R&D: A Profit Center, Not a Cost Center

By Gupta, Varsha

Publication: NJBIZ

Date: Monday, August 1 2005

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HEADNOTE

Industry Report

THE TEAM AT ExxonMobil's research facility in Annandale spends most of the working day studying molecular

behavior in crude oil. How much money the company makes from refining a barrel of the stuff depends on how many

petroleum products it can extract per barrel and how much the process costs.

The key to making more profitable products, says the company, is knowing as much as possible about the particular

batch of oil that is being refined-down to its molecular makeup.

Understanding oil on this level has allowed ExxonMobil, which invests $600 million a year on proprietary research, to

issue its refineries new crude-oil blending guidelines to prevent problems such as pipe fouling and corrosion. These

carry major costs since damaged equipment must be taken off-line and cleaned. Shutting down a large refinery can

cost more than $1 million a day in lost revenue and associated expenses.

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Researchers utilize lasers to analyze the molecular composition of hydrocarbons.

Tom Degnan, director of ExxonMobil's Petroleum Sciences Lab, notes that the company's new "molecular

fingerprinting" program "puts ExxonMobil well ahead of the industry curve in the ability to match the right crudes with

the right refineries to get the maximum value from each barrel of oil that we refine."

"The ExxonMobil experience shows that investing in research can lead to major cost savings through improved

material analysis which permits more accurate matching of process to material-in this case, oil," says Anthony

Makoujy, executive director of the Research & Development Council of New Jersey. "When we speak of analysis, it's

important to recall that ever since computer computational costs have dropped and process speeds have increased

dramatically, much more can be done with data, and done quickly, to benefit from the fruits of research." The council

is a non-profit organization in Denville whose members include a number of large research-based companies

including Johnson & Johnson, Honeywell and ExxonMobil.

Successful businesses don't view R&D merely as a cost, but rather as a critical investment in long-term success. Like

any good investment, says Makoujy, R&D pays major dividends.

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