Silicon Valley courts a wary oil patch
Tech firms offer data-management services, but some energy companies are leery
HOUSTON— A Google executive wearing white jeans and a navy T-shirt stood before a roomful of suit-clad oil executives here last month and delivered a blunt sales pitch: We can manage your data better than you.
Darryl Willis, part of a new group Google has created to court the oil and gas industry, said energy companies have reams of data but only use 5% of it, a serious problem in the digital economy. Signing a cloud deal with Google, part of Alphabet Inc., could solve that, he argued.
“Companies in the oil and gas industry will either be a catalyst for change or they will be a casualty of change,” he said during a presentation at the Unify Conference, an industry forum on digital technology put on by Baker Hughes, a part of General Electric Co.
Silicon Valley has come to Houston, as tech companies push to sign oil and gas companies to lucrative cloud and artificial intelligence deals. In recent months, companies including Chevron Corp., Equinor ASA, Total SA and Repsol SA have entered into contracts with companies such as Google and Microsoft Corp. collectively worth billions of dollars.
But the relationship between Silicon Valley and the energy industry is complicated. While oil and gas companies need Silicon Valley’s expertise, some energy executives worry they could be competing with technology companies in years to come, especially as both sides explore renewable energy. In learning the ways of the industry, tech companies could also develop analytical expertise of value for energy production and oil-field services.
“I can imagine us competing with, but also partnering with digital companies,” said Maarten Wetselaar, the head of the gas and new energies business at Royal Dutch Shell Plc. “There’s a very different competitor set that could emerge in this business.”
Companies in other sectors have already seen their cloud providers encroach on their business.
The big question, then, for energy companies is: Are they comfortable turning over their data to potential competitors, analysts say.
While energy companies have been using AI and cloud services for years, they have recently become more aggressive in digitizing operations as the indus-
“If it has to do with heating, lighting or mobility for human beings on this planet, we’re interested in it.” DARRYL WILLIS GOOGLE EXECUTIVE
try undergoes a modernization push. That is creating a race in Silicon Valley to win their business.
Google recently hired Mr. Willis, who despite his decidedly tech-like business attire, worked at BP PLC for the better part of three decades, as the internet company seeks a bigger piece of the energy action.
“If it has to do with heating, lighting or mobility for human beings on this planet, we’re interested in it,” Mr. Willis said in an interview, playing down any potential competition between Google and energy companies. “Our plan is to be the partner of choice for the energy industry.”
Microsoft also is increasingly focused on the energy industry, said Jason Zander, executive vice president at Microsoft Azure, the company’s cloud platform. He said the company is sensitive to customers’ concerns that providers could use their data even if indirectly to become competitors.
“Our message is: ’We are not in these industries. I’m not in retail. I’m not in energy,’” he said.
Chevron signed a seven-year deal with Microsoft in October worth hundreds of millions of dollars. Azure will capture and store the terabytes of data Chevron generates around the globe in everything from underwater oil exploration to refineries, allowing it to be analyzed in real time, said Bill Braun, Chevron’s chief information officer.
Major oil companies like Chevron, BP and Shell will use the cloud to do everything from finding more oil to predicting needed maintenance on equipment before it breaks down.
Chevron is in the process of selling some of its data centers to Microsoft and plans to move the majority of its data and applications to Azure in coming years, Mr. Braun said. “This is happening, and it’s happening fast,” he said.
Not everyone is convinced the deals make sense. John Gibson, who heads the digital team at energy investment bank Tudor Pickering Holt & Co, said the magnitude of energy data can make it prohibitive to get off the cloud once parked there.
“It’s like the Hotel California, you can check in anytime you want, but you can never leave,” Mr. Gibson said.
Amir Husain, chief executive of SparkCognition Inc., an Austin-based AI company, said energy companies may be ceding management of their data to future competitors. While it seems unlikely that Google or Amazon would ever enter actual oil production, control of data plausibly could become the more profitable aspect of the business if techniques such as fracking are commoditized, he said.
Both Google and Amazon also have invested hundreds of millions of dollars in renewable power, largely for their own needs, an area many large European energy companies are starting to invest in.
“If the value chain becomes entirely digital and [Silicon Valley] owns it and is providing alternative energy sources, is that really a business to be in?” Mr. Husain said.
Equinor, the company formerly known as Statoil, announced last month it had signed a cloud contract with Microsoft worth hundreds of millions of dollars.
But it has developed its own cloud platform, Omnia. It will move the majority of its data to Azure, but continue to use Omnia to analyze data and share it internally and externally, said Ashild Hanne Larsen, the company’s chief information officer,
“That’s the benefit of Omnia, we can connect with smaller tech startup companies,” she said, adding, “it’s not a defense against Microsoft.”