Middle East oil companies building R&D capabilities

 01 Jun 2017 - 1:49

Middle East oil companies building R&D capabilities

The Peninsula

Middle East national oil companies (NOCs) should implement a more robust research and development framework,  study by management consultancy Strategy& (formerly Booz & Company), said in its report released yesterday.

Despite the global decline in oil prices and overall R&D spending, global oil and gas companies have bucked this trend, maintaining relatively higher investments in R&D with an overall R&D intensity – the ratio of R&D spending to revenues –growing by 0.55 percent in 2015. 

However, NOCs in the Middle East have not kept up with their global industry peers when it comes to R&D intensity (R&D spend as a proportion of company revenue). 

“Even though NOCs in the Middle East recognize the need to build R&D capabilities to move from being technology adopters to becoming innovation leaders, they lag behind the global industry in terms of R&D investments. 

The difference in the investment level is significant when compared to industry peers, including NOCs outside the Middle East. For example international companies have an R&D intensity of 0.42 percent, NOCs outside the Middle East are at  0.52 percent, and Middle East NOCs are only at 0.10 percent 0.15 percent,” said George Sarraf (pictured), partner at Strategy& and the leader of the energy, chemicals, and utilities practice in the Middle East. 

The Strategy& study suggests that building the necessary innovation capabilities requires addressing several region-specific challenges including limited innovation ecosystems in the oil and gas industry.

Commenting on the current situation, Anil Pandey, principal with Strategy& and a member of the energy, chemicals, and utilities practice in the Middle East said: “Most major Middle East National Oil companies in the region are starting to see the opportunities and returns  R&D capabilities can  generate in the long run. 

As a result we not only see a shift in the investments both at a national and international level in terms building national R&D centers, technology parks and international satellite centers in order to enhance their overall capability", he said.