TechX: inside the UK oil & gas industry's new tech accelerator
The UK’s Oil & Gas Technology Centre recently launched a tech accelerator called TechX. Director David Millar explains to Molly Lempriere how it works, and why now is the perfect time for the oil and gas industry to embrace technology.
Tech accelerators can be found around the world, helping start-ups, entrepreneurs and SMEs develop and grow into commercially successful companies. But they are rare in the risk-averse oil and gas sector, which has traditionally been slow to accept new technological advances, digital or hardware-based, lagging behind many other industries.
The UK’s Oil and Gas Technology Centre (OGTC) is looking to change this with the launch of its TechX accelerator, which will offer expert mentoring, facilities access and funding to those looking to advance the oil and gas industry. OGTC technology accelerator director David Millar says now is the time to create exciting new products that could help ensure the success of the UK Continental Shelf (UKCS) for years to come, and here speaks to Molly Lempriere about how to implement change.
Molly Lempriere: Could you tell us how TechX is organised?
David Millar: It's organised into three programmes. Firstly, we've got our Ventures Program which is in collaboration with Deep Science Ventures in London.
Our Pioneers Program, which is for start-ups, is a four-month full-time programme at the centre in Aberdeen, followed by a 12-month incubator programme. So they're getting 16 months, really, of co-working support, funding, mentoring, partnership, education, rapid prototyping, access to the market and investors.
We've got £100,000 on offer for each of the start-ups that go through that programme, and we're also collaborating with BP’s technology venture arm. We have additional sponsorship on offer for two of the most exciting companies that will graduate, which will have the chance to get an additional £100,000 each, plus deep-access into the BP world and potential to enter into their investment pipeline.
Then the third programme is our Market Entry Program, which is predominantly designed for more mature organisations, SMEs. This is really about getting them fast-track access to facilities to test out their product, validate it with the industry, and then provide them with any additional funding they need to help them get into the market and then scale-up from there.
All programmes kick off this year; the Venture Program will start in July, applications for the Pioneer Programs closed on 7 February, and the Market Entry Program has an ongoing application process.
What are the biggest challenges SMEs and entrepreneurs face getting into the oil and gas industry?
I think one of the biggest challenges in the oil and gas industry is that it's very risk-averse, very reluctant to try new things. One of the phrases we hear quite often is the ‘race to be second’; nobody really wants to be the first to try something out. It’s a challenge for companies that have a new product that's very unique, as it's difficult to find someone to trial things with. Companies are not sure that they want to be first. That's a big challenge, so working with the operators to help de-risk things for them is key.
The availability of funding is also a big challenge, particularly for early-stage companies. Most venture capitalists, most venture technology or investment arms of operators will only invest in companies that are performing at a certain level, so normally a certain amount of million turnovers a year to show that people are interested in the project, that's usually when they'll get interested. Big operators like Shell, Total or BP are not always geared up to then work with a two/three person start-up company.
We can come in and fill a bit of that gap there, help nurture a company, validate their offering, test it out and provide a lot of the funding, so we can de-risk a lot of that from a financial perspective. But we do at some point need angel investors, venture arms of operators, venture capitalists, or PE [private equity] houses to come along to the party to help us. They will need investment at some point and we can't do it all. But we can certainly help them on the start of that journey and show confidence in the company, that we're investing in this company and we think you should as well.
How optimistic are you about the UK's oil and gas industry, and how big a role can technology play in extending the North Sea's life?
Personally, I'm hugely optimistic about the industry and I'm hugely optimistic about the opportunities for the north-east of Scotland. We've produced around 44 billion barrels of oil since 1964 out of the UK; we think there's about 15-20 billion barrels left. For every billion barrels we produce, that contributes £50bn to the UK economy. There's a huge prize there.
If we continue to use our current work practices and the technology available to us now, and did nothing, we'd probably get only about five billion barrels of that 20. We'd be leaving a lot behind, so technology is hugely important. If we don't invest in technology and new ways of working, we will never be able to extract that additional ten to 15 billion barrels that is there. That is our mission as a centre, we want to unlock that potential, we want to get every last drop that we can out of the UKCS to benefit both the north-east of Scotland and the rest of the UK.
We are not looking for just Aberdeen or UK-based companies; we're working hard with different organisations and entities to get that message out so that we can attract them. And we're starting to see that coming through. We got about 140 applications so far, from 20 different countries with a good spread across eastern and western, so we are managing to get the message out there.
Why do you think oil and gas fell behind technology? Did the industry get too complacent?
This is where I need to be careful. I think there are many factors to it. There will be cynics that say greed was a factor, that when oil prices were good companies were raking in the cash and inefficiencies were hidden because of that. I think the North Sea has shown that when there was $110 oil, a lot of the inefficiencies were hidden because the profit margins were still so high. It's only when you start to bring that oil price down to be at the intersection point of your operating cost that people say, 'right ok, now we need to start cutting costs'.
The first thing to go, unfortunately, is people because that's the biggest cost they carry, so they lean down non-essential personnel as much as they can. They find different ways of working, efficiencies, and there is some innovation in that space, but nothing that's game changing. They're getting the 10%, 20%, 30% improvements, but they get to a point where they've leaned out and they can't really change their processes much and they're still struggling.
It's that point where we start to think we need to jump the curve and we need to do something different, and that's where technology and innovation really come in.
Companies want to stay in the UKCS longer. BP's just discovered potentially two new wells and they're looking to double their output. So if we can help bring innovation to them, that can only be of benefit because they can increase their field life, they can create more profits. It's almost like we're at a turning point and we're trying to capitalise on that.
Yes we're late to the party, but I think we can really accelerate that journey to learn a lot from what other industries are using already, and potentially be a pioneer for some of the new stuff that's coming about as well. So it's a really exciting time.
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