By Christopher M. Matthews
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 industry 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."
--Sarah Kent contributed to this article.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
(END) Dow Jones Newswires
July 24, 2018 05:44 ET (09:44 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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