How does an entrepreneur get an entrenched industry to embrace a radically different technology? “It’s a hell of a lot harder than you’d think,” quips Mark Agee. For years, Syntroleum Corp., the small, Tulsa-based company that Agee runs with his brother Kenneth, pushed the oil industry to adopt its proprietary process, which converts natural gas into a synthetic liquid fuel. And for years, Big Oil resisted.
Lately, though, Syntroleum has won results — by crafting a careful plan and then moving fast in an industry unaccustomed to anything more nimble than an oil tanker. Since it went public in 1998, Syntroleum, which now has a staff of 85, has seen its market capitalization swell to more than $650 million. This in a business where newcomers are about as welcome as a brush fire.
Syntroleum’s smart science is rooted in the Fischer-Tropsch methodology, a process that was first developed in 1923. Its promise has never been denied: By converting natural gas to a synthetic liquid state, it becomes more portable and allows for the development of remote gas fields that lie far from a pipeline. It is also cleaner than crude. But gas-to-liquid (GTL) plants have long been prohibitively expensive.
Enter Kenneth Agee. A chemical engineer by training, Agee, 43, spent his free time in the 1980s tinkering with an updated GTL technology. After years of experimentation, he found a way to reduce conversion costs by replacing pure oxygen in the process with regular air. In 1990, armed with $600,000 from a venture-capital firm, Agee set out to sell his technology — but the industry didn’t come knocking. Finally, in 1994, his funding almost gone, Agee hired his older brother, a veteran of two previous startups.
“When you’re a small company with limited resources and you are dealing with 800-pound gorillas, you have to look at the world a little differently,” says Mark, 47. Knowing the value of creating buzz, Mark came up with a slick CD-ROM presentation produced with $50,000 of the company’s scant remaining cash reserves. Then he hit the trade-show circuit, targeting those industry players with access to vast reserves of stranded gas.
The Agees also devised an innovative sales model. Customers could license Syntroleum’s GTL technology, but only if they agreed to share any technical enhancements they developed with Syntroleum and with all other licensees.
Their strategy began to pay off. After Exxon announced what it called a GTL “breakthrough” in 1996, Syntroleum struck licensing agreements with a host of Exxon’s competitors. They couldn’t resist a technology that had the potential to turn their remote gas fields into cash cows. When oil prices dropped in late 1998, however, the big producers lost interest in synthetics. So Syntroleum shifted its marketing efforts — to automakers looking to make alternative-fuel vehicles. Volkswagen and GM signed testing agreements, and DaimlerChrysler built two concept vehicles that run on Syntroleum fuel. Now, given the recent rise in heating-oil prices, energy producers have warmed up once again. In May, Ivanhoe Energy Inc., a Canadian oil and natural-gas producer, became a Syntroleum licensee.
Despite its successes, Syntroleum doesn’t expect to be profitable until 2003. That’s when a $600 million commercial GTL plant it’s building in Australia is expected to begin generating revenue. The Agees are banking on the new venture to persuade Syntroleum’s licensees to build commercial plants of their own. The company will earn a fee for every barrel of synthetic oil produced. That prospect has Mark Agee feeling optimistic. “Theoretically, we could be the next Exxon,” he says. But nimbler. Much nimbler.
Stephen Hochbrunn (firstname.lastname@example.org) is a former Fast Company intern. Contact Mark Agee by email (email@example.com).
Sidebar: How to Dance With a Giant
When Mark Agee joined Syntroleum in 1994, he wore the scars on his back from two previous startups. He was in for a few more. Getting an old industry to embrace a new technology is a uniquely delicate dance.
Pick your targets carefully.
“I made a lot of phone calls in the early days when I couldn’t get anyone to give me the time of day. So we decided only to approach companies that had big stranded-gas portfolios, some involvement in synthetic fuels, and, preferably, some people on their staff who still understood them.”
Don’t skimp on the presentation.
“When everybody else was using overheads and PowerPoint slides, I showed up with full-motion video and graphics right down to the molecular level for the reactors.”
Promote the technology, not the company.
“We’re basically creating a synthetic-fuel industry within the larger energy industry. But you want people to come to that conclusion without your actually having to say it to them. The focus in our presentations has always been, ‘What does this do for the oil industry?’ rather than, ‘We’re Syntroleum. Look how great we are.’ “
Avoid the limelight until the time is right.
“We were cautious about our first public announcements. In our first release, we simply announced that we had licensed Texaco. After that, the strategy changed 180 degrees — to getting as much publicity as we could.”