The need for innovation in the oil and gas sector has been recognised throughout the industry. Faced with lower commodity prices, increasingly difficult geographical locations, and the search for unconventional energy sources, maximising productivity through investments in R&D is central to ongoing profitability and commercial success.

Service and equipment providers have traditionally been leading innovators in the sector and are investing increasing amounts in R&D. For example, in 2013 alone, Halliburton invested US$588 million in R&D, an increase of more than $100 million on its 2012 investment. For the leaders in the field, this expenditure corresponds to large patent portfolios, with companies such as Schlumberger and Baker Hughes being in the top 100 patent filers in the US.

Unlike the service companies, oil and gas companies themselves have been slower to recognise the value of innovation and intellectual property. However, a handful of companies are emerging as industry leaders in terms of innovation  including Shell, ExxonMobil and Chevron. Shell, who ranked 13th in the most innovative companies of 2013,1  recently identified spending in R&D, with a focus on innovative technologies, as a means to stand apart from its competitors.  It is currently the biggest investor in R&D of any company in the sector.

This increased focus on innovation is reflected in an overall increase in patent filings related to oil and gas extraction. In 2013, globally, there was a 30% increase in oil and gas patent applications from the prior year.2 

Given this trend, companies who fail to understand and utilise the patent system are at a significant disadvantage, even if they are innovating.  Intellectual property is a valuable asset that can be used strategically to generate significant benefits. Ensuring new innovations are adequately protected enables companies to maximise the benefit of those innovations, including by harnessing the potential for income generation through licensing, by preventing others from procuring the competitive advantage the technology provides, and by gaining access to other technologies through favourable cross-licensing arrangements. The monitoring of third parties’ patenting activities and patent searches in particular areas of technology can also provide valuable intelligence on technology trends, the activities of other significant players in the market and the potential for development opportunities.

Companies who ignore the patent activities of their competitors expose themselves to the risks of infringement actions, which can be both costly and disruptive to business. Those companies are also likely to be further disadvantaged if they have not developed their own patent portfolio, which can be used as part of a defensive strategy to a claim for patent infringement.

The significant increases in patent filing in the oil and gas sector, and the focus certain major players are placing on innovation and patenting, are clear indicators that intellectual property will be important for the future of the industry. Those wishing to obtain and retain their competitive positions in the market would be well served by tracking these trends and ensuring innovation and intellectual property protection are at the heart of their business strategies.