How Kensington Capital Partners Aims To Diversify Alberta’s Economy

The Toronto-based alternative investment house recently opened a Calgary office that's focused on funding energy projects and green technology

March 07, 2016

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Michelle Scarborough Kensington Capital Partners
Michelle Scarborough, senior vice-president, Kensington Capital Partners

There has been a lot of talk recently about the need to diversify Alberta’s energy economy. What there hasn’t been a lot of, are people willing to put their money where their mouth is on the issue. With more than $850 million under its management, Toronto-based Kensington Capital Partners is trying to change that. The alternative investment house recently opened a western operating base in Calgary that is focused on funding energy and power infrastructure, as well as green technology. The presence of venture capital in the oil patch is nothing new. And while Alberta may not be known yet for having a thriving tech sector, it is known for being one of the most entrepreneurial places in Canada.

Connecting those two worlds is where Michelle Scarborough comes in. She’s the head of Kensing­ton’s new Calgary office, and a seasoned venture capitalist with a background in the energy and tech sectors. She explains that the energy industry is going through a time of great evolution and upheaval, much of that as a result of new technologies. But that doesn’t mean technology is going to be the enemy of fossil-fuel development anytime soon. Indeed, the two are becoming increasingly co-dependent. That’s good news, not only for venture capitalists and an ailing Alberta oil patch, but for future energy producers and consumers everywhere, too.

It was June 2015 when Kensington’s Calgary office opened. Western Canada’s energy industry was and is taking a severe beating, and here comes this Bay Street investment firm riding in to save the day. Is that basically the origin story here?
No, it takes a village, really. But because of my background in energy and technology, I believe that technology is one of the ways we’re going to be able to help reduce costs, both in energy tech and clean tech. If we look across the landscape, the industry is driven by technology. Whether it’s pumps going into the ground to pull out oil, or all the power-generation facilities around those systems – it’s all technology-based. So really what we’re talking about now is the next evolution of technology in the energy business. And we are here because technology will be a big driver in reducing costs to the customer and increasing productivity and efficiency.

What’s the current state of Canadian oilfield technology, from a global perspective?
I work with a number of large corporations and the desire to adopt new technologies is there, but one of the challenges is: Where do you start? And where are you going to see the biggest improvement?

This hasn’t been well-articulated, but the industry has been a technology adopter all along. But the goal now is adopting technologies that transform how decisions are made, how water is used, how emissions are reduced and how power and energy can be used more efficiently. The idea is, certainly, to be more environmentally friendly, but also to maintain and increase that social license to operate. You’d be hard-pressed to find anybody in the industry who isn’t onboard with that. The question is: What are the economics for doing that effectively so that we can still maintain competitiveness? And that’s being asked on a global basis – it’s not just happening in Canada.

Often it feels as if we’re asking energy companies to embrace these rather new and uncertain technologies at a time when many are struggling just to keep the lights on. How do you help them bridge that divide?
Some of the technologies we are seeing are able to be implemented seamlessly into existing systems that the industry is already using, and that can be done quite cheaply. The new technologies that are being developed are coming into commercial use at a price that is affordable even in this market. And they aren’t impacting reservoirs, meaning that you don’t have to shut a well down to implement a new tool. They’re allowing the operator to make a well run more efficiently through data, and safety and security monitoring. So we’re seeing mainly communications technology being used for new applications in energy, while things like water technology and solvents are a bit further out.

Also, energy companies are becoming more adept at using alternative energies as a power source. We’re going to see quite an interesting evolution here over the next 10 years. It’s probably the best time to be investing in energy and clean tech that we’ve seen in a long time.

What are some of the more disruptive technologies that you see coming on- stream today?
Some of the big disruptors are technologies that allow you to remotely operate wells without field operators checking the wells every five minutes. It’s a huge cost savings and a big disruptor in terms of how they manage their system of wells and manage the flow. Is the well operating or not operating? Is it on or off? Is it functioning at optimum temperature pressure? How much sand is there? How much water is there? Those are things that will be quite disruptive over time. There are also technologies being developed that are disrupting the way in which water is used or not used in extraction. The use of different kinds of solvents – “green chemistry” – is on the horizon. Some very interesting chemistries are being created using biodegradable or bio-friendly processes. And then you’ve got disruptions through decentralized energy and decentralized power use. We’ve got coal-fired plants coming offline and we’re switching to gas. There’s going to be disruption in terms of how that gas is used, and how it’s used for decentralized energy and creating a distributed system. And the power companies will have to adapt to that. So there are a whole lot of knock-on effects as a result of changes in the energy space – and in oil and gas, specifically.

Prime Minister Justin Trudeau recently made the infamous distinction that he’d rather Canada was known less for its resources than for its resourcefulness. Do you see the recent growth of the Alberta tech industry as a move away from resource development or as a parallel path?
It’s not an either-or situation. We have the luxury of having natural resources as a big part of our economy, and I don’t think throwing that away is a great strategy. The energy sector in Alberta has been a big driver of technology in the past, and I don’t see that stopping. What I do see is the evolution of the energy industry as a technology industry. What we’re going to see is an evolution to a technology economy that allows all of the industries that Canada has been built on – that’s natural resources across the board, including solar and wind – to enhance us and make us very efficient and able to compete on the global market.

But most of the new energy tech companies that we’re seeing – whether they’re above the ground or below the ground – are green technologies in that they’re focused on expending less energy to get that same job done.

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