Aramco, a Kingdom of Saudi Arabia-backed oil major, plans to start its corporate venturing unit in the third quarter to invest round the world in start-ups.
In a keynote presentation at the 14th Annual Corporate Venturing and Innovation Partnering conference presented by International Business Forum, Majid Mufti, head of Saudi Aramco Energy Ventures, said the corporate venturing unit would strike its first deals "soon", ie from September.
Though Aramco has already had some success with its internal venturing programme, such as oil reservoir simulator software Gigapowers and nanotechnology robotic maker Resbots, Mufti said the unit would act as "a continuous gateway for innovation [to enter Aramco], introduce new technologies we had not previously looked for and provided human resources at the start-ups with ‘skin in the game’ [as they owned equity]".
Aramco has followed other state-backed peers, such as Kuwait Petroleum Company that started its venturing unit in 2006 and Russia’s Gazprom (formed in 2009), as well as independent oil companies, such as BP, Shell, Total and Chevron.
Mufti said Aramco, which manages the country’s 260 billion barrels of recoverable oil, had two research and development centres for below ground and downstream work but thought smaller companies delivered better return on investment than R&D. He said: "There are many start-ups being created by experienced people who have worked at oil and services companies, such as Schlumberger, that know the chellanges we are facing but need funding support to help them."
And while venture capital firms have been investing more heavily in clean-tech as a research of the estimated 17% average annual returns over the past dozen years, according to reseach group Cambridge Associates, Mufti said corporate venturing had its part to play.
He added: "Aramco is a steward of the country’s natural resource and Energy Ventures is part of a broader transformation going on in a shorter timeframe as by 2020 we want to be a world-leading integrated energy and chemicals company with greater energy efficiency and use of alternative energy."
This goal meant the corporate venturing unit would invest in three areas: upstream production of energy, downstream use and market demand companies and energy efficiency and renewable suppliers, such as in solar power.
While Energy Ventures could invest anywhere, Mufti said it was starting in the US and Europe and wanted to facilitate start-ups deploying or developing in Saudi Arabia.
As well as direct investments, Aramco is commiting money to venture capital funds and hired Jon Nieman from the US to move to Saudi Arabia to help evaluate fund managers. Nieman had previously founded consultancy firm Redline Partners and worked in US bank State Street’s private equity consulting group.