Copyright of the Daily Oil Bulletin 2018
Oil Industry Looks To Silicon Valley To Bolster Digitalization, Innovation
Legendary Calgary oilman Jim Gray neatly set out the challenge ahead for Canada’s oil capital, still struggling through the biggest energy sector downturn in a generation.
“In this new and highly uncertain environment, it’s an enormously dangerous strategy to sit idle and hope higher energy prices will once again bail us out. That era is over. As the new digital economy unfolds, it is producing a largely jobless recovery in Calgary as our energy industry remains a global leader, but adjusts to the new economic reality,” he penned in a recent editorial published in the Calgary Herald.
Chairman of the Energy Group at Brookfield Asset Management, the co-founder of Canadian Hunter Exploration and recipient of the Canadian Petroleum Hall of Fame’s special Lifetime Achievement Award in 2016 now sits on the steering committee of the city’s Economic Development Investment Fund (EDIF). Calgary city council backed his call to increase the EDIF to $100 million in December from $10 million approved last June to attract investment to the city and support the efforts of Calgary Economic Development to stimulate economic growth.
As part of its efforts, Calgary Economic Development is seeking to advance innovation in the oil and gas industry. Despite its high tech nature, the oilpatch is seen by many to be a laggard in adapting the latest in leading-edge digital technologies, such as the Industrial Internet of Things (IIoT), artificial intelligence, augmented and virtual reality, machine learning and blockchain — many of which are associated with California’s Silicon Valley.
In an attempt to stimulate potential synergies between the two, Calgary Economic Development organized a summit of oilpatch and Silicon Valley leaders in the heart of the valley, Palo Alto, in November to get the conversation started. Representatives from such tech companies as Amazon Web Services, Atomiton, Inc., Mocana Corporation, Lightbend, Inc., Losant and LucidWorks were among those presenting to almost a dozen energy companies at the interactive summit, which was co-sponsored by Shasta Ventures and TeamIt.
The summit included a workshop where oil and gas companies had the opportunity to present the challenges they currently face in applying digitalization within their operations. A follow-up summit in Calgary is planned for 2018.
In many ways, Silicon Valley and Calgary’s Bow Valley remain worlds apart. Doyens of the digital economy know little of the tech needs of the oilpatch — and could even be seen as working at cross purposes to the sector in promoting alternatives to oil and gas, like renewable power and electric vehicles. And the oilpatch, with its energies directed to very specific oil and gas finding and developing technologies, is not exactly leading in pioneering new digital age technologies.
While the first summit was largely an introductory exercise, attendees say it was a good start, with many indicating it has directly led to new initiatives the companies are actively pursuing. “I did certainly get some leads and I have followed up on a couple of those already, and anticipate probably doing a trial or a pilot with one of the companies that we met there,” said Matthew Heffernan, Zedi Inc. chief executive officer.
“We are in discussions with them to help us on complementing their technology and ours. It is certainly a good news story,” he said, though too early to describe the details. “I can say it would not have occurred otherwise [but for the summit] — I would not have been aware of them otherwise.”
He concedes that, as a high tech company serving the oilpatch, Zedi is more likely to readily find collaborative opportunities in the hotbed of digital technology innovation. It might be different for traditional oil and gas producers. “We actually provide high tech solutions to oil and gas companies already. The question is, can we do it better, cheaper, faster,” he said.
Heffernan, who sits on a couple of boards in Silicon Valley and already has working relationships with companies there, said the energy sector is more technologically advanced than those outside of the industry generally realize. “For instance, everybody is talking about IoT and blockchain and artificial intelligence, and that they are all going to put those sensors out here, and you could have a company with a massive valuation that is yet to deploy one sensor and not making any money. And we say, ‘well, we are at 1.6 million sensors in 25 countries, with 52 million leads a day, using artificial intelligence and have been for about 17 years,’ and jaws just drop,” he said.
It’s that kind of sentiment that points to the disconnect between the energy and high tech sectors — something more interaction between the two valleys could help address. Before high tech companies can begin providing solutions to the oilpatch, they need to have a better understanding of the workings and the needs of oil and gas companies, which is currently lacking, he said.
“The biggest gap that subsequent summits may contemplate is, if we are going to look at new technology to help the energy sector and we want to entice ideas from Silicon Valley, we may want to give them an introduction to oil and gas, because right now we have one group of people saying, ‘here is all the cool stuff we do,’ and you have another group of people saying, ‘we have specific problems,’ and there isn’t a direct linkage between the two.
“They don’t speak the same language, so let’s understand each other first, and what problem we are trying to solve, and then we can apply what they have for technology or solutions or ideas against these problems.”
Joy Romero, vice-president of technology development at Canadian Natural Resources Limited, said she also found the summit to be productive and plans to continue attending any future summits. “It made me aware of companies and products that I was not aware of before. We have followed up with several of the companies that we met there.
“High tech and digital technology implementation allow us to increase our productivity thus reducing our costs and increasing our competitiveness,” Romero said. “We are working hard through networks like the Clean Resource Innovation Network to accelerate the commercialization of technologies that help us realize our goal.”
CNRL is investigating all the latest trends in digital technology and has helped with the development and commercialization of high tech for uses not only in the oil and gas sector but other sectors as well, she added, including ventures into low carbon technologies as it looks to the future.
“It is important for Calgary and Alberta that our energy future be an ‘and’ story with oil and gas and renewables. We need to be sure that the programs that are developed don't pit these against each other and that they work with all of the energy sources together so that we can find and build the synergies that we can lead as Albertans. This will result not only [in] technologies being [marketed] in Alberta but globally as these are global opportunities which can result in a higher overall carbon reduction when we look for and develop these synergies,” Romero said.
Suzanne West, Imaginea io president and chief executive officer, said she also gained some leads from the summit and would like to see the initiative continue. “It did result in two individuals I will be following up with,” she told the DOB. “I would like to see there be more connecting of specific problems with specific solutions that we can make commitments around — to keep us accountable.”
Imaginea io, formerly Imaginea Energy Corp., pivoted from attempting to change the industry, which it says is “often slow to change,” from within to striving to create “clean hydrocarbons” in their own right after splitting from its original financial backers late last year (DOB, Nov. 30, 2017). The new company plans to leverage new technologies to produce pollution-free hydrocarbons with no use of fresh water.
The company is already working on development of several specific clean hydrocarbon projects, including a digital twin of the regulatory system on blockchain, a new utility token to be issued in the first quarter and yet to be announced strategic partnerships.
A move to a clean hydrocarbon ecosystem such at that Imaginea io is forming could “create tonnes of new jobs that are aligned with where the world is going and transform what we already have into what is needed in the world today,” West said.
She said it is “critical” for the industry to pursue a greater degree of high tech and digital technology implementation to compete and prosper in today's low commodity price environment, adding low emission technologies to the priority list. “We are not moving even remotely fast enough,” she warned. “We are in high likelihood going to be left behind in a substantial way.”
Calgary Economic Development has taken other measures to promote the city as a tech hub. It has courted Silicon Valley firm RocketSpace, a tech accelerator, and attempted to woo Amazon’s second North American headquarters to the city, where a quarter of downtown office space remains vacant. It believes the energy industry that largely built the city offers a great fit with the digital revolution.
Mary Moran, Calgary Economic Development president and chief executive officer, said the digitalization of the oil and gas sector “will be vital to improving the efficiency and lowering costs for the industry.
“Canadian natural resources continue to play an important role in global supply while leading the digital transformation to a lower carbon fuel supply,” she told the DOB.