Houston energy investment bank Tudor, Pickering, Holt & Co. is launching a partnership with Google’s new oil, gas and energy division, strengthening the energy sector’s connection to Silicon Valley as it works to reinvent itself for the 21st century.
The partnership will give Google a more visible presence in Houston as one of its oldest industries works to cut costs in the wake of the oil bust and remain competitive as electric vehicles and renewable power sources gain market share. The energy unit, based in California with an office in Austin, has been building its business here from a distance.
“It’s a very important bridge to be built,” said Darryl Willis, who in March became the division’s vice president after about 25 years at BP. “Houston is ground zero for all things energy.”
He added that the division, which provides cloud computing and data analytics services to energy companies, would consider opening an office in Houston if it developed a strong local customer base.
Economic development officials see the partnership as a step toward proving that Houston is open to Silicon Valley disruption as it strives to establish a startup ecosystem that would foster new, cutting-edge companies to support the digital transition in the energy sector and other industries underpinning the regional economy. The city, passed over last year in Amazon’s hunt for its second headquarters, has struggled to attract a major technology company with the potential to catalyze the sort of innovation economies that characterize Austin and other tech-focused cities.
“The initial movement of the big energy companies was to go to Silicon Valley to get this expertise,” said Bob Harvey, president and CEO of the Greater Houston Partnership. “We now need to bring this activity back to Houston.”
Houston has shown signs of making progress since it failed to make Amazon’s shortlist last year. The snub kicked off a scramble among leaders in the city and its budding startup community to craft a plan to develop an innovation district that would foster collaboration among local universities, business districts and tech incubators, ideally creating a dense hub of activity that would appeal to larger tech companies and investors.
Tudor, Pickering, Holt & Co. hopes its partnership with Google will improve its advisory services to energy industry clients looking to use emerging technologies to become more efficient. Google, meanwhile, is seeking to sell its cloud services to both established energy giants and smaller companies developing new ways to make the most of the industry’s vast trove of data.
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Barbara Burger, president of Chevron Technology Ventures, the Houston-based venture capital arm of the California oil major, said the city used to lose many of its energy startups to Austin or other tech hubs. Now, she said, they’re starting to stick around, and others based elsewhere are opening sales offices here.
“We’re seeing more of a culture and comfort among startups here,” she said. “There is momentum.”
Her division in June launched its $100 million Future Energy Fund, which will invest in companies working on ways to reduce carbon emissions within the industry. It’s the division’s sixth energy fund since it was founded nearly 20 years ago to find new technologies to support Chevron’s operations.
Tudor, Pickering, Holt & Co. last year launched a banking platform focused on finding and advising innovative energy startups and connecting them with clients looking for new technology. Its partnership with Google is the latest indication that the energy sector’s push to modernize is gaining momentum as data analytics, artificial intelligence and other technologies become less expensive and more readily available.
Investors, too, have fueled the shift by pressuring companies to boost profits and plan for the day when oil and gas no longer dominate the energy landscape.
“Investors are paying attention,” said Maynard Holt, CEO of Tudor, Pickering, Holt & Co. “It sets off a competitive dynamic in talking about what different companies are doing.”
Google’s energy unit, part of its broader Google Cloud division, already has struck deals with the international oilfield services company Schlumberger, the French oil major Total and Houston oilfield services company Baker Hughes. Google, however, is only the latest major cloud computing provider to make inroads in the energy industry. Companies including Microsoft and Amazon Web Services are also courting customers looking to put operations data to better use with high-powered analytics and artificial intelligence.
The opportunity is significant. Willis said it’s estimated that energy companies use between 1 and 5 percent of the data at their disposal.
“The energy industry is in the early stages of its digital journey,” he said.
Data has already played a major role in lifting the energy sector from the depths of the oil bust that knocked prices from $100 a barrel in 2014 to as low as $26 a barrel in early 2016.
Houston oil and gas producer ConocoPhillips, for example, slashed its cost of producing oil in the shale fields of West Texas and elsewhere in part by using data analytics to improve drilling efficiency and compare information across its operations.
The company has used the cloud, which allows people in different locations to store, analyze and share data, to integrate data sets from the company’s various divisions — historically kept in different computer systems. It has trained 4,000 of its employees in data analytics, and it hopes to boost the number to 11,000 within the next two years.
“Everyone is going to be benefiting from the use of analytics tools,” Greg Leveille, the company’s chief technology officer. “It will differentiate the winners and the losers in the industry.”