"I wanted to do a business that was worthwhile and I love doing things that are disruptive. Oil companies could save a lot of money from it," Stephen McCormick said.
Petromac, a company started last year by Auckland-based petrophysicist Stephen McCormick, has developed a disruptive technology that allows oil and gas companies to get better data from wireline logging of oil wells.
McCormick had spent a couple of years tinkering in his shed to build a device that could overcome problems when drilling oil wells in retrieving the full picture of what is worth extracting from under the surface and the size of the reservoir.
He has developed a patented wireline logging tool conveyance device he refers to as a "bent stick". It helps the wireline logging tool avoid getting stuck when lowered down a well and can guide the sensors to gather data in deviated wells that extend at an angle, not just straight down.
He said drilling wells and wireline logging of the wellbore carried out immediately after drilling are expensive undertakings, with offshore drilling rigs costs running at US$600 a minute or US$1 million a day.
"I wanted to do a business that was worthwhile and I love doing things that are disruptive. Oil companies could save a lot of money from it," McCormick said.
The device has been successfully trialled in 50 oil wells worldwide, including in New Zealand and in challenging conditions in the Gulf of Mexico.
Work should be completed in the next two months on a new generation model that irons out a kinks revealed in the trials and the company plans to then begin in earnest with a global marketing campaign.
Although the big drop in oil prices since mid 2014 has been great for consumers filling up their tanks at the petrol station, the timing has proved less fortunate for Petromac, as oil and gas companies and those drilling wells for them hunker down, shed staff, and become more risk averse.
Petromac investor Michael Oliver, who has been helping McCormick develop the business, said he's not under-estimating the impact that will have on the start-up, as it could make those in the oil and gas industry less keen to take a risk on new ideas.
On the plus side, he said logging and drilling companies tendering for jobs with the big oil players will see leasing the device as a competitive advantage.
"We're slowly getting our name out there and these oil companies may say 'if you want to do our job you have to use this product'. Once we start having that momentum, that's a bit of power," Oliver said.
Both Oliver and Maui Capital managing director Paul Chrystall have put an undisclosed amount of seed money into Petromac in exchange for a 6 percent stake each in the company, which is majority-owned by McCormick. Petromac also got a $103,000 Callaghan Innovation project grant.
Chrystall said the investment was too small to consider for Maui Capital but he decided to back it personally.
"I wanted it to be successful. It's a clever idea coming from years of experience looking at how to make something quite simple work more effectively," he said.
He introduced Oliver to McCormick to help him overcome being the "classic entrepreneurial engineer who continues to polish and polish" and finally do something with the product.
Oliver says there's a massive market for the device and he's optimistic they can build a company of scale. While it may not ever employ huge numbers of people, it could make good profits, and have spin-off benefits for the small Kiwi manufacturing firms, JWB Group and Supreme Steel, that make the product.
McCormick said it has been invaluable to have that help from the manufacturers who were willing to take a risk making very low volumes of a bespoke product in order to see if demand for it would eventually grow.
"I think we can make a good Kiwi company which can make a bit of money," he said.
A report out this week from economic development agency Venture Taranaki showed major growth in the number of Kiwis employed in New Zealand's oil and gas sector, with the number of jobs increasing from 7,700 in 2010 to 11,720 in 2014.
The report also shows a near $300 million rise in the sector's contribution to the country's economic well-being, up from $2.5 billion of GDP in 2010 to almost $2.8 billion in 2014.
(BusinessDesk is funded by Callaghan Innovation to write about the commercialisation of innovation).
(BusinessDesk)
