Background

The Research Institute of Petroleum Industry (RIPI) is a major research institute in the Islamic Republic of Iran (Iran) and is the largest of its kind in the Middle East. Established in 1959, throughout the years RIPI underwent many transformations in its research and development (R&D) activities and has become a major technology provider for Iran’s petroleum industry. In 2002, it developed a revolutionary new technology that converts heavy crude oil into the more desirable and economically profitable light crude oil, which can produce a much higher percentage of fuel.

Research and Development

RIPI’s main activities were initially to provide the Iranian petroleum industry with laboratory services (such as analysis of chemical samples and testing of new materials), but its mandate quickly expanded to provide more in-depth research activities. However, while this change brought about an increase in discoveries and new technologies, they were regularly shelved and rarely brought to the market. In the 1980s, a desire to expedite the commercialization process among RIPI researchers led to the creation of an Engineering and Development (E&D) division, with the mandate of developing marketable technologies.

Throughout this time, RIPI relied primarily on domestically developed technologies, and while it moved towards developing marketable products, it still could not compete with foreign technology in the petroleum industry. This changed in 1998 with the appointment of a new RIPI president, who had a clear vision to transform RIPI into a major technology provider for the petroleum industry. After 1998, RIPI entered a new era of a more open approach to R&D, in which it would also look at developments and new technologies coming from abroad and identify those that it deemed feasible and useful for the Iranian economy. After doing so, RIPI would then focus its R&D energy on improving and refining the technology, or inventing an entirely new technology based on what it imported.

Invention

This change in RIPI’s R&D approach led to the development of Heavy Residue Hydroconversion (HRH©), a revolutionary processing technology that converts heavy and extra heavy crude oil into the more profitable light crude oil. Heavy crude oil is any type of crude oil that is very dense or has a high specific gravity and thus does not flow as easily. As such, the production, transportation and refining of heavy crude oil presents many challenges as compared to light crude oil.

However, natural reserves of heavy oil in the world are more than double of those of conventional light crude oil. Worldwide demand for high value light petroleum products made from light crude oil is increasing, while demand for low value crude oil and products are decreasing. Because of these factors, the worldwide petroleum industry is increasingly focusing on upgrading refineries to maximize the production of light crude oil products. As Iran has a much greater quantity of heavy crude oil than light crude oil and all the newly discovered oil fields in the country predominantly contained heavy crude oil, RIPI knew that a conversion technology would be essential to keep the petroleum industry in Iran competitive.

HRH technology is one of the world’s most effective methods of converting heavy crude oil into light crude oil. The term “hydroconversion” essentially explains how the method works. Through the use of nano-scale catalyst particles (the substances which cause a chemical reaction), bonds within the molecules in heavy crude oil are broken down, resulting in higher value hydrocarbons. Seventy to eighty percent of hydrocarbon-bonded sulfur is converted into hydrogen sulfide, and heavy metals are eliminated from the oil and recovered as metal oxides. This entire process essentially reduces impurities and “upgrades” the heavy crude oil into light crude oil. HRH was developed specifically with Iranian heavy crude oil in mind, as it had high levels of asphaltene (a molecular substance found in crude oil) and metal content.

There are two important applications in which HRH technology can be used: in refining and wellhead (an industry term which refers to transporting and marketing oil). In the course of refining, substantial quantities of crude oil, which have low added value and thus are difficult to market, remain in the refineries as residue. HRH technology can take this residue and “upgrade” it into a form that can produce light oil products. In wellhead applications, heavy crude oil is difficult and expensive to transport and market. HRH technology can negate these costs by turning heavy crude oil into a lighter, more valuable and easier to transport product.

Although there are other conversion technologies available, HRH provides many specific advantages: it yields a higher conversion rate (90 – 95%) than other technologies (which can be as low as 40% and as high as 90%); it can further upgrade residue (5 – 10 %) heavy crude oil into light crude oil, resulting in no waste and 100% light crude product output; it reacts in lower temperatures; its applications are more flexible for different types of oil; it completely eliminates heavy metal impurities; it is a more economical process; it reduces sulfur compounds in the oil by 60 – 80%; and it has a low catalyst cost.

Partnerships

With the change in RIPI’s R&D, the Institute no longer simply used domestic technologies to develop new products, but placed an important focus on looking to developments abroad to see how they could be domestically incorporated. This open innovation approach naturally led to R&D partnerships, and this was the case in the development of HRH technology. When the project was first proposed in 2000, RIPI decided to monitor and identify new ideas and technologies for hydroconversion worldwide, in order to identify those developed by other companies but which RIPI could further develop and improve. This approach could potentially shorten the development time and thus help RIPI sooner meet the needs of the industry.

One such technology RIPI found was developed by Russian company Naphta Technologies and Investment (NTI), which was testing it in the laboratory on a small scale. A team of RIPI researchers visited NTI to assess the potential of the technology by conducting various technical tests along with their Russian counterparts. The tests proved successful, and in August 2002 RIPI and NTI entered into a joint development agreement, in which NTI was bound to supply RIPI with the already developed know-how on hydroconversion technology, while RIPI would conduct further R&D and ultimately commercialize the end product.

During the development of HRH technology, RIPI entered into two partnerships to build conversion units for pilot testing. The first partnership was with the National Iranian Oil Company (NIOC), which financed the construction of a 2 bpd (barrels per day) plant. The plant proved successful and its promising results paved the way for a second partnership with the National Iranian Oil Refining and Distribution Company (NIORDC), which financed the construction of a 200 bpd pilot plant near the Bandar Abbas refinery in southern Iran.

IP Management

Intellectual property (IP) has played an important role in the activities of RIPI and the development and commercialization of HRH technology. RIPI’s first national patent was registered in 1986, and by 2003 researchers at the Institute had registered nearly 50 national patents. Nevertheless, RIPI lacked a systematic approach to IP management. Decisions relating to IP rights (IPRs) were generally left to the discretion of individual researchers concerned.

By the early 2000s, RIPI had evolved to become the preeminent R&D institute in the region, and it was involved in over 70 international research collaborations such as that with NTI for the HRH technology. Through these projects RIPI’s management gradually realized the importance of IPRs and in particular patents, which were vital for successful research partnerships. In 2002, RIPI decided upon a more proactive attitude toward IP, and hired an IP expert to establish a dedicated IP department within the institution.

HRH technology represented one of the first to benefit from this new vigilance towards IP, the results of which shaped RIPI’s IP management strategies and revolutionized the way in which the Institute handled its IP ever since. The IP department’s strategy for patents follows the following order: a team of IP and legal professionals asses the patentability of the invention through a thorough patent information search; a national patent application is drafted; an analysis is undertaken on potential international markets; and any patent applications are made in those respective markets.

Beyond the actual patenting process, RIPI has many other important aspects to its IP management strategy. Because a strong IP portfolio is the basis for commercialization of technologies developed at RIPI, an incentive scheme for inventors is vital. If a patent is filed, the inventor(s) receive financial reward, and if it is licensed they receive 5 – 10% of the licensing revenue. As an additional measure to prevent early disclosure and in order not to overlook marketable technologies, the IP department scrutinizes all research papers and presentations that are to be published in journals or presented in conferences. All such works must receive approval from the IP department prior to any publication or presentation, and if any disclosure of the invention(s) is made before a patent is filed, the inventor(s) forfeit any financial reward and licensing revenue. This scheme inspires inventors to innovate and prevents them from prematurely disclosing patentable developments.

In order to avoid infringing on any already existing patents, the IP department recommends that Freedom to Operate (FTO) studies are undertaken. Such studies include a careful inspection of the closest prior art and any potential or ongoing patent applications to help recognize any overlaps. This paves the way for taking timely measures to mitigate any potential risk of infringement.

Patents and Trademarks

In the case of HRH technology, all of the necessary steps of the IP management strategy were undertaken. Shortly after its development, RIPI made a patent application with the Industrial Property Office of the Registration Organization of Deeds and Property of the Islamic Republic of Iran. The patent (#43972) was issued on 12 November 2007.

Recognizing the importance of IP protection in North America, RIPI filed a patent application with the United States Patent and Trademark Office (USPTO) of the United States of America (USA) in August 2006. The application was approved in September 2009. In addition, in August 2006 RIPI filed a patent application with the Korean Intellectual Property Office of the Republic of Korea, which was granted in September 2009 (registration No. 1009170780000), and an application with the Mexican Institute of Industrial Property, which was granted in August 2008.In total 25 countries were selected for additional patent applications, five of which have already been granted. In addition to the original patent, new patent applications have followed both domestically and internationally to reflect updates to the technology.

One lucrative market for HRH technology is Canada, due to its vast natural resources of heavy crude oil. Because of this, RIPI hired Goudreau Gage Dubuc, a reputable Canadian patent law firm, to conduct an FTO study. Although the study found that there were over one hundred Canadian patents and applications, HRH technology did not infringe on any of them. The methods of this FTO were also applied when making decisions for patenting in other countries and the results were repeated, to an acceptable certainty, as many companies in the petroleum field apply for Canadian patents due to the importance of that market.

Due to the fact that the HRH technology is a breakthrough with commercialization possibilities in many different countries, a distinguished trademark can enhance its introduction to the market and other related promotional activities. Accordingly a trademark for “HRH Technology” was applied for with the Iranian trademark office and was registered on October 21, 2008.

Licensing

The primary vehicle through which RIPI planned to commercialize HRH technology was through transferring it to the commercial sector, therefore licensing agreements were crucial. In parallel with the construction of the 200 bpd pilot unit, RIPI launched a series of negotiations with several major Iranian companies to enter into licensing agreements. This proved challenging, because the technology was yet to be proven commercially, and it is of a risky financial nature for interested companies (such projects could require several billion dollars of investment). However, RIPI was able to successfully enter into a licensing agreement with Khouzestan Refinery Company (KRS).

Considering the huge potential market for the HRH technology in North America and Iran’s limitations for accessing the market, the commercialization of the technology in those markets was outsourced to a foreign specialized agent. After rigorous searches and assessments of the capability of different candidates, the IP department prepared a licensing agent agreement that RIPI signed with a Canadian company active in the field.

Commercialization

The licensing agreement with KRS was a great success for RIPI in its new role as a technology developer, and was the first major commercialization of HRH technology. Under the terms of the multi-million US$ licensing agreement, KRS used RIPI’s HRH technology to build a full 180,000 bpd industrial plant in the southern Iranian city of Abadan. In addition to this agreement, RIPI also has a co-commercialization agreement with NTI, which was drafted by RIPI’s IP department. Under the terms of the agreement, a Joint Steering Committee (JSC) was created that is made up of technical and legal representatives of both parties to: develop and approve the commercialization program; make decisions on commercialization together with all necessary materials and conditions; and to make decisions in respect to the inclusion or exclusion of separately made inventions related to HRH technology. Under the terms of the agreement, any new or improved technology developed jointly by RIPI and NTI shall be considered to be joint property, with patent applications to be filed after approval from the JSC.

RIPI also promotes commercialization through other channels, namely international conferences, global oil and gas exhibitions, and presentations for top managers of companies in the industry. This last channel has proven to be the most important and effective, in which the technology and its technical details were presented in such a way that successfully persuaded many companies to consider using HRH technology.

The successful technology transfer and commercialization of HRH technology is an example of how the Institute was able to shorten the time it took for its technology to enter the market. Before it focused on open innovation approaches, RIPI would typically take between 15 – 20 years to commercialize a new technology. In the case of HRH technology, it was commercialized in only eight years.

Business Results

Converting heavy crude oil to light crude oil is an increasing need in Iran and many other countries throughout the world. RIPI’s successful development of the technology allowed it to not only prove that it is feasible and worthwhile through two successful pilot commercialization programs, but it also allowed the Institute to enter into a lucrative licensing agreement. With 180,000 barrels per day coming out of the KRS plant in Abadan, HRH technology represents a possible new chapter in the development of the Iranian oil industry, and an opportunity for RIPI to develop even more successful technologies.

Changing an Industry with Open Innovation and IP

With an energy hungry world and an evolving industry, RIPI has developed and commercialized a technology with far reaching potential. From the R&D phase, to the licensing agreement and commercialization, securing IPRs was an essential ingredient in RIPI’s transformation to using an open innovation approach. A strong IP portfolio and IP management strategy have allowed RIPI to accelerate the commercialization of its innovations, and with the success of HRH technology proven, the Institute is poised to continue to develop and commercialize new technologies.

Source: WIPO