How can service companies lower product development costs and boost sales by leveraging R&D credits? – TSGI Corp.

O&G Service companies and producers are feeling the pinch these days. So how can you incent an E&P customer to run your more experimental (and likely more expensive) product line? How can a government program translate into cheaper product development costs and higher technical sales in a challenging market?

Producers are cost sensitive, however unlocking optimal reservoir exploitation is critical for their long-term success. Meanwhile, service companies constantly innovate, working alongside customers to understand their challenges and help exploit their assets.

However, these technologies are sometimes more expensive than the established industry standard. And although producers see the value in using them, they sometimes can’t justify the cost.

There is a solution which benefits both you, the Service Co, and your E&P customer. Canada’s R&D tax credit program (SR&ED) incents attempts to advance technology and scientific understanding. By leveraging SR&ED, your customer can pull in a range of other field costs in addition to the cost of your more expensive product and receive ~24% back. This lowers the total cost of their project and more than compensates for the premium price of your latest innovation.

Example

An oilfield chemical company is working with a producer who has a problem with improving OGR and maximizing liquid recovery in a tight shale reservoir. ServiceCo wonders if IFT and wettability properties can be altered in the reservoir by introducing chemical additives.

After assessing existing in-house technologies and a literature review, ServiceCo prepares a plan for experimental development. They undertake lab studies using field samples and data to help bridge the knowledge gap and produce a potential solution. They support their customer in field activities and participate in data collection and analysis. Their findings are related back to the original hypothesis, which informs future product development.

If the Producer is using the chemical additive to answer their own questions about reservoir interaction and the corresponding liquid recovery in tight shale reservoirs, not only could they potentially recoup ~24% of additive costs via SR&ED, but they could pull other field costs into their SR&ED claim. By leveraging ServiceCo’s innovative product, they bring down the total cost of their operations (fiber optic, tracers, pumping, op costs), simultaneously advancing their understanding of optimal resource exploitation. SR&ED is a powerful tool for both lowering costs and advancing your company’s knowledge base.

If you and your team are interested in discussing how to execute a SR&ED claim to benefit your company and/or your E&P customers, get in touch with us and we’d be happy to explore with you.

tsgi.ca

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