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Rio Oil & Gas Expo and Conference 2020
ISSN 2525-7579
Conference Proceedings homepage: https://biblioteca.ibp.org.br/riooilegas/en/
Technical Paper
Lessons from the innovation system in the O&G
sector in Norway to Brazil
Breno Barreto Medeiros 1
Clarisse Farias Gomes Cordeiro 2
Renata Britto 3
Eduardo Raffaini 4
Glaucia Guarcello 5.
1. DELOITTE, CENTER FOR OIL & GAS SOLUTIONS, . RIO DE JANEIRO - RJ - BRASIL, brenomedeiros@gmail.com
2. DELOITTE, FINANCIAL ADVISORY, CAPITAL PROJECTS. RIO DE JANEIRO - RJ - BRASIL, cfgcordeiro@gmail.com
3. DELOITTE, TAX , BUSINESS TAX. RIO DE JANEIRO - RJ - BRASIL, renatabritto@deloitte.com
4. DELOITTE, FINANCIAL ADVISORY, CAPITAL PROJECTS. RIO DE JANEIRO - RJ - BRASIL, eraffaini@deloitte.com
5. DELOITTE, FINANCIAL ADVISORY, CAPITAL PROJECTS. RIO DE JANEIRO - RJ - BRASIL, glalves@deloitte.com
Abstract
Norway became a global reference for technology and innovation in the Oil and Gas (O&G) industry, serving as reference
for other countries including Brazil, which do not wish to rely its wealth generation solely on the exploitation of these
natural resources, (ABDI, 2011; Medeiros, 2016; Medeiros et al, 2016; Morais and Turchi, 2016). The objective of this
work is to analyse the innovation system in the O&G sector in Norway and Brazil, in order to withdraw lessons from the
former to the later. Analysing from the past to the present, we believe that the Norwegian policies to develop the O&G
industry and its innovation system has been more successfully than the Brazilian ones, especially as the oil industry in the
Norway started decades later (70s), than it did in Brazil (40’s-50s). The innovation system in the O&G industry in Norway
seems to be more complex and well developed than the Brazilian one, which apparently is still much centred in
Petrobras, universities and research institutes, and less in suppliers and others actors. Among other findings, we
identified that there are higher number of patents awarded in the O&G innovation system in Norway, while the Brazilian
one has more masters and PhDs related to the sector. Lastly, the research carried out suggests that there are more
consolidated activities towards open innovation and sharing economy in the O&G sector in Norway, than in Brazil. We
hope this work can contribute to stimulate more measures to boost the innovation O&G system in Brazil.
Keywords: Innovation System. Oil & Gas. Norway. Brazil
Received: March 16, 2020 | Accepted: Jun 06, 2020 | Available online: Dec 01, 2020
Article Code: 383
Cite as: Rio Oil & Gas Expo and Conference, Rio de Janeiro, RJ, Brazil, 2020 (20)
DOI: https://doi.org/10.48072/2525-7579.rog.2020.383
© Copyright 2020. Brazilian Petroleum, Gas and Biofuels Institute - IBP. This Technical Paper was prepared for presentation at the Rio Oil & Gas Expo and Conference 2020, held between
21 and 24 of September 2020, in Rio de Janeiro. This Technical Paper was selected for presentation by the Technical Committee of the event according to the information contained in the final
paper submitted by the author(s).The organizers are not supposed to translate or correct the submitted papers. The material as it is presented, does not necessarily represent Brazilian Petroleum,
Gas and Biofuels Institute’ opinion, or that of its Members or Representatives. Authors consent to the publication of this Technical Paper in the Rio Oil & Gas Expo and Conference 2020
Proceedings.
Rio Oil & Gas Expo and Conference, 2020. | ISSN 2525-7579 1
1. Introduction
Norway became a global reference for technology and innovation in the Oil and Gas (O&G)
industry, serving as reference for other countries including Brazil, which do not wish to rely its
wealth generation solely on the exploitation of these natural resources, (ABDI, 2011; Medeiros,
2016; Medeiros et al, 2016; Morais and Turchi, 2016). Its main oil company, Equinor, and the
Norwegian O&G suppliers are presented in several countries either with production and services
facilities or through exports (Medeiros, 2016; Thune et al, 2019). To understand this success story,
it is important to comprehend the development and the current status of the Norwegian innovation
system in the O&G sector.
Brazil, the second country that we study, has been improving its innovation system in the
O&G sector, becoming even world reference for some areas, e.g. deep and ultra-deep waters
(Morais, 2013). However, there are still challenges to overcome in order to Brazil become a global
technological reference in the sector level, like Norway did (Medeiros, 2016 and Weisz, 2016).
The objective of this work is to analyse the innovation system in the O&G sector in Norway
and Brazil, in order to withdraw lessons from the former to the later. In order to proceed with the
analysis, first we discuss briefly some key approaches regarding innovation studies in the section
2. Then, we present the key highlights of the O&G industry and its innovation system in both
countries in the section 3.
In the section 4, we detailed the methodology adopted to compare both O&G innovation
systems. The results are presented in the section 5. Lastly, we bring our final remarks at the
conclusion in the section 6.
2. National Innovation System (NSI) and Ecosystem of Innovation (EI)
Innovation is commonly seen as a field of systematic knowledge built from different layers.
Two of the clusters of innovation studies we discuss briefly here, i.e., National Innovation System
(NIS)1 and Ecosystem of Innovation (EI), are based in this understanding (Fransman, 2018;
Granstranda and Holgersson, 2020). Important point out that both approaches attempt to explain
the competitiveness of companies over time through innovation (Fransman, 2018).
However, when analysing innovation at the industry level and comparing between countries,
as is the purpose of this work, more case studies are found connected to the NIS, rather than the EI
(Bassis and Armellini, 2018; Bingwen and Huibo, 2010; OECD, 2006). In this sense, Bassis and
Armellini (2018) point out that: “[…] NIS offers a broad and flexible framework for organizing
and interpreting case studies and comparative analyses.”
Additionally, Bassis and Armellini (2018, p. 23) enhance that the NIS was developed
predominantly in the context of traditional manufacturing and capital intensive infrastructure,
while EI in the San Francisco Bay region, with very dynamic and young industries, and fast
changing technology environment. In this manner, OECD (2006) points out that technology and
1 It can be also referred as National System of Innovation (NSI), simple as System of Innovation or Innovation
System (Bassis and Armellini, 2018).
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innovation in the O&G sector, which is a mature industry, has evolved along time more
incrementally than radically2.
Not surprisingly, when searching for analysis of innovation in energy sector globally or
specifically the O&G industry in Norway and Brazil, more studies are found under the concept of
NIS or its developments, i.e., Sectoral System of Innovation (OECD, 2006; Sagar and Holdren,
2002; Dantas and Bell, 2011; Ferreira and Ramos, 2015; Mendonça and Oliveira, 2013; Morais
and Turchi, 2016; Engen, 2009; Engen et al. 2019), rather than EI (WEF, 2017).
In this sense, we chose the innovation system concept as a major reference for comparison
of innovation in the O&G industries between the two countries analysed in this work, i.e., Norway
and Brazil3.
Nonetheless, there is not a common definition of NIS4 worldwide accepted, as well pointed
out by OECD (1997, p. 9). In an effort to summarize and combine the definitions of the main
authors in this matter, such as Freeman (1987, Apud OECD, 1997), Lundvall (1992, Apud OECD,
1997), Nelson (1993, Apud OECD, 1994) and Patel and Pavitt (1994, Apud OECD, 1997) and
Metcalfe (1995, Apud OECD, 1997), it would include: a group of actors and institutions in the
private and public spheres, interacting and generating knowledge and innovation to the firms or
industry, and being influenced by incentive structures of the country.
3. Key highlights of the O&G industry and its innovation System in Norway and Brazil
We present in this section an overview of the development of the O&G industry and its
innovation system in both countries, in order to support the subsequently analysis.
3.1 Key highlights of the O&G industry and its innovation system in Norway
Despite only finding oil in 1969, Norway became a global reference for innovation and
technology in the O&G industry, serving as reference for other countries including Brazil, which
do not wish to rely its wealth generation in the sector solely on the exploitation of these natural
resources (ABDI, 2011; Medeiros, 2016; Medeiros et al, 2016; Morais and Turchi, 2016). Its main
oil company, Equinor (created in 1972), and the Norwegian O&G suppliers are presented in several
countries either with production and services facilities, or through exports, and technological
2 After extensive literature review and global empirical analyses, Perrons (2014) points out that R&D in O&G
(specially in upstream), are being done more in a collaborative way than it used to be decades ago, and thus, less
centered in the oil companies, but being viewed in a more system-wide way. In this manner he points out the high
importance of service companies leading patents awarded and deployment of technologies in the sector. Other
interesting finding of his work are that companies in the upstream embraced the open innovation, are developing
venture capital initiatives, as a form to strength R&D extramural, and are forging R&D partnerships with competitors.
A curious finding he present is that the industry does not count much on universities and government research centers
in the flow of information and knowledge, to do their R&D, but rather that innovation is more centered in the relation
between suppliers and clients (i.e. oil companies).
3 For a deeper discussion about similarities, differences and benefits of crossing the NIS and EI theories see chapter 3
of Fransman (2018) and Bassis and Armellini (2018).
4 NIS can be analyzed as a sectorial innovation system, which is a closely related concept (Fransman, 2018). For a
major reference on Sectoral System of Innovation (SSI) see Malerba (2004).
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development was an important factor to explain this success (Medeiros, 2016; Norwegian
Petroleum, 2020; Thune et al, 2019)5.
The industrial and technological development of the O&G suppliers in Norway were merit
of the companies’ strategy and efforts, collaboration work with oil companies and global suppliers,
but were also strongly supported by several governmental policies, which varied its intensity trough
time6 (Medeiros, 2016; Thune et al, 2019; OECD, 2006). In this sense, the strong rivalry of local
oil companies competing vertically in the supply chain, favourable the technological development
of suppliers in Norway (Medeiros, 2016). Nevertheless, important enhance that the E&P of O&G
in Norway was not done through a monopoly regime, but rather with presence of international
players and the development of local petroleum companies (Medeiros, 2016; Morais and Turchi,
2016).
The internationalization of the Norwegian supply industry was intensified in the 90s, after
two decades of competence development and strong policy support. Norwegian suppliers became
leaders in several sub-segments of the industry, reduced their dependency in the oil companies in
the Norwegian Continental Shelf (NCS), for sales and technological development (Ibid).
Some specific segments in the petroleum industry which Norway became technological
leader or well developed are: seismic, drilling, subsea (including dynamic position and automation
equipment), offshore services and equipment (including maintenance and modification of
platforms, shipbuilding and ship equipment for advanced offshore vessels), and oil recovery
(Medeiros et al, 2016; Norwegian Petroleum, 2020; Engen et al. 2019). Important highlight that in
general these competences were developed geographically in clusters, along the coast of the
country (Engen et al, 2018).
Recently, open innovation, sharing economy, venture capital and private equity (PE) firms,
apparently are gaining more highlights in the Norwegian O&G innovation system (Sasson and
Blongren, 2011; Tsvetkova, 2020; Invest in Bergen, 2020; Virtual Inventory7; Equinor8, and
Iakovleva, 2013). In this manner, we like to point that OECD (2014) states that PE funds is
intensive in the O&G sector in Norway (in terms of money spent), being concentrated mainly in
buyouts, and that the leading PE fund in Europe devoted to the upstream is Norwegian
(HitecVision9).
The main actors and relationship of the Norwegian O&G Innovation System is summarized
in the figure 1.
5 Through smalls and larges technological revolutions, Norway managed to produce O&G more efficiently and in a
safer manner, and the technological development in the petroleum sector had positive spillovers to other industries,
such as maritime and renewable energy (Norwegian Petroleum, 2020).
6 The policies to support competence development of Norwegian oil companies, suppliers and research institutes were
stronger during the 70’s and 80’s. These stronger policies, such as the Goodwill agreements/points or local content
measures had to be finished, when Norway entered the European Economic Area (EEA) in 1995 (Medeiros, 2016;
Thune et al, 2019; OECD, 2006).
7 See: The NCS Sharing Economy Program at: https://www.virtualinventory.no/ncs-sharing-economy . Accessed on:
05/15/20.
8 See: Equinor Innovate at: https://www.equinor.com/en/how-and-why/innovate.html . Accessed on: 05/15/20.
9 See: HitecVision at: https://www.linkedin.com/company/hitecvision/about/ Accessed on: 06/21/20.
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Figure 1 - The Norwegian Upstream Oil & Gas Innovation System
Source: Adapted from OECD (2006).
Nowadays R&D, innovation and exports in the O&G industry in Norway are stimulated in a
continuous base through different channels and organizations (e.g. Research Council of Norway,
Norwegian Center of Expertise - NCEs and Norwep), and relevant part of it being related to
suppliers (Medeiros, 2016 and Norwegian Petroleum, 2020).
3.2 Key highlights of the O&G industry and its innovation system in Brazil
The year of 1939 marks the start of the oil industry in Brazil, when this hydrocarbon was
found in Bahia state. In 1953 Petrobras was created under a monopoly regime, and the market was
open only in 1997 (Medeiros, 2016). Despite of having a longer oil history, and advancing
technologically with the production of O&G from shallow to deep and ultra-deep waters (Morais,
2013), Brazil did not manage to become a world reference in technology at a sector level, or by its
suppliers like Norway (Morais and Turchi, 2016).
The O&G innovation system in Brazil is considered to have been indeed initiated its
constitution with the development of E&P of O&G in deeper waters during the 80s, and the creation
of the programme Procap 1000, by Petrobras in 1986. Procap stands for Deep Water Technology
Program, and the intention was to allow production of O&G until 1000 meters deep. The Procap
1000 aimed to unite different players, from research institutions to suppliers, in order to develop
initiatives to overcome this technological challenge at that time (Morais and Turchi, 2016)10.
After the openness of the market in 1997, news players entered the Brazilian O&G innovation
system, with highlights to the National Agency of Petroleum (ANP), and important regulatory
10 The success of this programme led Petrobras to launch two more editions, Procap 2000 (1992) and Procap 3000
(2000), and the same logic of deepness target applies (Morais and Turchi, 2016).
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structures were created (Ibid; Medeiros, 2016). In 1999 it was created the first fund to stimulate
innovation in the sector, entitle CT-Petro (Morais and Turchi, 2016). In the same year it was
launched the first concession bid round, were national and international O&G companies could
acquire blocks to E&P the O&G (Medeiros, 2016).
Like in Norway, the bid rounds were also used towards stimulate local development
competence in the sector. Since this first bid round local content (LC) clause was introduced, but
the research and development clause (“1% R&D clause”) in presented since round zero in 199811.
Even though the LC policy varied considerably within the years, the R&D clause had less
significant changes, with some recent important developments (Medeiros, 2016; ANP, 2020 A).
In general, the R&D clause, presented in the E&P contracts, states that one percent of the
gross revenue of the fields with high production, which pays special participation, must be applied
within the country in R&D (Medeiros, 2016). This 1% R&D clause may be the main regulatory
stimulus for innovation in the sector in Brazil, which through 18 oil companies historically has
generated from 1998 until 2019, more than R$ 17 billion of obligation of investments (ANP, 2020
B). Historically the application of this huge R&D financial resources has been led by Petrobras
and locked within the internal expenditure, or in universities or research centres, with a timid
participation of local suppliers (Medeiros, 2016 and 2018). Furthermore, studies about the O&G
innovation system in Brazil, in general, focus more its analysis in three mains actors: ANP,
Petrobras and Universities/Research centres (Gama and Vivacqua, 2019; Weisz, 2016; Dantas and
Bell, 2011; Ferreira and Ramos, 2015; Morais and Turchi, 2016).
Not surprisingly, the main Brazilian O&G innovation system designs found (figure 2) are a
less complex environment than the Norwegian one (figure 1) 12.
Figure 2: The Brazilian Oil & Gas Innovation System13
Source: Adapted from Morais and Turchi (2016).
11 In the Round zero ANP granted Petrobras 115 areas, where it had previously invested (Medeiros, 2016).
12 In Gama and Vivacqua (2019), e.g., the Innovation System in the oil sector between Universities, Government
and Industry (UGI) is designed simply by three actors: ANP, Petrobras and Universities.
13 CT-Petro was the first sectorial fund to finance innovation in the sector, implemented in 1999, but after 2014 its
resources were designated for the social fund (education and health), following Law nº 12.858 of 2013 (Morais and
Turchi, 2016). Thus, it is more appropriate not to consider it nowadays.
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Nonetheless, recently oil companies in Brazil are starting to invest in startups, perhaps due
to the effect of the creation of the technology-based company concept or the digital transformation
wave (Medeiros, 2018). Within the diversification of presence oil companies in big fields in Brazil,
either through acquirement of acreages in the bid rounds or through acquisitions of shares in fields,
the application of this resources will continue its development in a more spread manner within the
actors.
Lastly, we point out that exports and other innovation efforts focused in the O&G suppliers
have been stimulated in the last years in Brazil, through different projects or programmes, but not
in a sustainable manner. For example, five specific initiatives to stimulate exports of O&G
suppliers have been terminated in few years after being launched, and some finished without a
proper public report highlighting its achievements (Medeiros, 2016). The last major government
innovation initiative for the O&G suppliers in Brazil identified, Inova Petro programme, had its
latter call in 201414.
4. Methodology
Considering the discussion and literature presented in the section 2, it was selected the six
main group of actors in the O&G innovation system to analyse in Norway and Brazil. Then, it was
defined criteria to measure the activity level and outcomes, as shown in the table 115. The
measurement indicators are also aligned with OECD (2006), which analysed in the chapter 9, the
upstream innovation system in Norway.
For the companies’ analysis, the sources used were Clarivate Analytics, Statistics Norway
(SSB) and the ANP. For the R&D centres’ analysis, the sources used were previous studies
identified, ANP historical data of R&D projects, contact with tech parks and internet exploratory
research. For the Universities it was done a bibliometric analysis. For the startups, the research was
carried out through global database such as AngelList, Crunchbase and contact with key actors in
the Innovation ecosystem. For the venture capitalists, the sources used were reports from the two
main associations correlated with the matter in both countries: Norwegian Venture Capital &
Private Equity Association (NVCA) and Associação Brasileira de Private Equity e Venture Capital
(ABVCAP). Yet for the Government part, the sources used were studies and official government
websites.
14 See: http://www.finep.gov.br/apoio-e-financiamento-externa/historico-de-programa/programas-inova/inova-petro .
Accessed on: 05/24/20.
15 Curiously the agents chosen to analyse are very consistent with the elements of an innovation ecosystem presented
in Rabelo and Bernus (2015).
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Table 1 – Selected indicators to compare O&G Innovation System
Actor
Measurement criteria
1. Companies
Number of patents regarding O&G
Investments in R&D in O&G
2. R&D
Centres
Number of R&D centers that works with O&G
3. Universities
Number PhD and Masters focused in O&G
4. Startups
Number of startups in O&G
5. Venture
capitalists
Volume of Private Equity (PE) and Venture Capital (VC) investments
in O&G
6. Government
Existence of regulations and incentives for innovations in O&G
Source: Adapted from Bingwen and Huibo (2010), OECD (1997, 2006), and Rabelo and Bernus (2015).
It should be highlighted the difficulty to find precise data in both countries for comparison
of some variables, but an effort was done to use information as accurate as possible, for the last 20
years. In this manner, this presents a limitation of this type of work.
5. Results
Within the companies’ indicators, the Brazilian O&G market seems to be more attractive for
the patents filing than the Norwegian continental shelf, while companies in Norway are more
proactive in patent filing, compared to the counterpart in Brazil. When comparing filling locations
in the last 20 years related to O&G, 2.694 patents were identified in Norway and 5.478 filed in
Brazil. However, when we change the lens for original filing locations, Norwegian companies
presented 794 patents versus 690 patents from Brazilian companies (Table 2).
Table 2 – Number of patents between 2000 and 2018
Country
Patents filed in this country
Patents filed by this country
Brazil
5478
690
Norway
2694
794
Source: Analysis by the authors based on Derwent World Patents Index from Clarivate Analytics16.
Some of the companies in Brazil that most filed patents during this period regarding to O&G
are Halliburton, Baker Hughes, Schlumberger, Petrobras and Shell. In Norway, some of the most
active companies regarding patent filing related to O&G are Halliburton, Baker Hughes,
Schlumberger, Weatherford, Shell, Statoil, and Aker.
Within capital, we identified that apparently the R&D expenditures in O&G in Norway17 has
been higher than Brazil since 2007 at least, with the exception of 2011. However, it is important to
point out that in Norway the data are real expenditure, while in Brazil it refers to obligation to
16 Using a hybrid search of both key words and codes from International Patent Classification (IPC).
17 Supposing the data of obligation to invest in R&D in the oil sector in Brazil is comparable to real expenditure in
Norway, just as a general reference.
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spend by the oil companies (1% R&D clause). These are the closest data found in this manner in
both countries. The incentive structures which stimulate R&D in O&G is discussed further.
Graph 1 – Norway and Brazil R&D Investments in O&G
Source: ANP, SSB, Brazilian Central Bank. Our analysis.
In relation to R&D infrastructure related to O&G, both countries seems to be similar in the
total amount of centers (Norway 20 and Brazil 23), but with some particularities. We identified that
in Norway there is sixteen research centres focused in O&G or that works with it transversely18 and
four universities that point out in this subject19. On the other hand, in Brazil we identified 13 research
centers20 and ten universities that standout in R&D in O&G projects21. Whereas in general the
numbers are similar, in Norway there is significant presence of the Norwegian Center of Expertise
(NCEs). The NCEs were funded in 2006 by Government entities, focused to boost innovation and
internationalization of clusters with potential to grow, and through collaboration between companies,
public sector and R&D and education institutions22. On the other hand, in Brazil it stands out the
much higher number of universities doing R&D in O&G, and apparently higher number of the
presence of R&D centres of global O&G suppliers.
Within universities, we identified that between 2013 until 2017 Norway had 1.165 master
dissertations and 119 PhD thesis defended related to O&G, and in the field of engineering, science
and statistics23. In Brazil we identified 10.010 master dissertations and 3.181 PhD thesis related to
O&G, and 92% of the former and 95% of the later, respectively related to engineering, science and
18 Equinor; Shell ; Sintef; ARCEx; NORCE; The National IOR Centre of Norway; IFE; NCE Subsea; NCE Maritime;
NCE NODE; NCE Raufoss; NCE Instrumentation; NCE Systems Engineering; GE; Schlumberger and Siemens
(Source: Medeiros, 2016 and companies and institutes websites).
19 NTNU; UiS; UiB and UiO (Source: https://www.studyinnorway.no/ ).
20 Cenpes; Equinor; GE; Schlumberger; DELL EMC; Halliburton; TechnipFMC; Tenaris; Siemens; Vallourec; IPT;
SENAI-CIMATEC and Institute Eldorado (Source: Medeiros, 2016; consultation with Parque Tecnológico – UFRJ
and exploratory search).
21 UFRJ; PUC-RIO; UNICAMP; USP; UFRGS; UFRN; UFSC; UFF; UFBA and UFC (Source: ANP and our
analysis – universities with more than 100 projects in R&D since 1998 using the resources of the R&D clause, which
in average is more than 5 projects per year).
22 See: https://www.offshore-mag.com/home/article/16755285/norwegian-centers-of-expertise#:~:text=Home-
,Norwegian%20Centers%20of%20Expertise,Corporation%20of%20Norway%20(SIVA). Accessed on: 06/28/20
23 Searched through the University of Stavanger Library search tool – Bibsys. Accessed on: 03/15/20
0
100
200
300
400
500
600
700
800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Norway O&G R&D Expenditures (Million US$)
Brazil O&G R&D Investment Obligation (Million US$)
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multidisciplinary24. The great discrepancy in scientific publications perhaps can be explained by
the difference of population: Norway (5.3 million in 2017) and Brazil (208 million in 2017)25.
The analysis of startups ecosystem was challenging, since we did not find a consolidated
database worldwide with relevant numbers of companies working in the O&G industry in both
countries. For instance in two startups global database, AngelList and Crunchbase, the numbers were
very insignificant (lower than 10 in each country). The best source for reference found in Brazil were
Petrobras two innovation calls for startups in 2019 and 2020, resulting in 55 companies26. As for
Norway we did not get response in time from key organizations we contacted asking for help to
obtain list of startups working in the O&G industry. We expect the actual number of startups in the
O&G sector to be bigger in both countries, and unfortunately the data found does not allow
comparisons.
Regarding venture capitalists, we identified that the main oil company in Norway, Equinor
has a consolidated Corporate Venture Capital (CVC) programme27, while the counterpart in Brazil,
Petrobras does not, even though recently developed a programme to invest in startups28. Within
Private Equite (PE) and Venture Capital (VC) we noticed that the investments in O&G companies
in Norway overtook the equivalent investments done in Brazil in 2016.
Graph 2 – Private Equity and Venture Capital Investments in O&G (Million US$)
Source: NVCA, ABVCAP and Brazilian Central Bank. Note: the data for 2019 in Brazil
was not available. Our analysis.
Within R&D incentives, Thune et al (2019, p. 34) highlight that in Norway it is strongly
supported by a benevolent petroleum regime: “[…] through this system, 50 per cent of operators’
R&D expenditures are tax deductible.” As noted in OECD (2014, p. 100), this is because the tax
on income from petroleum production is higher than other industries – 50% tax rate in comparison
to the “normal” 28% tax rate. This means that under the petroleum tax regime, for every NOK 100
24 Searched through https://catalogodeteses.capes.gov.br/ . Accessed on: 03/15/20
25 See: https://data.worldbank.org/ Accessed on: 03/15/20
26 See: Petrobras Conexões para Inovação – Modulo Startups (Edition 2019 and 2020) at https://www.sebrae.com.br/
. Accessed on: 08/26/20.
27 See: Equinor Ventures at: https://www.equinor.com/en/what-we-do/equinor-ventures.html . Accessed on: 07/03/20.
28 See: Petrobras Conexões para Inovação at: https://petrobras.com.br/pt/nossas-atividades/tecnologia-e-
inovacao/conexoes-para-inovacao/ . Accessed on: 07/03/20.
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spent on R&D, post-tax cost would be NOK 50, when considering only the tax on income.
However, the effective rate of tax deduction in the petroleum extraction industry would be even
higher, when considering the government “participation” fees, reaching a total tax rate on earnings
of 80% (Ibid).
In addition, under Skatttefunn R&D program credits are granted against tax and national
insurance contributions for 18% (large firms) of R&D project costs, up to a ceiling of NOK 8
million for internal projects, and NOK 22 million for the sum of in-house R&D and purchased
from universities and research institutes (OECD, 2014, p. 104). By using the Skattefunn tax credit,
for every NOK 100 spent on R&D, the post-tax cost would become NOK 2.
In Brazil, the tax rate for the petroleum industry is the same as other industries – 34%,
therefore the post-cost of every BRL 100 spent on R&D would be BRL 66. Under the R,D&I tax
incentives, a “super deduction” is granted for R,D&I project costs resulting in a cash return, through
tax reduction, from 54% to 61% of R&D costs – in this case, for every 100 spent on R&D, post-
tax cost would between BRL 39 and BRL 43.
Table 3 – Simplified Example: Comparison of Post-tax cost of R&D expenditure
Norway
Brazil
R&D expenditures (*)
(100.00)
(100.00)
Tax on income
50%
50.00
34%
34.00
Post-tax cost of R&D expenditure before tax incentive
(50.00)
(66.00)
R&D tax credit
18%
18.00
20%
20.40
Post-tax cost of R&D expenditure after tax incentive
(32.00)
(45.60)
* Assuming all R&D expenditures would be eligible for tax incentives in each country
Source: Authors, based on OECD (2014), Brasil (2005) and RFB (2017).
One important difference when comparing Brazil and Norway R&D tax incentives it that the
latter will pay excess of credit as a grant, while in Brazil the incentive is limited to a profitable
position in the calendar year, and the R&D “superdeduction” would not result in credits to be used
in future periods.
Regarding public policy in the O&G sector, while in Brazil the R&D investment is a
regulatory requirement (the 1% R&D clause, previously explained), in Norway policies and
programs have developed national strategies for R&D in oil and gas, since early 2000s, aiming at
the coordination of R&D activities (Thune et al, 2019, p. 34).
The R&D mandatory clause in the O&G sector in Brazil stimulates the internal activities, as
well as investments in external R&D, partnering mainly with universities and research institutions
and in smaller scale with suppliers. In Norway the strategy’s ambition is to: “ […] outline common
goals and technological challenges facing the Norwegian petroleum industry, and based on this, to
define prioritised technology and research areas.” (Thune et al, 2019, p. 34). Norway has seen an
increase in public allocation to specific petroleum related R&D programs, as well as incentives to
R&D projects developed by petroleum companies’ projects: allocations in various programmes
have tripled in 10 years, from 2006 to 2016 (Ibid, p. 34-35).
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6. Conclusion
Analysing from the past to the present, we believe that the Norwegian policies to develop the
O&G industry and its innovation system has been more successfully than the Brazilian ones,
especially as the oil industry in the Norway started decades later (70s), than it did in Brazil (40’s-
50s). The Norwegian oil industry became a world reference for technology and innovation at
sectorial level, with suppliers being presented in several countries, either with production and
services facilities, or through exports.
The innovation system in the O&G industry in Norway seems to be more complex and well
developed than the Brazilian one, which apparently is still much centred in Petrobras, universities
and research institutes, and less in suppliers and others actors, such as private equity and venture
capitalists. In this manner, important to point out that Perrons (2014) findings reinforce the
importance of the flow of knowledge between oil companies and suppliers (with highlights to
service companies), in the innovation development, rather than centred in universities or public
research institutions. Therefore, perhaps the first lesson to Brazil could be adjust the 1% R&D
clause in order to stimulate a more diversified investments by oil companies, e.g., in suppliers.
On the other hand, it should be enhanced the own efforts and strategies of Norwegian oil
companies and suppliers to develop itself and innovate in this industry. The vertical supply chain
competition among Norwegian oil companies is an example, and part of the success factors.
A higher and more continuous support, stimulus and coordination of efforts to innovate and
export in the O&G industry in Norway, especially in the last decades, seems to be one another
lesson to be learned in Brazil. In this manner, it should be pointed out that in Norway oil companies
are strongly stimulated to innovate with tax breaks, rather than being compelled to as in Brazil
(through the 1% R&D clause).
The startups environment was not well addressed in this paper, due to lack of data available
and despite the efforts in the research. Nevertheless, we believe to be an important element in
external innovation sphere, e.g., by corporate venture capital programmes, as also highlighted by
Perrons (2014). Thus, this is a relevant element that needs deeper analysis in further studies. The
PE and VE investments in O&G in Norway overtook the ones in Brazil in 2016 and kept higher in
the following years. Even though we could not identify possible reasons to explain this change, we
believe that this kind of investments contribute not just to the companies’ growth, but also innovate.
When analysing patents and the universities, it seems that in general we have a more oriented
efforts to develop patents by companies in Norway, while in Brazil it is more towards formation
of skilled workforce, measured in terms of master degrees and PhD concluded. This perhaps can
also be another issue to the rethought by the government in Brazil, and better aligned.
Lastly, the research carried out suggests that there are more consolidated activities towards
open innovation and sharing economy in the O&G sector in Norway, than in Brazil. We hope the
work developed can contribute to stimulate the government and private players in Brazil to take
more measures to boost the innovation O&G system in the country, in a continuous manner, and
considering the lessons from the Norwegian success that we tried to illustrate.
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7. Acknowledgement
We would like to thank Solveig Bjørkholt and Ellen Amalie Vold for supporting obtaining
data at Statistics Norway and at the Norwegian Venture Capital & Private Equity Association
(NVCA), respectively. Additionally we would like to thank our colleague in Deloitte, George
Lodygensky, for the support in accessing patent data. Any mistakes in the interpretation of the data
is solely ours.
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