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Field trials and SR&ED: How can O&G technology providers offset risk for their E&P partners? www.tsgi.ca
Field trials and SR&ED: How can O&G technology providers offset risk for their E&P partners?www.tsgi.ca
Rapid technological advancements coupled with a low-price environment has driven a wave of
innovative, entrepreneurial companies seeking to improve the ROI for hydrocarbon production. There
is unmet demand for E&P partners willing to trial unproven technologies, and many innovative oil and
gas service companies regularly inquire to see if (and how) SR&ED tax incentives can be leveraged by
E&P companies to offset financial risk and get their technology to field trial.
The opportunity you can leverage
For E&PCo to benefit from SR&ED for a field trial of ServiceCo’s technology, there are several
possible scenarios. In all cases, it’s important to note that for both parties to benefit, E&PCo
must utilize ServiceCo’s technology to test their own, independent hypothesis.
At its core, SR&ED is intended to support the development of new technology1. This differs from
the use of new technology, even if that technology is unproven. In the most common scenario,
ServiceCo would independently develop a new technology (an infinitely shiftable sleeve, for
example) and seek out an E&P willing to participate in a field trial.
Even though E&PCo takes on significant financial risk by trialing the technology in their well, they
did not participate in the fundamental technology development, and thus would not be eligible
to claim SR&ED. Although ServiceCo would be able to claim their costs related to SR&ED, it won’t
help them get the field trial and ultimately commercialize their technology.
Development vs. use of new technology
Getting your technology to field trial
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Making your field trial a win-win
Each company has the opportunity to claim their costs associated with attempting to achieve their
own technological advancement. For ServiceCo, this includes the development costs and any field
costs not covered by E&PCo. Meanwhile, E&PCo could claim for the amounts paid to ServiceCo as
well as any internal costs (operations, data analysis, etc).
Furthermore, there is no “double-dipping”; the companies are paying for and claiming separate
costs. The end result is that both companies are able to benefit from new knowledge, offset by the
incentives available through SR&ED.
As one example scenario, let’s say ServiceCo has developed the aforementioned “infinitely shiftable
sleeve” technology. Each company has an independent research objective. For ServiceCo, they seek
to prove out the mechanical function at reservoir temperature and pressure. E&PCo agree to trial
the technology and pay ServiceCo, but for them it presents an opportunity to test their theory that
sequential cycles of opening and closing sleeves will result in superior draw-down and a greater
Estimated Ultimate Recovery (EUR)2.
E&PCo has a SR&ED claim opportunity not for simply using a new technology developed by
someone else, but rather they have their own R&D goals which are facilitated by ServiceCo’s new
technology.
1 This a simplistic definition of SR&ED and should not be interpreted as being the sole criteria.
2 This is a generic example for illustrative purposes – more detail is required to determine SR&ED eligibility.
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Takeaways
To explore the size of the
opportunity for your company
please contact us for a free
assessment.
There is great demand for new technological solutions in the energy
industry, and knowing how to leverage SR&ED not only for yourself
but for your end user may just tip the scales enough to get your
technology into a coveted field trial.
Michael Bosdet, BSc, PhD President
TSGI Corporation
[email protected] (403) 451-3373
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TSGI.CA
Suite 400, 1122 4 ST SW
Calgary, AB T2R 1M1
403-451-3373
www.tsgi.ca
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