Fed up with the weak prices for your main product? Well, then, create the demand yourself.
Energy company Chesapeake’s move to invest more than $1bn to boost the development of natural gas powered clean technologies is a big splash in the world of corporate venturing but represents only 1% to 2% of Chesapeake’s annual drilling budget to boost its supply.
With an official announcement clothed in rhetoric, the company makes its plans sound like one of the most ambitious cases of enlightened self-interest displayed by a corporation in recent years. Chesapeake is pretty clear in its message from what it wants from the new division – it wants to end oil’s transport monopoly.
This creative use of cash is seen by Chesapeake as a head-on assault on the Organization of Petroleum Exporting Countries (OPEC). The plan is to "develop technologies that will replace the use of gasoline and diesel derived primarily from OPEC oil". Doubtless many in the clean-tech industry are delighted with this new potential source of funding (albeit it is still encouraging fossil rather than renewable fuel use so "clean" is a moot point) but, privately, OPEC members are relatively sanguine about the immediate threat.
One OPEC member producing both oil and gas said it was "great" that Chesapeake was creating the fund but "shale oil and natural gas still have [some] way to go in terms of technology both in production and application. The notion of it competing with OPEC on oil is not an immediate concern (ie not for the next 10 years at least)."
As the world’s second largest producer of natural gas, Chesapeake’s plans, if they work, are clearly good for itself, yet it argues the move is something more than pure capitalism. Taking a leaf out of US car maker General Motors’ book, Chesapeake argues what is good for Chesapeake is good for America.
Chesapeake’s chief executive said the investment would "create the best pathway to move our country away from dependence on OPEC oil and the resulting yearly transfer of more than $400bn of American wealth to foreign countries, many of them often unfriendly to US interests".
Playing the patriotic card appeals to the domestic market – an important factor given the recent pressure on tax breaks given to fossil fuel producers. But it could be counterproductive if it fuels protectionism and mercantilist policies in other places, especially given as the vast majority of petroleum is produced by state-backed enterprises.
What will it mean for the world’s largest producer of natural gas, Qatargas, if most of the consumers of gas in the transportation business are backed by Chesapeake? Blocking stakes and competitive pressure might drive up prices for other investors and consumers.
Yet even if such concerns exist, such visionary moves to change their market through a spot of corporate venturing is good to see. Cash piles are growing and the world is ready to be changed.