INDUSTRY INSIGHTThought Leadership

Excellence in research and innovation: What should the GCC focus on?

By Aarthi J, Research Director, TechVision Practice, and Sanchari Chatterjee, Senior Industry Analyst, TechVision Practice, Frost & Sullivan

GCC to emerge as an innovation hotspot

The chemical and petrochemical sector of the Gulf Cooperation Council (GCC) is focusing on diversification and creating a supply chain that is not entirely dependent on crude to establish its competitiveness in the global market. As a result, the GCC chemical and petrochemical industry has adopted a fast-paced research and innovation approach in the past few years with support from market participants and governmental efforts to ramp up the region’s manufacturing capacities and infrastructure. The GCC is expanding the intensity of research on value-added performance polymers, specialty chemicals, and intermediates while still focusing on its traditionally strong areas of petrochemical derivatives and commodity polymers. The region is also emphasizing the continuous development of basic organics, chlor-alkalis, fertilizers, etc. The accelerated growth of the chemical and petrochemical segments in the GCC region is needed for companies to discover lucrative opportunities and establish the requisite skills for expanding their global footprint.

Surge in research spending and investment in alignment toward region’s developmental priorities 

Globally, research and innovation have taken a different direction; apart from the focus on developing new chemicals and advanced materials, they are increasingly used to improve functionality, personalize chemicals, and advance materials to create new market opportunities and meet end-user requirements. Collaboration for scientific research and innovation is pivotal to continuously conduct incremental R&D, adopt digital solutions, adapt to end-user feedback, and assess new technical parameters across the globe. Continuous interaction and collaboration among company-academia, company-company, and between academic institutes have created a platform wherein all stakeholders mutually benefit, conduct exploratory and applied research, hasten commercially ready solutions, and upskill their technical expertise. Collaborative research projects with multiple stakeholders have been successful in finding solutions for common pain points. Implementing these strategies has resulted in new chemical development and identifying best practices in waste management. For example, in the US, a collaboration between Dow Chemicals and Mura Technology resulted in the development of HydroPRSTM (Hydrothermal Plastic Recycling Solution), a unique recycling method for generating high-performance recycled virgin polymers. Another successful example is the establishment of the Institute of Sustainability for Chemicals, Energy and Environment (ISCE2) by A*STAR, Singapore, which is intended to establish continuous cooperation between industrial players, academic institutions, and government agencies to advance R&D in fields like low-carbon technologies, carbon life cycle assessment, sustainable materials, and green manufacturing processes.

Collaborations to facilitate continuous R&D and innovation in GCC

The GCC, as a region, is open to generating ideas for R&D and innovations originating from research institutions, academia, end users, and other stakeholders. GCC companies are trying to establish partnerships and joint ventures to improve their technology and product portfolio, undertake R&D projects, and conduct detailed cost-benefit analyses on innovation budgets. For example, a memorandum of understanding (MOU) between Sahara Petrochemicals and Saudi International Petrochemical Co. offers ancillary benefits, including sharing manufacturing assets and cooperative research to produce new petrochemical end-products. The partnership between Saudi Aramco, Axens and TechnipFMC to accelerate the development and commercialization of the company’s Catalytic Crude to Chemicals (CC2C™) technology has the potential to greatly improve the yield and efficiency of chemicals. Another successful example is when SABIC joined forces with Royal DSM, a major global science-based corporation, and UPM Biofuels, a leading producer of sustainable raw materials for developing renewable ethylene, which will be incorporated into Dyneema®, designed by DSM for sports gear, protective apparel, and offshore marine or aviation cargo netting.

Partnerships gain momentum for facilitating continuous R&D and innovation

Collaborative R&D of corporates with academia has resulted in an increased pace of incremental, basic, and applied research, international investments, and stage-gate initiatives picking up steam within the GCC. Successful instances include membership-based industrial partnership programs of King Abdullah University of Science and Technology (KAUST) that foster creative thinking, the development of professional expertise, and access to conferences and workshops, raising further awareness for industry-university R&D partnerships. Under another effort, SABIC partnered with King Saud University, Riyadh, to form SABIC Polymer Research Center (SPRC) to advance polymer science and engineering education and research in Saudi Arabia with the use of modern digital tools. To promote the research and innovation of new chemicals in the GCC region, Dammam Valley has launched the BioTech Startups Programme in collaboration with Imam Abdul Rahman bin Faisal University, Saudi Aramco, the Ministry of Investment, the Ministry of Industry, the Future Investment Initiative Institute (FII), and Sadara Petrochemical Company. Major players in the GCC see shrinking margins brought on by increasing manufacturing costs and competition in the global market as a significant limitation. Authorities and market participants see collaborative activities between regional and global stakeholders as a way to overcome limitations.

The amount of money the GCC invests in research and the extent to which it develops competitive advantage capacities are key determinants to value, absorb, and utilize innovation. To achieve this, GCC members must first recognize how important continuous new product ideation is to develop a future knowledge-based economy to stimulate national innovation. To make research possibilities appealing and orchestrate the development process for a positive “return on investment,” funding agencies, universities, and research institutes must devise conducive economic policies. However, only major chemical and petrochemical producers have access to funding and investment. Despite governments’ emphasis on innovation, there is still a dearth of R&D spending. Chemical manufacturers in the GCC are spending their incomes on research and commercialization projects of new chemicals by relying on subcontractors and academic institutes. The GCC investors put their money into petrochemical and chemical downstream production and export capabilities. By doing this successfully, stakeholders can diversify their portfolios, strengthen their financial positions, and generate high-value jobs and skill creation.

Investments in initiatives to lower national carbon emissions, promote environmentally friendly goods and practices, and facilitate the energy transition in the region are also focused on strengthening the innovation ecosystem and establishing a stable infrastructure. For example, the circular economy program by BASF in Bahrain intends to process 250,000 tons of recycled and waste-based raw materials annually by 2025 and treble the revenue earned through circular economy innovations to €17 billion. For product differentiation, process efficiency, cost advantages, and sustainability, increased investment in research and innovation will be crucial, ultimately assisting GCC producers in becoming more competitive on the global stage. The GCC’s chemicals and petrochemical sector is constantly looking for ways to expand, whether through increased production capacity, driving sustainability, or through the development of better products and processes via cooperative applied research and experimental development. However, to excel in their future research and innovation efforts, the GCC needs to replace traditional R&D’s focus on working in closed labs and increase access to external expertise pertinent to achieving the innovation agenda. Facilities to manufacture large-scale petrochemical and derivative complexes, as well as recycling industrial waste, will be crucial to transitioning lab efforts to an industrial scale.

Research and innovation are also vital to boost employment opportunities

Certain skills and expertise, such as patenting efforts and some best practices from academia and local governments, will help push better research and innovation concepts and models within the region to minimize the environmental impact of supply chains and develop sustainable recycled chemicals and materials. A clear and targeted research agenda, which supports institutional and legislative frameworks and strengthens the research and innovation ecosystem at national and regional levels, can help conduct continuous research projects and establish innovation programs to advance socioeconomic development. Better access to resources and services, helping academic researchers understand industrial expectations, opening opportunities to implement research outcomes, and adherence to regulations would be imperative for transitioning the GCC into a technology-driven economy. Finally, to transfer the fundamental laboratory research of specialty chemicals and high-performance materials to large-scale production at facilities, innovation programs are needed to recruit and train scientists with the appropriate abilities and expertise. Industrial partnerships for training and skill development of academic researchers can bridge the gap and help in tech and product development that can address industry challenges and pain points. It can also foster sustained growth to satisfy the current and future ambitions of the region.

Need for strategic planning and creative thinking

The future of research and innovation in the GCC to create a diversified economy would largely depend on how local governments are able to rely minimally on imports by judiciously shifting some of their spending from facilities to R&D and by setting incentives for high-impact, practical research of chemicals and petrochemicals. Although the GCC chemical and petrochemical manufacturers and their international competitors differ in cost, feedstock, and market access advantages, market participants across the globe share a crucial requirement to develop or acquire unique technologies and create product differentiation. In the next three years, developing local talent, establishing national research frameworks, and supporting research-based performances are necessary to build a resilient future. Additionally, academia and companies must cooperate to conduct basic and applied research and to develop a strong IP structure to support NPD and commercialization. Establishing a research environment to address socioeconomic issues is also needed. Research strategies to manage waste and minimize reliance on fossil fuels will be implemented at a large scale. The expansion of indigenous research efforts to diversify the chemicals and petrochemicals portfolio to accommodate specialty chemicals, high-performance polymers and composites, sustainable materials, and chemicals using analytical techniques, multi-faceted digital technologies, net-zero technologies, etc., can help establish the GCC as a research-driven economy. Customizing best practices from global players to implement in their operations through R&D will need the involvement of companies, universities, and other stakeholders to establish long-term, sustainable business practices. Industry and trade associations can assist members with decision-making and advisory to adopt sustainable solutions. A sustained local research and innovation ecosystem, bolstered by regulatory, governmental, and industry associations support, would be instrumental in harnessing research and innovation for the socio-economic and technological growth of the GCC chemical and petrochemical industry.