Aramco to Pay Up to $120 Million a Year for European Startups

Saudi Arabian Oil Co., the world’s largest crude exporter, will invest as much as $120 million a year in European startup companies through a Norwegian venture capital firm to strengthen its technological know-how.

Saudi Aramco, as the state-owned company is known, signed a deal with Oslo-based Energy Capital Management, which previously managed investments for Statoil ASA, Norway’s largest oil and gas producer, it said in a statement. Investments will focus on technology companies specializing in so-called unconventional and tight gas production, as well as drilling and seismic technologies, Arne Froeiland, an ECM partner, said yesterday.

“We are seeking to make three or four investments a year,” he said by mobile phone, adding each may reach $30 million. “There are few dedicated sector funds when it comes to startups, venture and growth companies in oil and gas. Those who invest in our sector have had good returns over time but the number of players is limited.”

Saudi Aramco last month set up a venture capital branch, Saudi Aramco Energy Ventures LLC, to gain access to drilling and production technologies and boost recovery from current fields. Aramco also plans to tap unconventional resources, Amin Nasser, senior vice president for upstream operations, said in April.

ECM, with offices in Oslo, and Aberdeen, Scotland, will be Aramco’s exclusive VC manager in Europe. The Saudi company plans to set up teams in North America, it said in a statement last month. Bloomberg reported in June that Aramco’s venture branch would have offices in Aberdeen, Houston and Boston.

Early Growth

Aramco’s European partner will seek investments “between startup and early growth,” Froeiland said. They will be from $1 million to $30 million each for a minority stake and in most cases board seats or observer rights, SAEV said on its website.

While Aramco said it would look to invest in the upstream and downstream oil and gas sectors, as well as renewable energy, energy efficiency and water technology, ECM will focus upstream, Froeiland said. The acquisitions will probably include imaging technologies, well and drilling technologies, and systems for tight and unconventional gas production, such as shale gas.

Saudi Aramco’s press office didn’t immediately respond to an e-mail seeking comment. ECM managed Statoil’s 26 venture investments from 2008 until June this year, Froeiland said.

While he wouldn’t comment on the results in managing the investments, Froeiland said the firm’s four partners had a track record of returns reaching about three times invested capital.

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