As digital transformation in the oil and gas industry evolves, companies turn regard on startups providing automation and digitalisation solutions — for example, in March 2019 Chevron announced that the company is going to invest $90m into hi-tech oil and gas startups, while at the beginning of 2019 BP made the $5m investment in artificial intelligence company.
What can startups offer the O&G leaders that large companies cannot? Kristina Sabirova, Project Director of the AUTOMA 2019 Congress and Managing Partner of BGS Group, tells about the peculiarities of working with startups and benefits of such investments.
1. Additional Resources
When the O&G majors involve startups, they attract additional resources so they do not spend their time and money on establishing special departments, recruiting new specialists or distracting their professionals in place from other activities.
ExxonMobil has been enlisting the services of a drone startup for data collection and inspections since 2014. After 5 years of partnership, in August 2019 the company signed a 5 year agreement with Trambull Unmanned startup on extending drone operations at ExxonMobil’s production sites.
2. Flexible Solutions
When a company buys technology from a large provider, it gets a ready-to-use product with some individual changes and fitting. Investing in a startup company gets a brand new technology developed and adjusted in accordance with its needs and peculiarities. Startups are more agile and more inclined to work individually which makes a perfect fit.
In May 2019 Shell signed a contract with U.S. startup Senslytics to develop and implement more accurate and predictable wireline formation testing of its recent Blacktip discovery in the Gulf of Mexico. Senslytics goal is to meliorate their software so that it will compute the right time to pull the test system out of a newly drilled well.
3. Return of Investments
If the startup succeeds in developing and applying their solution, the investor company profits from it both as client and shareholder. As a shareholder, they obtain high-value assets, and as a client, they acquire an innovative technology at a lower cost and an early date before it goes to the market which gives a competitive advantage.
In July 2019, Repsol invested in Finboot startup aiming to accelerate supply chain procedures with the use of blockchain as a service which could save up to €400,000 ($445,000) per year (source: lenderinsights.com).
4. Different Business Processes
Being capital intensive segment oil and gas tends to traditionalism: it is quite slow with digital transformation, developing large projects — and with a cultural shift. Automation and digitalization evolve at a much higher pace and require quicker actions.
Meanwhile, startups already have certain advantages due to their corporate structure, culture and methodology: they are more used to sprints and scrum approaches, and simpler corporate structure supports fast developments as they do not have to pass through long approval processes inside the company.
Being new to the market provides motivation for a startup to develop faster to break into a market. All these peculiarities make startups more open-minded and ready to experiment with the main goal to provide monumental and venturous solutions in a short-term period.
Ferenc Horvath, Executive Vice President of Downstream for MOL Group, commented on their reasons of cooperating with startups in the interview for YouTube show BGS Talks: “I think this is a new way of thinking: we do not believe that we can solve all the issues [ourselves]. We trust very much these startup companies because the way they are working is very different and sometimes is much quicker and much more efficient.”
Though investments in startups may be highly profitable, it is a big challenge to find the right companies. First of all the market is packed with varied offers and it requires a definite digital strategy to narrow down the range of startups to invest in. Startups appear and collapse with unfailing regularity, some of these companies do not have any cases in their practice as they are new to the market.
It takes a lot of time, research, calls and meetings to make an investment decision and in the end O&G majors risk to waste lots of time and money without getting satisfactory result. Even if the partnership turns out to be efficient, it may take from half a year to several years to integrate the solution into existing operations, especially if it requires major business process changes.
As the event organisers we aim to ease up the collaboration for both sides. We made a selection of 10 most innovative and remarkable startups to deliver short 10-minutes presentations in frames of Startup Session at the AUTOMA 2019 Congress. The Oil & Gas Automation and Digitalization Congress AUTOMA 2019 will take place on 14-15 October in Zurich, Switzerland.
To find more information about it, visit www.is.gd/ruTQQm