The energy sector is responsible for extracting, refining, or supplying consumable fuels, like coal, oil, and gas. In the coming years, and with the advancement of technology, we will see massive progression in engineering and innovation that will bring us more sustainable and environment-friendly product applications.
In this episode of The Chemical Show, Victoria Meyer interviews Tom Swanson regarding the commercialization of bio-based chemistry for energy. Tom currently serves as the Senior Vice President of Sales for Locus Bio-Energy focused on surfactant solutions designed for crude oil recovery, transport, and remediation. Locus Bio-Energy Solutions joins the agricultural fermentation process with their cutting-edge technology to create a performance product that is used in oil and gas.
Topics discussed this week:
- Why are green and bio-based solutions important to the chemical industry?
- Overcoming obstacles from start-up to commercialization.
- Identifying what customers really value.
- How do you assess what’s critical in partnerships?
Tune in as Tom shares his chemical industry origin story, discusses more important details about Locus Bio Energy’s unique products and technologies they are bringing to market, and so much more.
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Commercializing Bio-Based Chemicals for Energy Production with Tom Swanson
This week, I am speaking with Tom Swanson, who is the Senior VP of Sales for Locus Bio-Energy, which is a bio-based startup company focused on surfactant solutions for crude oil recovery, transport, and remediation. Tom has a long history in energy and chemicals with 30-plus years at Baker Hughes, Clariant, Brenntag, Schlumberger, and then most recently two biotech startups, which are Locus Bio-Energy and Solugen. So Tom and I are going to have a great conversation about all things chemicals, energy, and bio. Tom, welcome to The Chemical Show.
Thank you, Victoria. I’m glad to be here today and always happy to share my story to help the upcoming entrepreneurs in the industry and the overall industry to advance.
What is your origin story? How did you get started in this wonderful world of energy and chemicals like where you are today?
I grew up in a large family out of Illinois, and we relocated to Houston. My father was always an entrepreneur, looking at several industries where you can invest and really be kind of the first in that industry to try new things. I went to school at Sam Houston State University and studied chemistry. Not knowing what I was going to do with that degree, but certainly recognizing I understand that I really enjoyed chemistry.
My first job out of university was at Baker Hughes and started there as an application chemist with global responsibility. And for the next seven years, I traveled to 28 countries working on oil and gas issues, from onshore to offshore, and to Greenfield Brownfield. My overall goal and objective were to really understand what were the pain points and how can I, from a chemistry standpoint, supply those solutions. So that was my start. It wasn’t planned. But it was kind of the taste of the future, and I never wanted to leave after that.
It’s always amazing to me. I think people in energy and chemicals are the global nature of the business and traveling to places that probably you never could have been trumped up. when you were in college and thinking about what your future career was.
I really enjoyed the different cultures and working with different people. I came from a large family. So you kind of had to have that mindset if you’re going to survive within that family. But I enjoyed the different foods, the people, and really from an oil and gas side, there’s a host of different processing techniques that are used globally for crude, oil, and gas. It was keeping an open mind and understanding they have a reason why they’re doing it and how can I make that chemistry fit within that process. And I was just keeping that open mind and different oils and waters that we’re dealing with different reservoirs. So all of that time together was a unique opportunity and experience.
So tell us about Locus Bio-Energy Solutions.
Lucas Bio-Energy Solutions was founded around 2017. The founder and co-founder were experts in probiotics. So they took that technology looking at what could we use from a fermentation standpoint to take agricultural products and create something that would be a performance product that could be used in oil and gas. They settled on a sophorolipid, which is well known in the industry in terms of its performance for reducing interfacial tension but allowing the transport of organics through an aqueous phase. That was started in 2017. When I joined, it was really looking at what is the strategy and approach to the market, and how we advance that in terms of commercialization.
Obviously, this is a green and bio-based solution. Why is it important to the energy industry? What is it about the products and the technology that Locus is bringing to market that makes it really unique or valuable?
If you look at the overall portfolio, and I’ll focus on just chemical suppliers, but it has a wider range of investors in the chemical space today, we are looking at what is sustainable, what’s renewable carbon index, and what’s low carbon. This is what the new generation of investors is looking at, whether it’s institutional private equity or venture capital. From our customer standpoint, they see that pull and drive from the C-suite as to what we are introducing into the environment.
First of all, does it perform in terms of our KPIs producing oil at a certain price per barrel? But what happens to all that water in oil as we process downstream? And what are all these additives doing in terms of the effect on the environment? So from that standpoint, we have multiple things going on, but investment looking at where do I want to put my money? Do I want to put it in something sustainable? Or, do I want to put it in petrochemical technology, which we all know is under pressure to deliver something to the environment with a positive effect?
Commercializing Bio-Based Chemicals: Don't view your technology as a standalone. View it as something that contributes as a bolt-on to existing technology. Because when you say new, it doesn't matter what industry. When you say new, you put up a lot of roadblocks. We've been able to say it's not new, but we can make what you've got better. And let's transition to something that's completely green.
It makes sense. Although I think one of the challenges I’ve seen and I think certainly others have is the whole aspect of scale. So if we look at the drive to net zero, the energy transition, the decarbonization goals that companies have, and countries have, etc., one of the biggest challenges is scale. It’s interesting to be able to bring in new technologies and bio-based. But it feels like there’s an inherent limiter. That may or may not be true. So what do you see from that perspective? How are you guys able to get to scale?
Strategically, I would say this based on my experience, with a startup, you have to focus on the end user, and you have to understand what are the needs. What’s the cost? And how do I compare with the other alternative solutions in the industry? That’s phase one. Phase two is you have to file as much IP as possible on what you learned. A lot of these learnings are done through free trials and support to the business, but yet the file as much IP as you can at that point in time.
Then, you have to transition into revenue quickly. So revenue is who is going to take that solution to the end user at scale and provide you the revenue for all the hard work that you’ve done. That’s another key element to that whole box of mystery because if you focus on phase one too long, you lose your investors. Because you don’t have revenue coming in. So I was brought in, in terms of developing that strategy, having experience before with the biotech startup, to say what’s our clear path to revenue, and then the other overarching pieces don’t view your technology as standalone.
View it as something that contributes as a bolt-on to existing technology. Because when you say new, it doesn’t matter what industry. When you say “new”, you put up a lot of roadblocks. We’ve been able to say it’s not new, but we can make what you’ve got better. And let’s transition to something that’s completely green. But let’s not start from the beginning. It’s completely green because it’s difficult to do that.We look at partnership as a solution provider to oil and gas. Click To Tweet
So that’s helpful. You’ve described a bit of this development path, and also where Locus started. What obstacles has Locus faced as it’s gone from its early days to where you are today? And obviously, you’re trying to really commercialize and focus on that growth and revenue piece.
In 2017, I came on board. In late 2021, the bulk of the work, which we’re benefiting from today in Locus BE was based on direct-to-operator. So we developed over 300 case histories proving the technology directly to the operator in terms of increasing oil production, stimulating wells, and transporting organics. Then when I came on board, I said we’ve done the three to four years proving ourselves. Now, we have to take it to the next level.
My remit upon hiring was how fast can we move with our distributors in terms of taking those playbooks of knowledge, teaching them how to do what we do today from an application standpoint, and really taking advantage of those volumes because now we’re a team of probably 30 in the energy space. But if you look at all of our distributors and their employees, now you’re looking at tens of thousands. It was getting the knowledge to them to say we’ve done everything that we need to do to prove the technology. Now, you can take it to the next level, and now we’re actually a global exporting company.
That’s awesome. You talked earlier about understanding the end user and I like to talk a lot about customer value and customer experience. That’s really the critical component when we’re talking about chemicals and growth and going into the market. When you look at this, who is really your target customers, and what do they value in what you’re bringing? What are they looking for?
The key metrics with our customers, of course, when you look at the water handling side of the business, it’s what’s my cost per barrel to either inject it or reuse it for fracking? What’s my cost per barrel? When you look at the oil side, it’s really about how much incremental oil can I get out of an existing asset to offset a frack. Then, number three is if I’m going to fret, what technology can I use during that high-cost frack event to prolong the decline curve, which is natural and unconventional shale? These are three approaches, but really what our customers are asking us is how much more revenue can I generate by spending the same amount of money? Or, how much money can I save or improve the process when I have to either dispose of or reuse a water component?
Although it’s not just about the money, it’s not just about the cost. I think to a certain degree, there also seemed like there would be a lot of value in the green and bio sustainability metrics story use, is that true?
If you look at different levels, the example I gave you right now would be the direct buyer or owner of the P&L. That’s from an operational standpoint. As you move up through the chain, you have other components from the C-suite and investment profile. They want to see, not only the profit returned to the business, but how is that sustainable looking forward, in terms of investment. How we’re going to attract investors? And is it something green? Is it something that’s not going to be detrimental to the environment? Can we reduce human exposure? So there are two levels where we deal today, unfortunately, is the here and now, what are my thoughts? Can I be competitive? But we have to recognize there’s a C-suite and investor profile, which is the future, which is where we have to show sustainability.
I think this touches on you that you started, obviously, in what I would categorize maybe it’s more traditional chemicals, chemistry, and energy companies when you look back at Baker, Hughes, Clarion, and others versus where you are today. But across your career, how has this evolved? What do you see as being different today versus where you started with these other companies?
My early start date before biotech and venture capital was really large organizations. You have assets in place, and during that time frame, it was focused on profitability. We were looking at what’s the best product. It doesn’t matter where it comes from. We used a lot of non-environmentally friendly products. Our goal was to produce as much oil as we could and streamline processes. Where I’m at today, the technologies really developed to where I think in the future and down the road, we can look at a completely green solution for oil and gas.
Right now, it’s the start of it, where we’re supplying products that are green that improve processes and increase oil production transport, everything from the reservoir to the refinery. I think we’re able to demonstrate that now. But how can we expand that into all the applications and challenges within oil and gas where we can contribute products that aren’t detrimental to the environment, and allow companies to reprocess and reuse water? Let’s face it. Injecting water in saltwater disposal is just a wasted resource.
But how can we get around that? And the larger organizations, of course, it was focused on profit. But it’s interesting that the startups now are a springboard for large companies to develop and test out the chemistry because they have to protect their brand. The startups are more focused on getting some venture capital and some private equity. If they have an idea, let them try it. If you look at all the super majors in terms of chemical conglomerates, they all have partners in a biosurfactant, bio-based, but they’re allowing those small companies to prove it out before they jump in.Our goal was to produce as much oil as we could and streamline processes. Click To Tweet
That’s right. I certainly see that. I’ve talked about this before on the podcast. The partnership is critical in all of this innovation space, green bio, and other innovations across the industry. I think you’re right. We see that the development and the trialing are happening in much smaller companies. Quite frankly, I think some of it’s risk-based, but some of it’s also the fact that until it gets to a big enough size if it was inside of major. It would get killed because it was too small. It’s too small, too expensive. Yet, when you’re at a startup company, it is the business. So you’re investing in developing and have the ability to be faster, have the ability to give it more time to test out different angles on the technology and its applications and how you utilize it than what a big company can do. Because it just doesn’t move the needle until it’s actually been proven.
That’s a great point. I think in terms of the biotech investors, they are looking at the future. And can you scale? What’s it going to look like in the future? How big is it? Within a large organization is the here and now. It’s lost in the P&L. It’s an expense. When is this going to deliver? How big is it compared to our market share today? You raise a great point. I think that’s why you’ll always have that symbiotic relationship with innovation, small companies, and then larger companies. Always keeping the eye on that. And when do we pull it in?
From your point of view, when you look at partnerships, what’s critical to you? You guys have been forming partnerships, and you’re getting a lot of different acclaim across the industry. How do you assess what’s really critical in those partnerships?
From an energy standpoint, we look at partnership as a solution provider to oil and gas on the basis of our Sephora limit, how can we approach it holistically? We look at partners that can provide low or high RCI products and green ancillary products that we can combine and blend but ultimately give our customers the performance aspects that they’re looking for and enhanced oil recovery, stimulation, and paraffin control. So we look at it as we’re not a standalone technology, but we contribute to the whole portfolio of green, low ESG, and sustainable products in the market to provide our customers with a complete package solution.
I think at the end of the day in the oil field and energy and chemistry, it’s all about solutions. It’s rarely a single chemical going to be the solution. It has to be part of a whole package.
We have the adage in oil and gas, and I’m sure other industries have, too, is: there’s no silver bullet. But it’s how well can you transition to the complete solution through your partnerships. So we’ve been able, fortunately, to maintain great relationships in the industry, with other biosurfactant or biobased products that we can combine with ours to actually provide solutions to our customers. We’re really the application formulation experts for oil and gas. We’re able to combine a host of technologies to actually deliver a performance product to our customers.
Commercializing Bio-Based Chemicals: If you look at all of our distributors and their employees, now you're looking at tens of thousands. It was getting the knowledge to them to say we've done everything that we need to do to prove the technology. Now, you can take it to the next level, and now we're actually a global exporting company.
Tom, how you’ve developed, and where you’re growing? Where are you guys producing today? What are the expansion plans? Where do you expect to be as you look out into the future over the next few years?
We’re privately held. A lot of that is behind closed doors. If you look at our other business units within Locus fermentation, we have a global contract with Dow Chemical. We’re expanding our production facility in Solon, Ohio, which produces our biosurfactant. We have plans this year to grow exponentially in terms of expansion of production. Then, we’re utilizing that through our blending facility in Midland, Texas for oil and gas to produce the products for our customers.
But we have a five-year plan and it includes expansion into mining. We’ve got growth aspirations in oil and gas in terms of what we’re going to export to our international customers. That’s outside of the US. We’ve already had traction in that direction last year. It’s really a matter of fact how fast can we produce to fulfill the need? I think that’s what we’re really talking about at this stage. That’s really what’s driving the investment within Locus.
That’s great. Well, Tom, thank you for this. I’ve enjoyed learning a little bit more about Locus and about you and appreciate you joining us on The Chemical Show.
Thank you very much, Victoria. I’m always happy to share my story. I think we have a long way to go, but I’m seeing some great progression.
Thank you. Thanks, everyone for listening and joining The Chemical Show today. Keep listening, liking, sharing, and following, and tune in for another great episode next week. Thanks!
About Tom Swanson:
Mr. Swanson currently serves as the Senior Vice President of Sales for Locus Bio-Energy focused on surfactant solutions designed for crude oil recovery, transport, and remediation. Previously, Mr. Swanson has a combined 30+ years of experience in energy-related chemical business and services.
Specific areas of expertise include senior commercial and technical roles with Baker Hughes, Clariant, Brenntag, Schlumberger, and two biotech startups (Locus Bio Energy and Solugen Inc). Mr. Swanson continues to be an active speaker in SPE, NACE, and other industry-sponsored conferences as well as named on several world / US patents and is a degreed chemist.
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