranging from R&D collaboration, pilot testing, licensing, joint marketing/ logistics/production /supply agreements. For water-related innovations, most likely type of support would be R&D, pilot testing, supply agreement, depending on the maturity of the solution. Total will also open its networks to access in house technical/industrial/HSE/market expertise as well as partners, customers, talents, funding…..
5. Why did you invest in NanoH20? To what extent was this a strategic investment rather than financial?
NanoH2O presented a very interesting profile combining truly innovative and differentiated technology with good IP, clear value proposition to customer (up to 20% reduction on the energy bill), low disruption in the value chain (drop in solution which can directly substitute existing membranes, no need to fundamentally change the basis of design for new units, no need to change operating procedures…) and a strong team, both on the technical side (ability to keep leadership role in bringing new technology serving the needs of customers) and on the operations and commercial side (water and membrane industry experience). Another important criterion was the syndicate: TEV co-led series C with BASF Ventures and Beijing-based Keytone Ventures, early VC investors Khosla Ventures and Oak Ventures also participating. As for any TEV’s portfolio company, its financial profile at the time of first investment was compatible with TEV’s risk appetite. Equally important in the investment decision was the opportunity to bring advanced solutions and enhanced performance for Total water treatment operations and future projects. The dual “water/energy efficiency” play was also an attractive feature, as energy efficiency is a top priority for Total.
6. How big a landmark in water-tech investing is your and your coinvestors’ exit from NanoH20? Do you expect to see more investors now interested in water-tech?
NanoH2O’s exit to a leading Asian industrial player looking for market validated technical innovation is a very positive signal for the water-tech and broader clean tech ecosystem, paving the way for other stories combining differentiated and market-focused technology, strong team with relevant background and investor syndicate bringing complementary skills and support. The future will tell if NanoH2O’s success will attract more investors to this space; watertech, like other clean-tech targeting industrial markets, will remain challenging for investors lacking the ability to understand the full value chain in which innovation will be deployed with corresponding risks and opportunities for key actors involved.
7. What water technologies hold most promise for solving water problems of the oil and gas industries? Or to put it differently, where are technology break-throughs most required?
Future solutions to water challenges will come from different “technical horizons” such as novel materials and coatings, advanced chemistry, biotechnologies and smart sensors. They will require a system-based approach to optimise the ever more severe set of technical and economic requirements, the environmental constraints as well as the challenges of smooth integration with core industrial operations of oil and gas production. Technical breakthrough in the fundamental disciplines contributing to the hardware (materials science, chemistry, biology ..) are welcome to open new avenues, alongside other “enabling” technologies such as sensors, IT and data analytics. The winners will be able to develop a system-based approach to design integrated solutions tailored for robust operations.