Research and Development – Some Inconvenient Truths?

The major increase in concern over the risks of climate change has led many to see one path towards a solution being in the realm of technological breakthroughs. And with the enormous profits being generated within oil and gas companies, many would expect this industry to be intensifying its efforts into Research and Development (R&D). Yet the oil and gas industry has disproportionately lower levels of R&D investment than many others, both in absolute terms and as a percentage of revenues re-invested. It is also an industry that appears to be slow to adopt new technologies.

It is for individual companies to decide whether increasing R&D investment is the best use of shareholder funds. But there would seem to be the need to explain the low levels of R&D. There would also seem to be a collective responsibility to intensify efforts centered on innovation and solutions to some of the most important problems-to-be-solved for future generations. To do this will require stepping beyond the incrementalism of technology development and the slow adoption rates in our industry. It will also need to develop commercially-viable approaches to overcome the collaborative barriers created through protective intellectual property rights. And it will require the development of open, collaborative networks – extending even beyond our industry - to bring the world’s best minds to bear on these key problems.

PFC Energy has been examining the issue of R&D for some time and has been active in advising companies on how to best align R&D with corporate strategies and emerging opportunities. Irrespective of the debate for or against increased R&D investment, our work indicates potential for significant improvements in the approach, delivery and adoption of new technology and that many of the key lessons and best practices lie beyond the oil and gas industry.

Key Conclusions:

R&D investment levels within the oil and gas industry are comparatively low compared with other sectors, and adoption rates for new technology are similarly lagging.

Irrespective of levels of R&D investment, best practices from elsewhere suggest the potential for significant improvements in the levels of innovation within oil & gas.

To tackle some of the largest energy-related problems of the future, the increasing use of collaborative networks could be leveraged more within companies, across oil and gas companies and to the scientific community as a whole. Alleviating the risk of climate change could be one such arena.

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Lew Watts is PFC Energy’s President and Chief Executive Officer. For further information on this article contact Enews_lwatts@pfcenergy.com.