New Tech Accelerator Teams With Big Operators to Solve the Pilot Problem
- Trent Jacobs (JPT Digital Editor)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- April 2019
- Document Type
- Journal Paper
- 44 - 45
- 2019. Copyright is held partially by SPE. Contact SPE for permission to use material from this document.
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Proving out and then scaling up a new technology are among the most challenging feats in the oil and gas business—about as dicey as drilling a wildcat well of old. What could make this uphill climb much steeper? Finding that no one wants to even test your innovation.
The scenario is so common to the upstream sector that it has led to the creation of a new kind of venture capital fund based in Houston. Formally launched this year, Eunike Ventures is combining the roles of investor and technology accelerator with a third and unique prong: guaranteed pilot projects. Equinor, Anadarko, and Hess are the first oil companies to underwrite this experiment as corporate sponsors.
“[Startups] can get all the funding they want and still not get any pilots,” explained Amy Henry, adding that, “the issue is making that connection point with the operators.”
As chief executive officer and cofounder of Eunike, Henry sees the problem not just as an impediment to the growth of early-stage innovators but also the industry’s much-discussed quest to modernize itself through the adoption of new technologies.
The industry veteran has touched all the angles of technology uptake during her career, which was punctuated by roles inside Shell’s venture and unconventional units, along with a stint in Malaysia as the chief financial officer of Petronas’ unconventional business.
Upon starting Eunike, she realized that the solution to a more efficient technology evaluation and adoption process was rather simple: “You need to have operators have some skin the game.”
This is different than the current formula that many of the biggest oil and gas producers have subscribed to, which dates back to the late 1990s when many of them formed venture units. The snag these groups have historically dealt with is that their investments in a new technology do not always persuade frontline field managers to share the risk by deploying it, even at a small scale.
If it can be boiled down to one thing, then the bottleneck is really just about budgeting.
“We understood the problem,” said Eunike’s other cofounder and chief operating officer, Thomas Henry, as he reflected on innovation projects he worked on over nearly 3 decades with Shell. “We couldn’t get our own assets to buy into some of the technologies that we developed—nobody was willing to fork up the money for field trials.”
Under this new scheme, the issue is circumvented by funding a startup only after at least one of the operators in the “alliance” commit to a paid pilot. This is the trigger for Eunike to make an investment in the startup.
Amy Henry said this underlines the fiduciary responsibility Eunike has to both the startup and the operators. It also reveals another aspect of the business, which is to help the operators accept the failure of a pilot despite how much they may want it to work out.
“We’re not eliminating, but we are reducing internal bias,” she said. “We’ve all worked in oil and gas companies and had special projects, and it is always hard to say that something is not going well.”
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