While oil and gas companies as a whole remain one of the strongest sectors in delivering shareholder returns last year, conversations around the industry’s role in ensuring energy security, affordability and sustainability amid the energy transition are on the rise.

In particular, global oil and gas majors themselves are actively weighing their long-term strategies to focus on energy diversification while pursuing the decarbonisation of their operations and increased investments in alternative energy sources.

The pressure on energy companies to expedite energy transition had been building long before the Covid-19 pandemic and the energy crisis that took hold of Europe. These events further accelerated PETRONAS’ interest in shifting to lower-carbon energy sources in a just manner.

Supporting PETRONAS’ ambition to become a net zero carbon emission company by 2050, PETRONAS Ventures has been given the monumental task of identifying and investing in eligible tech companies to accelerate the group’s energy transition efforts.

The corporate venture capital arm looks for visionary entrepreneurs with breakthrough technologies and innovative business models to support PETRONAS’ business growth, particularly those that are in line with its sustainability agenda.

“The creation of PETRONAS Ventures allows us to be in a forward-looking position to discover innovative technologies. We are not acquiring these companies or technologies upfront, but we hold a small stake to gain first-hand understanding of what they do, how they do it and how a collaboration with PETRONAS Ventures could help them to scale and commercialise,” says Arni Laily Anwarrudin, Senior General Manager, Merger & Acquisition and Corporate Ventures.

PETRONAS Ventures was also set up to have first dibs on new technologies that are unheard of, but are still very much connected to the energy business. “We have always been a company that’s been driven by research and development. While we have our own research activities, we realise that some of these innovations are readily available,” explains Arni.

PETRONAS Ventures targets direct investments in technology start-ups that focus on five areas, namely Future of Industry & Work, Future of Chemicals & Materials, Future of Energy & Mobility, Frontier Technology and, until recently, Sustainability. Its coverage focuses on North America and Europe, managed by PIVA Capital based in San Francisco; and Asia-Pacific and Middle East and North Africa, managed by Twin Towers Ventures based in Kuala Lumpur and Singapore.

“We look at what’s out there in terms of energy transition, sustainability, decarbonisation and how we could bring these technologies back into our core business. The beauty about being in the market is that we can still be a sensor connector, linking from a technology standpoint to our business without having to commit our investment,” says Arni.

She adds that the predominant reason for PETRONAS Ventures’ interest in collaborating with start-ups is the strategic deployment of funds in the right technology. These funds act as a minority stakeholder in early- to growth-stage companies, leveraging PETRONAS’ strong global network across the energy value chain for a strategic fit with its co-investors and partners, and assisting start-ups in scaling up.

To date, PETRONAS Ventures has successfully conducted 23 direct investments into start-ups.

“We invest directly with a sizeable stake that will allow us a voice on the board, not to influence decisions, but to have conversations and gain insights,” says Arni, adding that these conversations also expose PETRONAS Ventures to new trends and opportunities several years ahead of its competitors.

“We recognise that innovation is crucial in the rapidly evolving space, where you must disrupt or be disrupted. In the energy sector, most of the industry’s disruptive potential comes from start-ups,” adds Arni.

As start-ups are seen as a critical resource in the decarbonisation effort, PETRONAS Ventures runs its own accelerator programme, the PETRONAS FutureTech, to support the local start-up ecosystem.

This programme aims to spur Malaysia’s deep tech start-up ecosystem as well as explore non-traditional partnerships, making them global-ready to solve business challenges with local innovations.

According to Arni, the first two editions of the programme were only limited to the participation of Malaysian start-ups. However, it was later extended to Asia-Pacific, in line with the region’s impressive growth in innovation and investment sectors, quickly becoming a global leader in the start-up ecosystem.

“It is only natural for us to tap into those ecosystems and identify potentials that can complement PETRONAS’ business objectives while providing much-needed synergy and collaboration to the local talent here in Malaysia,” says Arni.

She further observes that the local start-up ecosystem has evolved very well in the last five years, with more access to capital available and the government playing a more active role in encouraging a conducive ecosystem.

“We must not try to become the ‘Next Silicon Valley’; that is just not realistic. We need to rely more on our unique selling points instead. With these, Malaysia can become internationally attractive to test and scale new technologies,” explains Arni.

Apart from making direct investments in start-ups, PETRONAS Ventures also invests in other venture capital funds, with Arni leading corporate mergers and acquisitions as well as divestment activities for PETRONAS, in addition to her role in PETRONAS Ventures.

She recognises that collaborating with external innovators is essential for PETRONAS to meet its net zero goals. 

“PETRONAS cannot do this alone. We need to expand our strategic partnerships locally and regionally with other corporations and ecosystem players to offer a wider platform for the start-ups that are seeking to validate and grow their innovation while focusing on real customer needs. 

“This will help to foster a more wholesome and stronger ecosystem.”

Arni advises all innovators to be very clear about the solution they want to deliver to customers in resolving pain points. “As long as they are focused, there will potentially be a lot more collaborations in the future. Of course, in Malaysia, we are also excited about building a healthy ecosystem.”

PETRONAS welcomes strategic collaboration opportunities from all sectors in harnessing the latest innovative solutions to enhance business, economic and national growth.