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Over the past decade, oil and gas players have increasingly
pursued open innovation strategies to complement internal research
and development activities. Corporate venture investing is one such
form of technology sourcing that allows companies to access both
innovations and new, technology-enabled business models developed
by startups. As companies seek more cost-efficient technology
development models and look to cast a wider net for new ideas and
solutions, corporate venture capital investing is further
establishing itself as a key element of the industry's overall
approach to strategic technology development.
After the demonstrated success of this investment vehicle for
incubating new E&P technologies developed outside their
organizations, companies are now increasingly leveraging it to
support their low-carbon aspirations and access technologies
developed outside the oil and gas sector entirely, such as
renewable energy generation, plastics recycling, and mobility. To
deepen the alignment with long-term strategic aspirations,
corporate venture groups appear to be emphasizing cleantech
investment themes over core E&P applications (since 2016,
investments in startups developing clean energy technologies
constituted the majority of oil and gas corporate venture
investment activity).
IHS Markit tracks investment activity by oil and gas corporate
venture capital groups via a database that provides details of all
portfolio investments from January 1998 through December 2019. Data
collected include the name of the startup, oil and gas sector
investor(s), startup location, technology category, investment
round, and funding amount (when available). Tracking corporate
venture investment activity provides a window into emerging
industry technology trends, including:
Corporate venturing continues as a strong source of oil company
innovation. Oil and gas corporate venture capital groups
participated in 83 rounds of startup funding during 2019 (see
Figure 1). This level of investment activity is comparable to that
in 2018, solidifying the arrival of a robust technology development
ecosystem that supports entrepreneurs and strategic and financial
investors seeking to incubate early-stage innovation for the energy
industry.
Figure 1: Oil and gas corporate venture activity by
technology category
Oil and gas corporate venture activity is enabling the energy
transition. In 2019, 67% of investment activity funded startups
developing clean energy technology (cleantech startups represented
49% and 45% of investment activity in 2018 and 2017,
respectively).1 This result represents a dramatic increase in the
industry's support for clean energy innovation as companies execute
their strategies for managing the energy transition and look to
their corporate venture capital groups to support and advance these
strategies.
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