Tag Archives: Chevron

Big Oil Meets Energy Storage


French oil major Total has made a billion-dollar bet on energy storage with its purchase of Saft – complementing its existing stake in solar major Sunpower and other investments in distributed generation. This move is just an opening salvo in a Darwinian competition emerging among energy supermajors to get ahead of the future of the power sector. The remaining energy storage landscape offers oil firms few appealing opportunities to respond – but they should aim to make deals nonetheless, and changes in the energy landscape mean that doing nothing is an even worse option.

By: Cosmin Laslau

The Landscape Is Changing for Oil & Gas Corporate Venturing Groups, but Value Can Be Found

Corporate venture capital (CVC) groups at major oil companies are vital to the oil and gas start-up ecosystem. They have an equity stake in about half of all oil and gas start-ups that have raised funding. However, oil companies have also committed hundreds of millions of dollars to petroleum substitutes like biofuels, solar, and wind. Among the top eight CVCs’ investments in unique start-ups since 2005, they have publicly announced investments in 153 unique start-ups, 37% of start-ups are focused on oil and gas substitutes, with BP and Total leading the effort. However, there is more to the story than the high level numbers.

After a brief period of experimentation, oil majors have shifted their focus from renewable power and alternative feedstocks to focus back on oil and gas. While the number of deals has remained relatively consistent, averaging 22 transactions per year, the share of renewable power and alternative feedstocks deals has dramatically decreased, from 79% in 2010 to just 16% in 2015. Unlike traditional venture capital firms focused purely on financial results, CVCs theoretically aim to invest in technology that add value in their operations. Given oil majors did not have major businesses dedicated to renewable power or alternative feedstocks, their operations did not benefit from these investments. Similarly, CVCs could not add value beyond their cash (i.e. field trials, technical expertise, industry knowledge, etc.) to the start-ups they invested in, which is counter to the true value of a strategic investor. Little surprise, therefore, to see the oil and gas CVCs progressively retrench back to their core. With the exception of Statoil, most oil majors have plans to exit the alternative feedstock and renewable power generation space to focus on technologies more closely aligned with their core business. Oil and gas technology start-ups accounted for 84% of investments in 2015, up from 21% in 2010. That said, while the new investment strategy might be financially beneficial in the short term, it may leave oil majors vulnerable in the long term.

Among the top eight CVC groups, Chevron and Shell have the strongest track record of success. Continue reading

What Are the Major Alternative Fuels Interests of Oil Majors?

As the alternative fuels industry diversifies and scales up, financing is always the key to technology commercialization. While several sources of financing drive the whole industry forward, we investigate the trends of corporate financing from oil majors, based on a non-exhaustive database of over 1,000 deals and partnership engagements from 2000 through September 2014. With the focus on financial engagement, we only look into the private placement, equity stake, joint venture (JV), mergers and acquisitions (M&A), other than general partnerships. For example, we counted BP’s bioethanol JV plant with British Sugar, but we didn’t include BP’s research work with the Energy Biosciences Institute. We then drew a graph based on the investment counts (rather than invested companies) of the seven most activate oil majors in our database, namely, Shell, BP, Total, Valero, Chevron, Petrobras and Reliance. Particularly, repeated investment activities on the same company would be counted as multiple. We further sorted the investment by six core technology families – algae, biomass to sugar, catalysis, crop development, fermentation (and enzyme development), and pyrolysis/gasification.


From our analysis of their activities in the alternative fuels industry, we find that:

  • BP leads the investment frequency in a variety of technology families. Particularly, it has a strong focus on the crop development by transgenics and breeding, with repeated investments made to Chromatin (client registration required) and Mendel Biotechnology (client registration required). It also continues investing on biomass to sugar technology including to handle cellulosic biomass, such as REAC Fuel (client registration required).
  • Shell is not a fan of crop development, but has a wide coverage on other technologies. For example, it invested on multiple rounds and formed a JV with Iogen (client registration required), but terminated the JV in 2012. Then the oil giant formed partnerships and JVs with Codexis (client registration required), Cosan, and Novozymes to continue its interests in cellulosic ethanol. Shell shifted its shares in Codexis to Raizen, its ethanol JV with Cosan and “formed the largest sugar and ethanol company in the world”. It also partnered with Virent (client registration required) on the biomass catalytic conversion to produce renewable gasoline, and Cellana (HR BioPetroleum) on algae biofuel. Moreover, Shell Foundation also funded Husk Power System (client registration required) on gasification development.
  • Total and Chevron are the most active corporate investors in the fermentation domain. Total did the private placement on the IPO of Gevo (client registration required) and formed a JV with Amyris (client registration required) with both focusing on corn and sugar cane feedstocks. Gevo is focusing on isobutanol fermentation and Amyris is doing the bioconversion to produce isoprenoids. On the other hand, Chevron invested in Codexis (client registration required) and LS9 (client registration required) with its concentration on the genetic engineering, while LS9 was acquired by Renewable Energy Group in early 2014 (client registration required). All invested companies by these two giants are diversifying their revenue streams with drop-in fuels, specialty chemicals, and/or drugs in downstream markets.
  • Velero has a strong focus on the drop-in fuel production either by bioconversion or catalysis. Valero owns 10 facilities in the U.S. with over 1,000 MGY corn ethanol capacity. However, it is also interested in cellulosic ethanol with its funding of Qteros, Mascoma Corporation (client registration required), and Enerkem (client registration required). Additionally, the focus on waste feedstock can be reflected by its investments in the ill-fated Terrabon (client registration required), which was focused on wet waste-to-gasoline.
  • Investments of oil majors in developing countries are more constrained by local resources and policy drivers. For example, Reliance is investing the algae technology developers such as Algae.Tec (client registration required), Aurora Algae (client registration required), and Algenol Biofuels. Petrobras is concerned with fuel production from sugar cane or bagasse, such as BTG-BTL (client registration required) and BIOecon, which combine the feedstock advantage and local policy driver. Other oil majors not listed in the graph, such as Chinese oil majors, Sinopec and PetroChina (CNPC), are shifting their focuses from food ethanol to cellulosic ethanol and coal-to-ethanol, which is responding to the call of the Chinese government to discourage the food ethanol industry (see the report “Fueling China’s Vehicle Market with Advanced and Coal-based Ethanol” — client registration required.)
  • Less active oil majors in this space include ExxonMobil and ConocoPhillips. They only made sporadic investments – such as Synthetic Genomics (client registration required) by ExxonMobil and ADM by ConocoPhilips. Additionally, ExxonMobil mobile recently teamed up with Iowa State University to research pyrolysis.

Deep Casing Tools Seeks an Alliance

Deep Casing Tools has developed a range of one-time-use powered reaming tools – Turborunner, Shalerunner and Turbocaser Express – that attach to the end of a casing string. When the string runs into an obstruction in the borehole, the tool rotates and drives through the obstruction. Once the tool reaches the target depth, operators can cement that section using conventional methods. Operators can then drill right through the tool to begin completing the next section.

Founded in 2003 by a team of oil industry engineers, Deep Casing Tools developed its technology to tackle the issue of landing first time at target depth in increasingly demanding wellbore conditions that the industry faces today. The company recruited Lance Davis as CEO from the Acteon Group in 2007 to raise funding to launch and market the technology globally. It launched its first product 2010, and the technology has quickly gained traction, doubling unit sales every years since product launch, with customers including Chevron, Saudi Aramco, BP, and Shell.

With increasingly complex well designs and monitoring systems for unconventional production, the North American market represents a massive opportunity for this company. While Deep Casing Tools has its own distribution channels throughout the rest of the world, the company is seeking a strategic alliance with a US partner. Major distributors such as Baker Hughes or Schlumberger are potential routes for the company’s drive into North America. When we spoke with Lance, he mentioned that the ideal partnership would be with a company where Deep Casing Tools product range will complement the existing technology portfolio, creating a mutually beneficial route to growing both businesses’ interests in the US market.

Solazyme files for IPO

As we mentioned in an earlier post, Solazyme recently filed for an initial public offering (IPO) targeting $100 million. This wasn’t a surprise: Just as we had seen Amyris form multiple strong partnerships in the months leading up to its IPO (see the July 6, 2010 LRBJ*), Solazyme’s been revving up its own stable of new partnerships. It’s been forging partnerships in fuels and chemicals more intensely in recent months than it has throughout its lifetime. Since September, the company has inked deals with Bunge, Unilever, and Roquette (see the September 14, 2010 LRBJ* and the November 9, 2010 LRBJ*) on top of existing relationships with companies like Chevron, Honeywell, Abengoa, and Virgin (see the August 17, 2010 LRBJ*), and a joint development agreement with Dow announced last week.

Some highlights from the company’s S-1 include the company’s claims that it has already achieved “attractive margins when utilizing partner and contract manufacturing for the nutrition and skin and personal care markets,” and that it believes it can undercut fuels “when we commence production in larger-scale, built-for-purpose commercial manufacturing facilities utilizing sugarcane feedstock,” citing oils at a cost below $1,000 per metric ton, $3.44 per gallon, or $0.91 per liter.

Solazyme also notes that its Roquette JV will fund an approximately 50,000 metric-ton-per-year facility for nutrition products, which would be the first serious challenge to DSM-owned Martek (see the January 13, 2011 LRMCJ*). The company also mentioned a deal with Colombia’s national oil company (NOC), Ecopetrol, and a Brazilian letter of intent to form a JV that would add capacity of 400,000 metric tons of oil per year – nearly a thousandfold increase over the 455 metric tons the company produced in 2010.

But for all its strengths, Solazyme still lost $16 million last year on $39 million in revenue. By comparison, Amyris brought in $65 million in 2009, the year before its IPO.

While there are always reasons to be cautious when a loss-making company files for an IPO, one of the biggest challenges Solazyme will face is the public market’s mistaken association of its technology with older technologies like corn ethanol or dodgy algae developers. Solazyme is indeed an algae company. But it is wholly different from certain competitors, whose reliance on hype rather than commercially viable technologies poison the pond (pun intended) for legitimate players like Solazyme, Phycal, and Algenol (see the November 13, 2010 LRBJ*, the August 17, 2010 LRBJ*, and the March 10, 2009 LRBJ*). Gevo and Amyris represent better comparisons for Solazyme, and both had relatively successful IPOs (see the October 12, 2010 LRBJ* and the February 10, 2011 LRMCJ*). 

* Client registration required.