Russ: Hi, I’m Russ Capper and this is HXTV, the show championing Houston’s innovators and entrepreneurs, coming to you today from Houston House at the 2019 Innovation Agora at CERAWeek by IHS Markit. My guest today: John Lovell, Vice President of Technology & Strategy with MicroSilicon. John, welcome to the show.

John: Good morning, Russ. Thank you.

Russ: Tell us about MicroSilicon.

John: MicroSilicon is a new startup in Houston where we are combining a new chemical sensor with artificial intelligence to improve the efficiency of chemical operations in the oilfield.

Russ: Ok, and that’s done right at the wellhead, right?

John: Yeah, we have this IoT technology that plumbs right into the wellhead. The oil flows through our system, returns back to the wellhead, and as it flows through our system, we extract chemical properties of that oil and then we digitize that, send it to the Cloud where we have some advanced software which can turn it into actionable decisions for the operators.

Russ: Ok, and decisions that fast on the chemicals that’s coming out. That’s pretty new, isn’t it?

John: It’s completely unique, right. Nobody had done this before. The traditional model is that you would take samples, maybe once a year, and those samples of oil would be sent to a chemical lab and they would come up with the best cocktail, and great, and those chemicals would be put into the ground. There were no changes made, really no continuous monitoring of the success of that over the course of the year. We’re completely changing that because our data will go up, say, every five minutes, and we’ll say, “Oh, your asphaltene level is going up,” or, “your water level is going down,” or, “we’re combining oil measurements, water measurements, gas measurements, and these chemical measurements all at the same time.

Russ: At which, therefore, allows you to control and enhance the flow significantly, real time.

John: The thing with asphaltene, asphaltene in particular is a flow assurance issue. It’s a two-billion-dollar problem around the world. If we can catch it early, before the asphaltene starts sticking, then we can significantly reduce the cost of interventions and workovers. That’s sort of on the pre-emptive side. In fact, really, our goal is to allow the operators to become proactive rather than reactive. Asphaltene is a little bit like the cholesterol of the oil well and it can clog up, so it’s kind of like, you have a measurement of cholesterol in your blood once a year, but what we’re proposing is a continuous, real-time measurement. That changes the paradigm. Instead of one chemical being continuously injected, it would now be that we could change the amount of chemicals. So, it would be like, on a Monday, you maybe need a little bit more statin and then you tailor it down a bit. The goal would then be, in fact it’s proven, that we’re reducing the chemical spend for the operators.

Russ: Very impressive. Isn’t it true, too, the asphaltene is, I mean, even if it doesn’t clog it up it’s just worse product, at the end of the day, if it gets high?

John: If the asphaltene stays in solution, then the refineries, they can handle it. They know exactly what’s happening. The challenge is if the asphaltene is starting to drop out and precipitate. Then it can really mess everything up. There are examples of tens of millions of dollars. The worst case I ever heard was a hundred-million-dollar workover to fix from the asphaltene when it clogged up.

Russ: Is it possible even that you would be making changes throughout a day of operation, multiple times?

John: So, for sure, when we look at that data, that data is changing every few hours. This is new information that really isn’t very well known in the industry, is that the chemical compositions are not completely constant. They are changing, and it’s even interesting where there, so, a high level of asphaltene is actually not always bad. It just sort of flows through the system and goes to through the refinery. A low level of asphaltene maybe isn’t bad, but the worst is when the asphaltene is kind of going up and down. What we think we’re seeing is that the asphaltene is depositing to the side of the tubular and then coming off and then coming up. This kind of cyclic phenomenon is probably the most dangerous. We see that because we are measuring every five minutes.

Russ: The system is in production today, right?

John: Yeah, we’ve had a number of very successful field tests around the world and we’re taking orders now and building systems.

Russ: Ok, so you’re actually bringing in revenue today.

John: I don’t want to say we’re cash flow positive or my boss will kill me, but no, we’re bringing in revenue, yeah. We’re in pretty good shape.

Russ: How old is the company?

John: We were founded as a spinoff from Rice University in late 2015, early 2016. We have four full time employees and we’ll be growing up to five or six this year, so we’re growing.

Russ: I think I even came across a few awards that the company has already received?

John: We’re very honored and pleased to have had a couple of awards. We picked up, last year, at the SPE we were awarded the Best-in-Show in a startup competition. We were the most promising startup at the SPE competition in Dallas last year. We also, I don’t know if you know this, kind of like the Oscars of the oil industry is the World Oil Awards. We are extremely excited to have been nominated for best digital data transformation technology. So, we were up there all dressed up in our bow ties and stuff like that, for real. We were sitting next to all the big players and it was very great to be there. We didn’t win but we will win next year.

Russ: Well, congratulations for just being there. I’m still sort of taken aback by the fact that you are so far ahead of the old way of doing it, but is there anybody else between the old way and you guys that might be a competitor even?

John: It’s a good point. You can still take the oil to a chemical lab and have it sampled. Once people start seeing that they need to be making this measurement much more frequently, all of a sudden it’s like, really? You want to wait on year-old data? Wouldn’t you like to know what’s happening to your well now? In that sense, we don’t really have any competition yet. That may change in the future, but we have some IP too.

Russ: Take me back to the beginning. What triggered the idea?

John: That’s interesting, because especially in the Middle East, is where they have a lot of asphaltene problems, and so there was an initiative started by ADNOC, in Abu Dhabi, with Rice University to investigate asphaltenes, and so they have a big program at Rice looking at asphaltenes. Also, there was a professor there, Professor Babakhani, and he was working on miniaturization of technology and he realized that he could miniaturize some of his technology to exactly make this asphaltene measurement. So, that got kicked off and is now spun out of Rice University and we’re building hardware.

Russ: Going from realizing you could miniaturize the assessment of what was in the oil and suddenly making it available real time is a significant step all unto itself.

John: I have to admit, when I first met Dr. Babakhani, and he showed me the little chip, I was like, that’s so cool. And, do you realize that’s going to take you three years to get from that to something that’s going to work in the industry? Because all the packaging and the data, even things like—the measurements are in gigahertz, so we’re sampling incredibly rapidly, and so that’s a huge amount of data going into this IoT device, and that gets decimated and analyzed and then transmitted up to the Cloud. Even there, there’s a whole bunch of activity on that to get the data up to the Cloud and have the AI-based software on the Cloud extracting until finally you get something that the operators want to see, which is more xylene or less xylene, right?

Russ: Right. So, we did interview Dr. Babakhani like, three years ago, here at CERAWeek, and it was impressive at the time, the miniaturization. It sounds like everything is going in the right direction. What do you picture? What’s the company going to look like five years from now?

John: One of the challenges, I would say that we have is that we have so many cool things that we can do with this technology, and if we’re not careful, we’re going to, “oh, let’s do kerogen. Oh, let’s go unconventional, let’s do wax, let’s do paraffin.” So, the main challenge we have at the moment is trying to focus on getting the asphaltene out and getting that to a hundred installations around the world or so, and then have on the, kind of like, not the backburner, but as a second wave then, the next generation of technologies coming out. By five years, what I would see is we will have a platform established, so we’ll have, let’s make up a number, 300 systems out there in five years’ time, but then we can upgrade those systems to add more capabilities so that we become the real time chemical center at the wellhead all over the world.

Russ: It sounds very exciting.

John: It’s a great time to be in the oil industry, I have to say.

Russ: Absolutely. John, I really appreciate you sharing your story with us.

John: Thanks very much, Russ. It’s been a pleasure.

Russ: You bet. And that wraps up my discussion with John Lovell, Vice President of Technology & Strategy with MicroSilicon. And this is HXTV.