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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
innovation developed by start-ups. As companies seek more
cost-efficient technology sourcing models and look to cast a wider
net for new ideas and solutions, corporate venture capital
investing has emerged as a key element of the industry's overall
approach to technology development.
After the demonstrated success of this investment vehicle for
sourcing new E&P technologies developed outside their
organizations, companies are now increasingly leveraging it to
access technologies developed outside the oil and gas sector
entirely, such as digital, clean energy, and mobility. With these
technologies having growing relevance to upstream operations and/or
a firm's long-term strategic aspirations, many corporate venture
groups are emphasizing them over core E&P applications that now
represent only a small component of the industry's overall
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 June 2018. Data
collected include the name of the start-up, oil and gas sector
investor(s), start-up 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 to be a key source of
technology development for oil and gas firms. Oil and gas
corporate venture groups participated in 34 new rounds of start-up
funding during the first half of 2018, compared with 30 and 35
investments during the first halves of 2017 and 2016,
respectively.
Corporate venture capital is facilitating the energy
transition. During this same period, oil and gas corporate
venture activity has pivoted from a focus on digital technology
(decreasing from 43% of investments in the first half of 2017 to
18% in the first half of 2018) to clean energy (increasing from 38%
of investments in the first half of 2017 to 65% in the first half
of 2018). Since 2016, IHS Markit has likewise documented the
formation of two clean tech-dedicated oil and gas industry
corporate venture investment funds (Equinor Energy Ventures and
Chevron Future Energy Fund).
E&P technologies are no longer the primary focus of
oil and gas corporate venture activity. In 2017,
investment in start-ups developing core upstream technologies fell
below 20% of the industry's overall investment activity (9 out of
52 investments). Continuing this trend, upstream investments
constituted only 18% of activity during the first half of 2018 (6
out of 34 investments), and recent investment activity suggests
this fraction will decrease further through to the end of the year.
This development stands out, especially since as recently as 2012
upstream investments represented 53% of overall oil and gas
corporate venture activity (18 out of 34 investments).
