Oil Giants Lean on VC Units in Transition Push

Copyright © 2021 Energy Intelligence Group

Oil and gas companies trying to navigate the energy transition are relying more and more on their venture capital and entrepreneurial programs. They see these units as tools to find and develop solutions they can either turn into profitable businesses or incorporate into their own strategies around clean technology and decarbonization.

The push into venture capital by most of the largest traditional oil and gas companies has been steadily growing for years. But it is taking on new urgency — and focus — as pressure mounts to pivot into more sustainable business models. Equinor Ventures, for example, plans to deploy some $750 million over the next five years into the clean energy space. The company is looking for ways to advance opportunities for its own transition, with an eye on addressing the challenge of fighting climate change while still delivering the energy the world needs, says Gareth Burns, vice president of Equinor Ventures.

As a corporate venture capital fund, Burns says, Equinor is ultimately looking for ways to gain insight and exposure to promising technologies while also making profitable investments. But it must strike a balance between simply gaining strategic insight and getting a financial return over time, he told the Energy Intelligence Forum 2021 last week. He said Equinor has had a “small handful of big financial successes” in its investments. To wit, last month, portfolio company Corvus Energy, a maker of marine batteries, announced plans for an initial public offering in Oslo. Equinor’s 15.6% stake is expected to fetch a decent return.

Similar Endgames

Mandates and strategies differ by company, but the end goal is largely the same: use the existing corporate infrastructure — access to capital, facilities and expertise — to smooth out the bumpy early roads that nearly every start-up endures. Then, accelerate promising innovations that can have immediate and lasting impact.

“We take away a lot of the pain points of start-ups to allow them to focus on two things: building a product and selling it,” says Miriam Eaves, head of origination for BP Launchpad. Launchpad, formed in 2018, “sits alongside” BP’s more traditional corporate venture arm as an “innovation engine” that helps build and scale digital-focused companies that are adjacent to BP’s core business and are “enabling” of BP’s strategic aims of becoming net zero by 2050, Eaves says. The portfolio companies exist, initially, as separate entities, but BP is the majority shareholder. The aim is to transition the companies into "big businesses for BP" within five to six years, or spin them off if they prove less strategic, she says.

Launchpad announced its latest acquisition last week, its eighth since formation. It is US-based Blueprint Power, a technology firm that aims to turn buildings into a “flexible power network” by connecting them to energy markets through cloud-based software. The company currently works with five of New York City’s largest real estate owners who together generate 13 megawatts of renewable power. With BP’s support, Blueprint now hopes to nearly triple that capacity to 36 MW by the end of 2022 and launch in several other major US urban power markets. It is “exactly the type of company BP wants to scale and scale fast through our BP Launchpad accelerator,” the company said in a statement.

Big Oil Welcomed, Usually

Not every clean-tech entrepreneur is eager to form partnerships or take money from companies associated with Big Oil. Eaves says there have been occasions when BP’s overtures to invest have been flat-out rejected for that reason. But more often start-ups embrace the opportunities offered by these partnerships, she says. In the case of Blueprint, Eaves said the founders “had lots of optionality in capital choices … but their analysis showed that what we brought to the table was going to help them scale faster.”

Burns said he has encountered only one company in his more than six years on the job that was unwilling to take capital from the company. “The vast majority of our new capital is focused on clean tech and the energy transition, and as such hopefully is also a demonstration of our commitment to the space,” he told the Forum panel.

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