BP Ventures, the CVC arm of oil and gas giant BP, plans to plough 90% of its spending between 2023 and 2026 into climate tech startups, its new chief tells Sifted.
Gareth Burns, who joined BP Ventures from Norwegian energy firm Equinor in January this year, says investments will focus on five areas: hydrogen, bioenergy, electric vehicle charging, convenience, and renewables and power.
The fund, which launched in 2006, backs companies at Series A and B stage as a minority equity investor. It invests globally and is currently recruiting for staff in various locations, with a planned headcount of 25 people.
Burns did not reveal the total budget for the latest iteration of the venture fund, but says it will deploy $200m this year, and that the total over the next four years will be greater than the figure invested across the fund’s history.
BP is under strong pressure to plough more of its capital into the transition, after recording record profits from its core oil and gas business.
Burns tells Sifted that, across the entire business, BP invested 30% of its capital into the energy transition in 2022, up from 3% in 2019. During that time, profits from BP’s oil and gas business jumped nearly 600%, from $4bn to $28bn.
A move away from oil and gas investments?
Historically, a lot of BP Ventures’ focus has been on tech for the existing oil and gas business but “that’s an element that we are significantly reducing”, says Burns.
Sifted analysis of six energy firms’ CVC investments, including BP Ventures, shows that, across the funds’ lifetimes, the largest category in terms of capital deployment is technology for the existing oil and gas industry.
Burns says that less than 10% of BP Ventures’ capital in the current iteration of the fund will go into oil and gas technologies — and that includes any follow-on investments into the existing portfolio.
The singular most lucrative investment for BP Ventures was its backing of American data analytics company Palantir, which listed in 2020. BP sold its stake in 2021 for $443m.
Net zero goals
BP was one of the first oil and gas giants to announce an ambition to cut emissions to net zero by 2050. Initially, it said that emissions would be 35-40% lower by the end of this decade; however, earlier this year, the company watered down its targets, saying it’s now working towards a 20-30% cut instead.
In 2022, BP announced five “transition growth engines” — areas of focus for its own emissions reduction. They are hydrogen, bioenergy, electric vehicle charging, convenience, and renewables and power.
“We believe there are profitable opportunities for us to invest in that will deliver return from a venture capital perspective, but also deliver a strategic return for BP,” says Burns.
Recent investments from the fund include Advanced Ionics and Electric Hydrogen, two US startups focused on green hydrogen technology, which Burns says could bring down the cost of hydrogen.
A lot of renewables investments are now large-scale infrastructure projects and not a venture case, says Burns, but he says BP Ventures is interested in technology that could make the deployment of renewables cheaper. It backed Australian company 5B, which is working on tools to increase the speed of solar park deployment.
Can startups make a dent in BP’s emissions?
So what interaction do BP Ventures’ portfolio companies have with the company’s core business — and can they move the needle on its emissions?
Burns insists they can. “In some cases, it is commercial agreements. In some cases, it’s the opportunity to tap into some of the technical capabilities that we have within BP,” says Burns. “And in other cases, it’s helping these startups gain market traction and establish the right sort of operating framework to enable them to be successful.”
BP’s venture arm could help point the direction for the wider business, he says. “Investing in innovative startup companies will give us some longer-term visibility on what we think may come through over time.”
One thing the fund is notably not doing — but says it may in the future — is measuring the emissions reduction potential of its portfolio, a metric more and more VC firms are calculating.