Abstract
Oil-rich countries have long attempted to maximize its capture of oil wealth, traditionally using the direct production through NOCs or setting a high government take in contracts with IOCs. More recently, contracts and regulations have also focused in localizing manufacturing (local content) and promoting domestic capabilities in R&D. While local content regulations have received more attention in the scholarly literature, regulations to promote R&D, their effectiveness in promoting spillovers and their effect on oil company's strategy is yet an understudied area. This work studies the regulations and practices put in place by oil-rich countries, and particularly Brazil, Mexico, and Malaysia, to promote R&D through contractual obligations, such as levies earmarked to R&D and investments in knowledge institutions. It is based on the analysis of legislations, data on funding for research institutions, and interviews in the three countries with policymakers, regulators, oil company executives, and scientists to answer two questions: a) What policies have been used by oil-rich countries to promote R&D&I in the oil industry?; and b) how these policies influence the strategies of oil companies? This study shows that regulations in the oil industry can effectively contribute to the promotion of local capabilities in R&D, but issues of policy design are crucial to maximize the effectiveness of such policies. As the oil industry, and the offshore in particular, becomes more high-tech and subject to pressures to localize their investment, demands for local R&D are expected to increase. However, the set of policies that can capture wealth from current oil production – maximize government take – differ substantively from the capabilities and institutional complementarities necessary to promote knowledge.
