From R&D to Commercialization – Deploying New Energy Technologies at Scale

[00:00:00] H.J. James Choo, PhD: As in true fashion and continue the methodology that you actually saw happen right in front of your eyes, these panelists actually have not seen the questions.

[00:00:14] Todd R. Zabelle: The last ones couldn’t remember, so it didn’t matter.

[00:00:18] H.J. James Choo, PhD: And Keith, who’s actually second from your left, was, as you can see in the agenda, he’s not actually in the agenda, but we actually asked him to join the panel this morning because of his background.

[00:00:30] H.J. James Choo, PhD: He actually is on the panel without really understanding what this is about. But he actually has the plenty of experience to share, so we’re gonna actually go try to get some of his wisdom. So what are we actually talking about here? Todd already actually alluded to this morning.

[00:00:48] H.J. James Choo, PhD: There is a huge amount of pressure to deploy new energy technologies at scale. And you can argue whether some of these technologies, like pyrolysis or NGS are actually new technology, but I certainly are is a new application. And depending on who you talk to, you’re gonna see this conversation about the value of of death.

[00:01:12] H.J. James Choo, PhD: Yeah. And it’s pretty self evident, but it says at the beginning there is r and d resources that are going to get depleted as it becomes more and more toward the commercialization and into the public sector. It’s a private sector, whereas research for commercialization actually goes up. And when those two not actually are, some of those two are not enough, that’s when the value of debt actually occurs.

[00:01:41] H.J. James Choo, PhD: According to the recent estimates, about 90 percent of startups fail, which value that it is about three trillion dollars, okay? So it’s not a small amount. And as Todd actually alluded to it this morning, a lot of companies, however, Or relying on modular standard design approaches to try to roll this out.

[00:02:04] H.J. James Choo, PhD: And I can actually you can actually find numerous of these in the, in on the internet. It’s more, if you actually look at the world, the economic forum, they say the SMRs going to re-leverage standard mass manufacturing production synergies on fire. All these companies are out there saying, as long as we actually have a standard pro product, we should be able to deploy them and scale.

[00:02:28] H.J. James Choo, PhD: Okay, now, we actually have a panelist here, who’s actually living through that, or have worked with many companies that actually have done that, realizes it’s not just a simple deployment of products, really it’s a little bit more complicated, and demand, local requirements, conditions of each site requires configured to order installation.

[00:02:49] H.J. James Choo, PhD: To talk about that, we actually have four panelists here. As you can see, Jim is here. Jim. I’ve got two Jims, this one. You actually have I was just raising my hand. I said it was me. James is on stage. So we’ll refer to him Jim 1, Jim 2, Jim 3. Jim Craig is the currently the vice president of project management execution for BrightMark at Chevron, where he’s leading the project development delivery team focused on delivering portfolio of dairy R& G facilities around the United States.

[00:03:22] H.J. James Choo, PhD: He’s he’s been with Chevron for the past 20 years, but he what, he’s mostly famously known for is when we were first working on one of the largest projects that Gary already talked about, we are, Todd and I were actually doing a presentation of how we can actually, how PPA can be applied. He said during the break, are you guys talkers or doers?

[00:03:46] Todd R. Zabelle: I don’t think it was the break. I think it was in front of the whole crowd.

[00:03:49] H.J. James Choo, PhD: I think at that point we actually shut down the presentation and went to work. That was the beginning of implementation. So that’s what Jim is known for. Keith, again, thank you, Keith, for actually joining the group has worked for BP over the over 18 years working in major capital projects globally.

[00:04:06] H.J. James Choo, PhD: He has led major capital oil and gas projects in the North Sea, Egypt, and Ang Angola. As part of BP’s transition to an integrated energy company, Keith was tasked with leading the green hydrogen project, helping the company make the bold move and helping establish green hydrogen as a viable energy source.

[00:04:24] H.J. James Choo, PhD: So he’s actually living that experience. Jim Richardson with Heirloom Carbon is the interim head of capital projects at Heirloom Carbon, a direct air capture company based in Brisbane, California. John. Erdem operates the first U. S. DAC facility in Tracy and has plans to do more in Shreveport Louisiana potential plans in Texas, Oklahoma, Europe, Canada, and Middle East.

[00:04:54] H.J. James Choo, PhD: Jim actually has over 30 years in the related to capital projects business. If you actually haven’t met Jim when I first met him, he actually had a license plate on his car called Gallus. Laughter. And if you guys actually know this Scottish slang, it actually means someone’s bore old or daring.

[00:05:15] H.J. James Choo, PhD: If you think anyone’s gonna try something that’s bold, go to gym. And Todd, who requires no introduction, because you already actually heard him talk. The questions. Let’s actually start from the external to internal, okay? External wise Everyone here actually has many, decades of experience in large capital projects.

[00:05:42] H.J. James Choo, PhD: What are the market how are the market expectations different from what you’re used to seeing? And how does that drive your execution strategy? Jim Richardson, start with that.

[00:05:54] Jim Richardson: Yeah, talk a little to that. There’s when we think of market expectations, I’m maybe touching a couple of angles and you can re redirect.

[00:06:02] Jim Richardson: One is customer. What’s the market, what’s the customer’s expectations? And so I, and the CO2 market for capture of carbon the market is very preliminary. It’s a voluntary market. So you have buyers who are doing this because they understand the direction. They possibly expect that a mandatory market will, emerge but you have a market that is customers willing to be men.

[00:06:32] Jim Richardson: And willing to pay arguably what one would believe is above market price for low early volumes to start the industry. I, and then the other part of a touch on market is the investment. The investors and which investors will come to the table. And we touched earlier in one of the presentations on, investment in the valley here in particular.

[00:06:56] Jim Richardson: Very much comfortable with digital investment, bits and bytes. very much. Less comfortable when it comes to major capital projects. Building steel is not a traditional investment for VCs. And the market there, we’ll probably get into this more. Where do you get the money? How do you fund both the technology, the innovation development, and then the delivery of major projects for very willing customers at the back end?

[00:07:25] Jim Richardson: Jim?

[00:07:26] H.J. James Choo, PhD: Anything you want to add? No, I’m good.

[00:07:28] James E. Craig, PE: Anything I want to add? I’m just thinking through what the question was, to be honest with you Just thinking about the structure of the projects out there and the financing that comes in really the external piece of it. And what I’ve seen because I’ve been thrown into a joint venture called Brightmark and doing renewable natural gas.

[00:07:51] James E. Craig, PE: And you’re always looking for money to fund these things. And I’m excited To touch a little bit on a hydrogen project that we’ve bought into and we start looking at the external stakeholders and you talk about external stakeholders to fund it and you got people trying to execute.

[00:08:05] James E. Craig, PE: So the external stakeholders are wanting certainty, right? So they want lump sum EPC contracts with liquidated damages and think that’s going to give them price certainty or guarantee that they’re going to have paid more money yet. Very complex structures. You have engineering company yet owner companies like a chevron partnering with equipment supplier.

[00:08:24] James E. Craig, PE: Then you have D. O. E. Funding. And then you got seven companies of joint ventures or capital raising over here. So it’s very complex from the from the capital standpoint. And then all of a sudden you end up with a contract you got to go execute with new people, new companies that really are not that sure how to go execute or how the work gets done that you have lump sum EPC contracts with.

[00:08:46] James E. Craig, PE: And so it causes stake, external stakeholder management becomes extremely difficult because if there’s any changes, you have a lot of people you have to go engage to get buy into these changes that really don’t understand project and how they get done. And then you have contractors at local site conditions that you’re you have.

[00:09:04] James E. Craig, PE: local workforce that is not as maybe the capability is not as strong as somewhere on the Gulf Coast. Where they really know how to get work done. You’re in these really remote areas, and you’re relying on a work very transient workforce, and then they’re not the most disciplined either. So you end up with a little bit of a conflict of how you’re gonna go execute these projects predictably and competitively and manage that cost.

[00:09:27] James E. Craig, PE: It becomes extremely difficult, and I’ve spent a lot of time, especially in my last thing of renewable natural gas. sitting at dairy farms, right? I’ve been across all the Midwest, which is absolutely beautiful. And I’ve been feel very lucky that I’ve been able to experience it. But it’s extremely hard to execute in those areas with the type of contract structures that we have out there.

[00:09:48] James E. Craig, PE: And a lot of that is driven by the external stakeholders out there thinking they’re going to get certainty with the type of contract structure they put in. But at the end of the day, The contracts are, beyond schedule, they are over budget, and at the end of the day, the workforce, the owner company that’s out there, the new company that may be a JV or whatever it is, and the small EPC that really doesn’t do any work, they subcontract it all out, don’t understand the workflow and how to get the work done, which causes a lot of variability and a lot of waste cost.

[00:10:20] H.J. James Choo, PhD: Keith, is that sort of what you’re saying, or is there something else that you actually want to touch on?

[00:10:23] Keith Magowan: Yeah, I think Oil and gas is pretty straightforward. You produce a barrel of oil. You can definitely sell it. You know where you’re selling it to. When you look at green hydrogen projects, the industry the market’s not there.

[00:10:39] Keith Magowan: It’s we’re trying to establish what the market is. But it actually leads to difficulties with what are you trying to design for? You don’t know who your customers are. You don’t know what the customer’s needs are. You’re trying to make decisions up front about design and plant design.

[00:10:56] Keith Magowan: And actually, you don’t know if it’s right or wrong. When you actually look at the technical aspects of a green hydrogen project, it’s pretty straightforward. It’s water in, electricity in, mix them together, hydrogen out, oxygen out, and lots of heat. That’s kinda it, right? So where the the project processes that are set up at the minute that are deep rooted in oil and gas.

[00:11:20] Keith Magowan: They’re all about high comp highly technically complex projects and spend. We’re actually trying to apply those processes to technically straightforward projects is wrong, right? The complexity in green hydrogen projects is about the commercial aspects. And actually it’s very dynamic commercially.

[00:11:40] Keith Magowan: Absolutely. Both from whether it’s government funding, who who’s your off takers going to be. It changes all the time and that changes what your project’s going to be. So actually you really need to think differently about how you want to manage your projects, how much money do you want to spend up front?

[00:11:57] Keith Magowan: When you’re actually still in that kind of commercially complex area by trying to sign your off takers. And then once you get to FID for me, you should try and minimize everything up front, pre FID. And then once you actually get to a point where you think you’re going to sanction your project, that’s when you ramp up and you’ve got to go.

[00:12:16] Keith Magowan: It’s very different to oil and gas.

[00:12:20] H.J. James Choo, PhD: We actually heard from those that actually have been in a large oil and gas companies, or still are in large oil and gas companies, trying to actually get into this new energy business. You actually have been working with a lot of companies that’s actually being in the startup phases of these energy projects.

[00:12:36] H.J. James Choo, PhD: Are you seeing something that’s, uniquely there or something that they should, they’re trying to do that’s gives you a lot of warning signals?

[00:12:44] Todd R. Zabelle: Yeah, so I think if we look at this and I think it’s been alluded to, it’s this need to create a customer in demand, secure financing and then build the production system Simultaneously, and I guess it could be two chickens and an egg.

[00:13:03] Todd R. Zabelle: I don’t know. But these three factors are in play. What we’re seeing and we’re involved in, several of these is truly a lack of understanding of what it takes to do it right. And the amount of funding that’s needed to do it at all. One, one that we’re working with they thought they needed to raise 20 million.

[00:13:26] Todd R. Zabelle: We said you really need to raise between 300 and 500 million. Then we ran the numbers out about a hundred billion. Now, where are you going to go get a hundred billion to deploy this thing? And a hundred billion sounds crazy if over 10 years they do 10 billion a year that’s, probably the number, right?

[00:13:41] Todd R. Zabelle: So people come up with wonderful ideas, proven technology, but they just can’t grasp the magnitude of what it is they’ve created in these new energy technologies. We see that the bigger players are stepping back across the board BP and Sheldon very, vocal about that. So you’re losing a huge funding source that have with people that actually have a huge appetite for risk compared to your local banker, let’s say, right?

[00:14:11] Todd R. Zabelle: So one, where is the capital going to come from and the amount of capital that’s needed to make these things happen? And then I think the second part is trying to get these. These new codes, if you will, to understand the need to establish a playbook, right? So they said if we went and we had 100 million, what would you go do?

[00:14:31] Todd R. Zabelle: I said the first thing we do is we spend 20 million just building the playbook of how we would go do it and then have the systems and all ready to go. Because one of the things that we see is we get back to what I was talking about earlier is what the spreadsheets and the expediting and all that.

[00:14:46] Todd R. Zabelle: And when you get into that, Doom loop. It’s over, right? So I think there’s lack of appreciation of the amount of resources that are needed to create the playbook, to put the commercial agreements in place and then to properly build out the technology. And people just after a while, they don’t look at it that way.

[00:15:04] Todd R. Zabelle: Things get discombobulated and they tap out. I think that’s what you’re seeing going out. So it’ll be interesting. From a market perspective, as the big guys pull back, which is just really unfortunate because they have to know how and the resources and the new co guys come in who are all excited.

[00:15:20] Todd R. Zabelle: It’s going to be super amazing how this might go.

[00:15:21] James E. Craig, PE: So I find that very interesting, because you know what? What I’ve seen a little bit of is as The energy transition market has evolved, right? It all started with solar and wind, right? Pretty standard product, pretty easy to deploy once you get it out there.

[00:15:38] James E. Craig, PE: But these same players are now going to moving into renewable natural gas. They’re moving into hydrogen. And what I’ve seen a little bit is that they’re using that standard playbook they used here for a very simple process and very simple design and installation, taking it and trying to apply it to a more complex.

[00:15:54] James E. Craig, PE: Facilities is they go on and sometimes it just doesn’t work either from a workflow perspective or from a production system operating system, it doesn’t work and they need to rethink what they’re doing as they apply it to these new systems.

[00:16:08] Todd R. Zabelle: Yeah, just to add a little bit more to that. One of the things that we also see is they’re very enamored with the technology element.

[00:16:15] Todd R. Zabelle: So we one of the particular ones they were very much focused on this reactor technology. They have, we said, but. The reactor needs a condenser and the rest, and then you got a little thing, but that actually isn’t the plant. You need a number of reactors and condensers, and then the the manifold and all that goes with it, and the power and the rest.

[00:16:32] Todd R. Zabelle: That forms the plant, but the plant isn’t really a production system because somehow you got to bring in the, feedstock, and then you got to do something with the offtake. We don’t know who’s taking the offtake. take that as key saloon to what actually is the feedstock and where we’re going to process the feedstock to what extent them.

[00:16:49] Todd R. Zabelle: So that’s going to take us up to the value chain. What the hell are we doing here? And they’re just down here saying, I got a reactor and we’re going that, that’s great. You got a reactor. That’s super amazing, but you got to go all the way up to the value chain to figure out. Who’s the customer?

[00:17:03] Todd R. Zabelle: Who’s the provider? And then bring that all the way back down. And, but the, reactor is just one little, one moment. I think that’s why they don’t understand the amount of capital that’s required because we just got to make some reactors. And so I’ll just leave it. I went on a tour of this plant thing to work on.

[00:17:19] Todd R. Zabelle: The guy said, yeah, you can’t believe it. We had to run the electrical from there all the way over there. I said, yeah. So that’s the plant we’re talking about.

[00:17:26] Jim Richardson: All right. I think if I can pick up on that a little bit toward that’s. One of the, things and, I’ve been incredibly inspired and, motivated by the, talent that exists in heirloom carbon.

[00:17:41] Jim Richardson: It’s, we talked earlier about the dilemma and the challenge, and Dave and, Will and others talked about the dilemma and challenge of converting your workforce, change in the workforce or the change management when you are able to work in a company where the workforce is younger. There s not a layer to peel back.

[00:18:00] Jim Richardson: There s an opportunity to grow into the right space from day one. And so that s a fantastic opportunity. You re still living in an ecosystem where the providers operate under traditional practices. And so you re a new and youthful owner trying to make that difference. The other thing, and it may be common for others in this space, the cost of the technology may be 20 or 30 percent.

[00:18:26] Jim Richardson: Of the facility that’s required to deliver the end product. And so the need to bring, you can do a cost down on technology. Silicon Valley talks about that a lot, cost down on technology. But when 70 percent or 80 percent of your cost is traditional construction or traditional project or steel. Then you’ve got to also have a process which will continually drive that cost down as well.

[00:18:53] Jim Richardson: Dave talked to this a little bit earlier. The only process I’ve seen that does that is a production management system. Continually take the cost out of the majority of the cost of the facility while taking the cost of the technology down simultaneously.

[00:19:11] Keith Magowan: I think that’s a great point. Because when again, when you go back to the oil and gas bit, and Gary, I think you mentioned this.

[00:19:19] Keith Magowan: We’re a bit dumb, fat and happy, right? With the oil price is going to save you, right? When you actually have massive cost overruns, when you’re on ultra low margin, like projects like green hydrogen, you don’t have that luxury, right? So it’s an absolute rigorous focus on cost and cost out is the only way you’re going to get it.

[00:19:39] Keith Magowan: Yeah. And I think that it’s a, whole different mindset that people have to get into the, if you’re going to work in that area and in that industry. You’ve definitely got to have that at the forefront of your every decision you’re making. The projects that I was working on, I said there was no change.

[00:19:58] Keith Magowan: It’s like fully off the shelf, da right? I just want standard products. And I signed off zero zero change orders. And by the time I finished, it’s I started off with a car and I ended up with a boat. But they told me it was like it was the same thing, right?

[00:20:18] Keith Magowan: It’s just not. And that’s why the cost of gone astronomical, the schedules are gone out. And it’s because people were just back in the blindly following process, not thinking about cost.

[00:20:32] H.J. James Choo, PhD: That actually brings up a very, interesting point. So one of the things that. in the oil and gas and anyone that’s actually a producer environment like data centers, hospitals producer environment.

[00:20:44] H.J. James Choo, PhD: Schedule always trumps cost, right? The sooner you can actually put it online, it’s going to actually create the revenue and so forth. But one of the things that we keep hearing from the energy transition or renewable technology projects is it’s gotta be commercially viable per project. If not, we’re gonna shut this down.

[00:21:00] H.J. James Choo, PhD: If so, we’re gonna move on to the second project. So the methodology that you use to actually see in the schedule driven perspective, how does that actually affect how you actually deliver and manage the cost driven projects? Anyone want to take that first?

[00:21:18] Jim Richardson: I’ll jump in. Yeah, go for it. Then you can chuckle.

[00:21:23] Jim Richardson: I think, one of the things is, a good, is a really good point, James. So you, start, you talk about what you’re doing, you’re scaling. And ultimately, for the things we’re talking about, we’re hyperscaling. We’re going from lab scale to trillions of dollars, literally trillions of dollars.

[00:21:41] Jim Richardson: And go read any article about the amount that energy transition and climate change are going to take to be delivered. That is a phenomenal step to make. And meanwhile in, earlier this year at McKinsey’s hyperscaling conference in San Francisco, Todd and I were, there and James was there. Part of the discussion by the conventional banking institutes was, we’ve lost that DNA.

[00:22:09] Jim Richardson: We don’t know how to fund capital steel investments and innovative investments. And so now you’re starting to talk about a different ecosystem of funding to take you from that which a VC will fund, which is the pure research, with a willing customer willing to pay for the product at the end, and willing to pay sizable portions to get this thing off the ground and into the industry.

[00:22:33] Jim Richardson: But you still have to fund a project in the middle. And who are the financiers of that project? And what are the returns expectations? And, banks, bless them, I find it difficult to lean in for less than 15 or 20%. And you got to ask yourself, we’ve just gone from lab scale, we maybe got a pilot scale, we’re doing a demo scale, but we’re not at full commercial scale yet.

[00:22:55] Jim Richardson: We’re not able to have the scale that actually delivers the economies you need. So how do we go through and how do we transition through that funding step? And I think someone mentioned the Valley of Death and those of you who’ve read Geoffrey Moore and Crossing the Chasm, talking about more of the bits and bytes technologies and technology innovation.

[00:23:16] Jim Richardson: I think rather than Valley of Death, it’s really valleys of death. So because you’ve succeeded at lab scale, doesn’t mean you’ve succeeded at pilot scale. You’ve still got to fund the next scale up and you’ll probably be three or four projects in before you truly have. The economy of scale that drives a repeatable performing business and that’s a tough one for a lot of investors to get over.

[00:23:42] Jim Richardson: You’re talking about probably being a billion dollars in before you’re really on that smooth running platform.

[00:23:50] Keith Magowan: I think, James, the schedule versus, what was it? Cost. Cost. There’s always a drive to go fast, right? But you have, to be real. And when you’re looking at the green hydrogen market, the technology is not there to go at gigascale.

[00:24:09] Keith Magowan: We were at 100 megawatts, 200 megawatts, which is actually massive. I think the biggest plant that’s currently in operation that’s not running at full capacity is 200 megawatts. And I was doing two times, 200 megawatts and three times a hundred megawatts all in parallel. And they were talking about giga scale at before 2030 startup, when you actually take a step back and you look at how would you make a giga scale project?

[00:24:39] Keith Magowan: The biggest electrolyzer on the market is 15 megawatts , right? You’re gonna need like hundreds of these things. And even taking. 100 megawatt plant and instead of using a 20 megawatt electrolyzer had to use 5 megawatts. And suddenly the cabling, the pipe rack and everything just exploded.

[00:25:04] Keith Magowan: I needed another building, I needed more HVAC, I needed more cooling just to try and make it work. And that’s because technology is not there. So when you start looking at massive projects and the massive scale up that you’re talking about. You’re going to have to develop the projects, taking a bit of risk on technology, that when I get to 2029 or whenever, I need to buy the the electrolyzers to go make that work, that there’ll be something that’s 100 megawatts.

[00:25:35] Keith Magowan: It won’t be 5. Now you go and try and push that through a big company, right? These processes are technology readiness levels and serial number one risks and stuff. It’s like you’re going to talk a different language to people, right? When you’re trying to get approvals to go through, you’re going, yeah, it doesn’t exist.

[00:25:53] Keith Magowan: But trust me, I’ll get there. It’s just a different argument. But if you don’t do it, you definitely can’t build it out with the technologies there today.

[00:26:06] James E. Craig, PE: It’s an interesting dilemma in my mind because a lot of the projects I’ve been on, I’m on the back end side, right? Trying to fix them from disaster.

[00:26:14] James E. Craig, PE: And so you have to step back and think, look at a lens from five years ago policy drives a lot of these timing of policy is what you have to meet, right? And you got to think about what are you trying to produce at what rate? And I think a lot of times we. Throw that out and just say, Hey, we’re gonna put all these up at one time.

[00:26:33] James E. Craig, PE: Give it to a small contractor. We want you to go over and give you 100 million contract to go build seven facilities in the middle of Iowa, and you can go do it. You’ve never done it before. So it’s more of a hope strategy. So I think is as owner companies and Companies get into this.

[00:26:50] James E. Craig, PE: You got to be very intentional to think about what are you trying to achieve? By what time? Because I hear the technologies that not there a lot of times it’s not. You have to lean forward, but the small deployments and understanding what the local conditions are, what the local workforce is to be able to be predictable, I think is a huge step in the right direction as we go through this kind of energy transition piece.

[00:27:14] James E. Craig, PE: And I think there’s got to be a lot of education that goes on. I think the owner companies got to be educated on what they’re trying to take on. The new energy companies need to be educated. What’s right? The E. P. C. S. Need to be, you know what’s going on? Because right now what we’re doing is not working.

[00:27:28] James E. Craig, PE: In my opinion, the contract structures and the expectations were setting up out there to me is taking us back to error to type of execution, which is a hope strategy at the end of the day. Yeah.

[00:27:39] H.J. James Choo, PhD: Do you want anything to add Todd?

[00:27:47] James E. Craig, PE: You can’t pass. You can pass all you want, Todd.

[00:27:48] H.J. James Choo, PhD: One of the things that Todd also actually talked about is the playbook. And as you guys all know, any type of project that has multiple organizations actually are amalgamation of the production system that they bring. Whatever the internal processes that they use or they actually learn how to do their work.

[00:28:06] H.J. James Choo, PhD: One of the things that just talking to all of you at different times is really important. What’s really interesting is, at least in the traditional oil and gas, even the language that you use, F E L, feed, those are common languages. That’s really not common in the architectural engineering construction business, right?

[00:28:26] H.J. James Choo, PhD: Whereas the architectural engineering construction business, you might be more actually conceptual, schematics, and so forth. At the same time, the supply chain that you’re working with on these projects actually are bringing people from all sorts of different industries. What recommendation do you actually have for people that are building these playbooks, or what are you doing to build these playbooks in organizations?

[00:28:53] Keith Magowan: I guess I wish I had the time to build a playbook. Because I think I went into the Grand Canyon of death.

[00:29:02] Keith Magowan: With the stuff I was on. But yeah, like taking a step back actually thinking your way through. And the question I ended up asking. I’ve never asked before in any project was how do I make money? What’s the value what’s the sources of value that I’m having to look at? And it’s not, it certainly wasn’t what I thought it was going to be.

[00:29:28] Keith Magowan: When you’re dealing, like I say, with commercially complicated, very dynamic commercial projects. Really having to understand where’s your funding coming from? What are they wanting, right? And what’s their impact on it? Where are you trying to sell it to? What subsidies are you getting?

[00:29:45] Keith Magowan: Because if you’re building your business on subsidies, it’s a really difficult space to be in, right? And most green hydrogen projects, they’re all heavily subsidized. It’s the only way you’re actually going to make money. Because nobody in their right mind as a consumer is going to buy green hydrogen over grey when it costs five times the amount.

[00:30:04] Keith Magowan: So it has to be heavily subsidized at minute, but you need to understand what those subsidies are, what’s the restrictions with them? There’s a lot of discussion about we need to go to China and start bringing in loads of electrolyzers from China because they’re cheaper and better.

[00:30:17] Keith Magowan: Guess what? You can’t, right? Because if you’re getting European Union subsidize, or subsidies, it’s got to be built in Europe. If you’re going to have subsidies from the IRA, it’s got to be built in America, right? There’s, it’s just really complicated commercially, like I say, technically it’s simple, but if you, have to understand your value proposition and how you make money.

[00:30:45] James E. Craig, PE: Yeah. No, I completely agree. And I’m going to repeat myself again. One, you don’t have time to make playbooks because you got to get out there and deploy. Luckily, within Chevron, we do. We have baked in operations science as part of our capital projects operating models. So our terminologies changed the way we talk about projects.

[00:31:07] James E. Craig, PE: We do talk about whip. We do talk about work in process. We do talk about capacity and how are we going to optimize these projects and workflows. But when you’re Going into a new company, they don’t understand that language. And while you have all these complexities that you’re trying to do from a commercial standpoint, at the end of the day, you’ve got to deliver a project.

[00:31:26] James E. Craig, PE: And you’ve got to deliver it predictably, and you’ve got to do it within the cost that’s associated with it. Otherwise, it doesn’t matter how many subsidies you get, you’re not going to make any, you’re definitely not going to make any money. And And then you’re trying to influence partners and, companies outside of you, which is extremely, difficult to do.

[00:31:42] James E. Craig, PE: So relationship building, and I think Dave said, going through to the work sites and going to the contractor’s office. And to me, it’s been very much a very interesting dynamic because I’m a very much, In your office type of person to build a relationship. That’s how I do things. But working with some of these new companies, they don’t do it that way.

[00:32:00] James E. Craig, PE: The younger generation. Some of it. We’ve lost a knack of being face to face and actually understanding the work through covid because people have gotten very comfortable staying at home and doing on a zoom call or teams call. And I guarantee they call me the grumpy old man who gets on the gets on the team’s call and makes everyone turn their camera on.

[00:32:19] James E. Craig, PE: And then I got a whiteboard behind me and I’m writing down actions and telling people what they need to go do. But, and then pulling people together in meeting rooms, because it feels like I’m on a little rant here. Sorry, I’m on my thing, but it just feels like we’ve lost it, lost the art of building relationships.

[00:32:35] James E. Craig, PE: Understanding how the work gets done, going to the work phase, talking to guys to get the work done so we can actually get it done in an efficient manner. And these projects are complex from the highest part to how they make money. They’re equally as complex because we’re executing areas of oil and gas standards or energy standards in the rural parts of the US.

[00:32:56] James E. Craig, PE: Where you don’t have a strong workforce that you’re trying to build up as you’re building these projects. So you have quality issues, reliability issues. I never knew that Iowa got down to minus 40 degrees in the winter. I worked in Kazakhstan. I’m like, man, that is like the Kazakhstan of the US.

[00:33:13] James E. Craig, PE: But that’s the type of weather extremes you have here in the U.S. And that’s where we’re trying to build facilities in the middle of dairy farms where the dairy is relying on you to be operable and I’m relying on him to be operable, and it just adds more complexities. So I’ll stop. But to say that that’s complex.

[00:33:32] James E. Craig, PE: This is complex. And at the end of the day, there’s got to be a lot of working about what’s the workflow and how we’re going to get these projects done.

[00:33:40] Todd R. Zabelle: Yeah, I just add one thing, and I’m just sitting here and thinking as I listen to this. Is the financial proforma, the new CPM schedule. And so what we see as investors come in, especially guys from the Valley here and the PE guys up in San Francisco and London and so on and so forth.

[00:34:01] Todd R. Zabelle: They have these requirements that actually set the project process. Right and the few of these guys that. We know fairly well they’re, doing crazy things with the, delivery process that it doesn’t make sense. So we got to do a proof of concept and then we’re going to do another proof of concept.

[00:34:21] Todd R. Zabelle: We already did a proof of concept. Yeah. We’ve got to do some more because we’re trying to de risk and we get some more money. I’m like, look, the thing’s producing, we got to go spend like a billion now or we got to shut it down. There’s no in between. I think that’s what you’re saying. Even if you modulize it.

[00:34:38] Todd R. Zabelle: The customer is going to say, don’t waste my time. If you can’t give me the product, don’t waste my time. But the financial guys who need to be involved in this have a different view on don’t waste my money. And so it’s just, it’s very complex between the customer that wants a commitment and is serious about committing, but needs to commit at scale.

[00:35:00] Todd R. Zabelle: The offtake or the feedstock provider, who’s probably cool to whatever, but the financial person’s putting. It’s almost like having the environmental impact and, that stuff influence process or banker. It is a banker influencing process, and it’s a process that’s antagonistic to how the project wants to flow and how it wants to be delivered.

[00:35:24] Todd R. Zabelle: One of these guys, the banker said we should buy all the stuff in advance. I’m like, why don’t we do that? And it’s because the private equity guy was going to get fees off the money that they put in the organization. I said, but it’s going to be dead. And they we may not care because all we care about is the AUM assets under management.

[00:35:39] Todd R. Zabelle: We’re getting 2%, right?

[00:35:42] Jim Richardson: It’s skewed. Yeah. If I could pick up on the playbook comment as well, I think I’m fortunate to be joined by, almost a dozen colleagues here from, heirloom. And we’re in the middle of trying to write that playbook. And every time we peel back another layer, we get to, Oh, there’s something else we need to do.

[00:36:03] Jim Richardson: And we’re still learning how to do workflows. And we’re still learning how to put those together. And we’re still learning that, to Todd’s point, banker expectations do not align with the best flow for the project. But, if you are not self funding, and you gotta go out for money, you gotta try and make those things match somehow.

[00:36:22] Jim Richardson: You gotta try. The other thing we talked about playbooks and we talked about the slightly different worlds of AEC and EPC or commercial build and industrial build and the nature of the technology that we use combines those two. And so you’re merging two worlds that have slightly different vernaculars and perspectives of what the flow and process looks like.

[00:36:46] Jim Richardson: So we’re in the process of having to define our way of working. Our definitions leverage the best of the things that all of you have experienced, such that we can have a team roll forward and be a sustainable production system. So plants as products, projects as production systems. Combine those two factors, allow the process to influence the product and vice versa.

[00:37:13] Jim Richardson: And those are really, that’s the playbook to build. It’s the opportunity. The, I think if you were to say the micro opportunity. Is to be able to get that in front of sometimes government officials, sometimes bankers, and have them understand that they’re, if you like, EPC fixation and project management fixation and stage gate fixation is actually detrimental to outcomes.

[00:37:38] Jim Richardson: Yeah, that’s a somewhat tough journey. We are on it with part, the Department of Energy in one of our projects. We need to be on it with our funding partners as well. But I’m sure it’s a challenge that everyone who’s trying to scale comes across.

[00:37:56] H.J. James Choo, PhD: Thank you. Anyone anything else? Okay, good. As you guys probably actually heard, if and based on Todd’s slides this morning, if 10 percent of what’s forecast come to fruition, a lot of us in this room will be involved in those type of projects.

[00:38:15] H.J. James Choo, PhD: In short future, the question is, and they actually have validated that traditional ways of looking at it from a stage gate perspective or, actually buying everything in the front so that they can actually build a whip or get progress is not going to actually suffice for the delivery of these projects.

[00:38:34] H.J. James Choo, PhD: So one thing that I would recommend is continuously actually you can talk to these gentlemen down here, but also continue to learn more about how do we actually deliver projects on time on budget. With less cash tied up, so that you can actually become more commercially viable as projects mature and scale.

[00:38:53] H.J. James Choo, PhD: Please join us in thanking these panelists.