Summary
A continuous challenge in the petroleum industry is to identify and rapidly
implement new technologies into field operations to increase production,
improve employee productivity, and lower costs. Utilizing new world-class
technology is critical as the industry moves towards more complex environments.
To support this trend, a Chevron corporate strategy is to leverage technology
to deliver superior performance and growth. A range of suitable tools are
available, such as internal R&D, joint ventures, and collaboration with
academia and service companies. A less traditional method in the petroleum
industry is to use corporate venture capital (VC) as a tool to gain access to
world-class technology. This paper covers a decade of Chevron VC experience,
including justification for corporate VC investments, how success is measured,
financial and strategic yield, investment criteria, governance, partnerships,
track record, and portfolio highlights. In this paper, several technology
transfer success stories are given including the financial and operational
value they created for the Chevron business units. The investments cover such
diverse technology areas as artificial lift, seismic monitoring, deepwater
technology, wind power, and high-end computing for reservoir simulation.
Introduction
The Venture Capital program was conceptualized in Chevron in late 1998
during the run-up of the technology sector and new business models associated
with the Internet and the "New Economy." The Chief Technology Officer
(CTO) proposed the venture program as a method to leverage technology
investments and access technology innovations that were being developed in
venture-backed companies. Chevron?s headquarters are located in San Ramon,
California, and the proximity to the Silicon Valley VC community as well as the
strategic intent to rapidly adopt new technology were strong factors
contributing to the concept. In addition, prudent investing held the promise of
producing financial returns along with technology access and strategic
impact.
A study team within Chevron was commissioned to review various corporate VC
models, and develop the proposal and governance structures that created Chevron
Technology Ventures Investments LLC (CTVI). The study team recommended creating
a small new unit for the purpose of making VC investments to access technology,
which would report directly to the CTO. The guidance was to operate the unit
like a VC firm, including managing the portfolio of investments as a series of
closed-end funds, each approved individually, and monitored through the life of
the fund. As for governance, it was recommended to utilize an Investment
Committee (IC) to ensure accountability and facilitate rapid decisions for
investments. The IC was, and continues to be, composed of the CTO and senior
members of the finance and business development function to validate the
technical soundness, the connection to Chevron strategies, and finally the
financial analysis of any proposed investment. The recommended structure for
Fund I was a 10-year closed-end fund comprising both direct and VC Fund
investments. Chevron subsequently approved and publicly announced a $60 MM USD
fund.
© 2009. Society of Petroleum Engineers
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History
- Original manuscript received:
7 2009
- Meeting paper published:
4 October 2009
- Manuscript approved:
3 2009
- Published online:
28 October 2009
- Version of record:
28 October 2009
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