The world will need to add the equivalent of two more Saudi Arabia’s to meet even the most conservative fuel consumption estimates over the next two decades, according to Donald Paul, CTO of Chevron (CVX). And that kind of scale is what startups need to keep in mind when thinking about how they can work with Chevron, Paul pointed out at a conference this week.
To illustrate the scale of Chevron’s oil business, Paul said it takes close to 15 years and billions of dollars of investment to validate and scale up new fuel technologies. Chevron’s R&D process goes from costing a couple million dollars in the lab phase, to tens of millions of dollars for a pilot plant, to hundreds of millions for the field demo plant (still research) and finally a couple billion dollars for full-scale production.
“The role for startups…is how do you plug into this chain?” said Paul. “Scale-up is the key.”
When it comes to biofuels vs. oil, the scale issue is clear. A big ethanol plant can do 100 million gallons per year, while a typical crude refinery is 3 billion gallons per year, Paul pointed out. “There is a scale issue with alternatives,” he said. “That is a fundamental aspect of it.”
Chevron can also invest in startups to get them to scale up to what the oil giant needs. Its venture capital arm has a history of investing in startups related to oil and to clean energy in general (portfolio list here.) The firm recently boosted the amount of its fourth fund, which will focus on clean technology, to $75 million.
Paul mentioned a few technologies that are of interest to Chevron including building innovations in processing enhancements, CO2 capture methods, and new conversion technologies that can use different feedstocks. When it comes to acquisitions, though, Chevron might not be the best exit strategy. As we recently pointed out, the cleantech M&A space is far from mature.