Green innovation of state-owned oil and gas enterprises in BRICS countries: a review of performance

ABSTRACT

State-owned enterprises (SOEs) are a major force in energy markets in BRICS countries, including in national energy innovation systems. In this research, we investigate whether some of the largest oil and gas SOEs in BRICS countries – Brazil’s Petrobras, Russia’s Gazprom, India’s ONGC, China’s PetroChina, and South Africa’s PetroSA – are greening their innovation to foster low-carbon solutions in line with shifting government Nationally Determined Contributions (NDCs) on climate change. We compare the innovation priorities of oil and gas SOE firms in these countries, and specifically their efforts in clean energy from 2005 to 2020. Using an original data set, we set forth case studies on five SOEs and highlight differences in their approaches across a number of different features: the level of government ownership; firms’ revenues and financial health; national government policy; and global oil prices. We assess factors influencing performance in clean energy innovation and study each firm’s success in registering patents for specifically targeted energy technologies. Our findings show that all five SOEs demonstrate only modest efforts in greening of their energy innovation outcomes. We observe their heavy reliance on oil revenues to finance innovation and note how ongoing responsibility to avoid oil and gas shortages is stifling green innovation. We recommend policy avenues for governments to realign SOE practices with climate action and specifically NDCs.

Key policy insights

• Low-carbon transition of SOEs in BRICS countries is a necessary and important part of a government’s national strategy for achieving sustainable growth.

• However, the largest SOEs in BRICS countries are making only limited progress in aligning their innovation towards low-carbon goals.

• Fiscal incentives will help support green innovation of SOEs and their efforts to decouple R&D investment from net income, allowing such investment to continue even if net income falls.

• Governments of BRICS countries should step up climate-related disclosures among SOEs and collect and share data on their innovation and greening efforts.

KEYWORDS:

• Green innovation
• state-owned enterprises
• BRICS
• oil and gas
• transition
• R&D investment

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Most recently some of Gazprom’s workforce are being called to military service amid sharp cuts in the firm’s operations as an outcome of Russia’s ongoing conflict with Europe over the invasion of Ukraine.

2 Sinopec is a more diversified company and has many businesses including chemicals and fertilizer. While Sinochem does do oil and gas exploration, it is primarily a chemicals firm.

3 Form 20-F is an annual report filing for non-U.S> and non-Canadian companies that have securities trading in the U.S.

4 Financial data following generally accepted accounting principles – GAAP.

5 Patznap database includes patent data from 126 jurisdictions, including national patent authorities of the six companies in our study.

6 These categories include: alternative energy production, transportation, energy conservation, and waste management, agriculture and forestry, administrative, regulatory or design aspects, and nuclear power generation.

7 Including US$ 5.53 million in research and development in the advanced biofuels segment and US$4.17 million in renewable energy with a focus on wind, solar and BioQav (Petrobras Sustainability Report 2020). Reported in nominal value.

8 ONGC has been profitable since 2005. It made 112,464 mln RS profits in 2020 according to its annual report.

Additional information

Funding

This work was supported by BP (British Petroleum); William and Flora Hewlett Foundation; and National Science Foundation, China NSFC (72104126).