The Middle East is considered a region that sits on huge, low-cost, easily extractable reserves of oil and gas and where countries enjoy cash windfalls without thinking about adding value to exploration and production.
But companies and governments in the Middle East are increasingly looking into developments that require investment in technology, managing fields, expanding the resource base, increasing recovery, and even exploring unconventional resources. In addition, local governments see significant upside in building the region’s knowledge-based economy. “We want to leverage our R&D success into new business opportunities in the kingdom” of Saudi Arabia, said Amin Nasser, senior vice president for upstream at Saudi Aramco.
Major companies in the Middle East have started addressing these ambitions through innovation and collaboration, investing in educational infrastructure universities, and hosting firms willing to invest in technology-related businesses. The major centers for research and development (R&D) in the region are the King Abdullah University of Science and Technology (KAUST) and Dhahran Techno Valley (DTV) in Saudi Arabia, and the Qatar Science & Technology Park (QSTP).
Several foreign firms, primarily service companies, have recently begun establishing technology centers in the region to better serve their clients and to more effectively address challenges related to their operations.
Oil and gas research activity is flourishing at DTV located in Dhahran, Eastern Province of Saudi Arabia, which supports local and international companies working to develop their products and services. Ten technology companies, 10 research centers, and 10 incubated businesses are now operating at DTV, said Amjad Shaikh, a technology transfer executive at DTV and an assistant professor at the King Fahd University of Petroleum and Minerals Department of Chemical Engineering. Companies operating at DTV have been issued 20 product patents, while 121 more patents await approval, he said.
DTV consists of several entities, such as the King Abdullah Science Park, the Innovation Center, Consultancy and Liaison Office, and Business Incubation. These entities work to protect knowledge creation, facilitate industry collaboration, encourage entrepreneurship, support innovation, and enhance knowledge transfer to and from King Fahd University.
“The science park has one of the world’s largest concentrations of top oilfield service companies,” Shaikh said. This is further strengthened by the fact that DTV and its affiliates are located close to Saudi Aramco, the world’s largest oil producer, and King Fahd, generally regarded as the Middle East’s top university for its engineering programs.
Different Reasons, One Goal
The establishment of technology and research centers in the Middle East has risen with oil prices.
“The Middle East contains 60% of the world’s oil reserves and 40% of gas reserves, most of which are in carbonate rocks,” said Mohammed Badri, managing director of Schlumberger Dhahran Carbonate Research Center. “Carbonate reservoirs are heterogeneous at all scales, providing endless challenges and opportunities. Our decision to establish an R&D center in the Middle East was based on the need to tackle these challenges in collaboration with our clients.”
Other foreign firms have also set up technology centers near their major customers in the region.
“We made a strategic decision to locate our R&D center closer to our major customer, as we will gain the ability to better understand more their challenges and to develop fit-for-purpose technologies that solve the customer’s challenges much faster,” said Michael Bittar, senior director technology for Middle East and North Africa at Halliburton. “Added to that, establishing an R&D center in the Middle East gives us the ability to tap more into the Middle East and the entire Eastern hemisphere talent pool.”
“Our center in Dhahran will concentrate on unconventional and reservoir productivity research, as we believe that there are a lot of potentials in this domain,” he said.
The center is set to open later this year.
“Our decision to establish the USD‑25-million Emerson Center for Technology and Innovation in the kingdom’s Dhahran Techno Valley underscores the critical importance of Saudi Arabia and the Middle East region to the global Emerson business,” said William Garden, general manager of Emerson Process Management Saudi Arabia and Bahrain.
Developed with King Fahd University, the center is the company’s largest investment in a single market to date. “We are not building the center primarily for financial profit, but we aim to become a major player in the Middle East’s technology development, enabling local engineers and technologists to win new patents, contributing to building new factories, and helping organizations attract Saudi employees,” Garden said.
CGGVeritas also inaugurated a technology center in Al Khobar in partnership with Argas. The center offers high-end processing and imaging technologies, including a visualization center. “Our ambition is to locally apply and advance the sophisticated processing algorithms we develop globally in order to unmask the embedded value of the seismic data we have been acquiring here for so many years,” Robert Brunck, chairman and chief executive officer of CGGVeritas, said during the center’s inauguration in 2009. “CGGVeritas will continue to stand by the side of Argas to serve Saudi Aramco and its partners in a continuous drive to improve the understanding of reservoirs in Saudi Arabia.”
The growing demand for technical support from companies operating in the region is also spurring growth. “We have set our technical center here in the Middle East to cover the growing demand for technical support, product development, and adapted applications in the region,” said Cyril Cisinski, managing director of Wacker Chemicals Middle East, a German chemical company that provides drilling fluids.
Local Focus, Global Use
The technology centers aim to work closely with local clients to define problems and deliver locally developed solutions that may also be used globally.
For Schlumberger, the research at its carbonate research center will help its operations in other parts of the world. “Carbonate reservoirs are distributed in many basins and can benefit from the results of our research activities,” Badri said.
Although Halliburton’s center is focusing on technology that solves the reservoir challenges of its Middle East customers, the solutions can be applied elsewhere. “The technology that it is going to be developed in the center will have a global use and application,” Bittar said.
The technology and R&D centers also collaborate with local scientific institutions, such as KAUST, King Fahd University, and QSTP. “Our model of establishing research centers in proximity to academic centers of excellence and in areas of oil and gas industry activity means that the Dhahran center can exchange knowledge with other research communities—both within Schlumberger and in the wider technical world,” Badri said.
Encouraging Results
Service companies, national oil companies, and international operators are all working on upstream challenges in the region, such as water and reservoir management, in addition to the potential development of unconventional resources. Saudi Aramco’s EXPEC Advanced Research Center, for example, is conducting a SmartWater research program that is attempting to modify the chemistry of the seawater it injects, altering the properties of the rock surfaces, and loosening the reservoir’s hold on the crude oil left after years of waterflooding.
The work at the Qatar Shell Research & Technology Centre is focusing on the development and implementation of technologies that support Qatar’s energy industry, particularly the country’s aspiration to be the largest global liquefied natural gas exporter and the gas-to-liquids capital of the world. The center is focusing on research related to improving the understanding of local carbonate geology, testing and developing gas-to-liquid catalysts, and developing sulphur-based products.
In addition to deepening the understanding of the fundamentals of carbonate reservoir properties and fluid flow process through these rocks and the chemical interactions, the center also aims to provide the foundation for new CO2 storage technologies that can be applied in Qatar and elsewhere.
Companies are upbeat about their research to date, although most of the centers are new. The Schlumberger center has produced many patents and papers since its establishment in 2006. “Some of these results are either now being implemented in the commercial domain or being further investigated in our engineering organization to turn them into commercial products and services,” Badri said.
Although the technology centers are in their infancy, their future appears bright. “We take the long view on R&D, as it’s our access to our national resources, which will take decades, if not centuries, to fully develop and produce,” said Saudi Aramco’s Nasser. “This allows us to invest in high-impact technology that typically has a very long-term investment horizon.”
Acquisitions Bring Technology to Region
In addition to establishing educational and research infrastructure, countries in the Middle East are obtaining access to new technology through company acquisitions, often through sovereign funds or through their national oil companies.
Saudi Arabia Basic Industries (Sabic), one of the leading petrochemical producers in the world, acquired GE Plastics in 2007 for USD 11.6 billion. Buying the division allowed Sabic to gain a foothold in polycarbonates, engineered plastics used in applications ranging from riot shields to compact discs. It also allowed Sabic to acquire technology used in the oil and gas sector.
The United Arab Emirates (UAE) sovereign fund, International Petroleum Investment, has acquired major stakes in several international companies, including Borealis, which licenses the technology for products such as polypropylene and polyethylene. It also completed the purchase of a 70% controlling stake in the German industrial services firm Man Ferrostaal for about USD 950 million in 2009. Together, these purchases were strategic acquisitions for the UAE energy sector and diversification of the local economy.
In July 2012, Saudi Aramco announced the launch of an investment arm to acquire technology companies that are of strategic importance to Saudi Arabia. Saudi Aramco Energy Ventures (SAEV) plans to invest in startup and high-growth ventures that offer new technologies in the upstream and downstream oil and gas sectors, renewables, energy efficiency, and water supply.
“As we continue to address long-term energy challenges, SAEV will help us more effectively engage with the global community of innovators and entrepreneurs,” said Khalid Al-Falih, chief executive of Saudi Aramco.