T
he global oil market has gone through a period of
considerable volatility and weak prices over the past
two years, with adverse impacts on companies’ overall
investment levels. Many companies are now geared toward
cost reduction inmany areas, including spending on research
and development (R&D). According to Strategy&, global R&D
spending dropped by 16%between 2014 and 2015. However,
despite the decline in oil prices and overall R&D spending,
oil and gas companies have bucked this trend, maintaining
a relatively higher allocation of investments to R&D as a
proportion of their sales. In fact, their overall R&D intensity
(the ratio of R&D spending to revenues) has grown (Figure 1).
Oil companies need to address specific technical challenges
and are already aware of howR&D can act as a differentiating
capability with long-termbenefits. For example, many
firms need to find solutions to improve recovery, increase
production, boost operation efficiency, unlock resources, and
reduce costs.
R&Dtrends inMiddleEastNOCs
National Oil Companies (NOCs) in theMiddle East have not
kept upwith their global industry peerswhen it comes to R&D
intensity (Figure 2). The figures, however, only tell one part
of the story. There is a strong recognition among the leaders
of Middle East NOCs of the need to build R&D capabilities so
that theymove frombeing technology adopters to becoming
innovation leaders. NOCs are thus increasingly investing time,
efforts, andmoney in research and technology to enhance
in-house research and foster linkageswith the innovation
ecosystem.
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