TFS-18395; No of Pages 13

Technological Forecasting & Social Change xxx (2015) xxxxxx

Contents lists available at ScienceDirect

Technological Forecasting & Social Change

An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development
Mojdeh Mirimoghadam a,, Sepehr Ghazinoory b
a
Candidate of Science and Technology Policy Making, Tarbiat Modares University, Iran
b
Faculty of Economics and Management, Tarbiat Modares University, Iran

a r t i c l e i n f o a b s t r a c t

Article history: This aim of this study is to identify elements in the institutional setting which affect technological learning out-
Received 30 June 2015 comes in large socio technical systems. By drawing on eldwork and empirical evidence from Iran's oil and gas
Received in revised form 27 November 2015 industry, a multiple-case study has been conducted. It is found that the institutional regime of this sector jeopar-
Accepted 11 December 2015
dizes technological learning scenarios through 4 overarching aspects: Cost, Time, Risk and Management struc-
Available online xxxx
ture, which we call the CTRM square. It is also revealed that the locked-in institutional structure of the sector
Keywords:
creates a negative co-evolution among actors leading to impairment of technological learning. Our data
Technological learning (TL) shows that the characteristics of large socio-technical regimes in developing countries act in favour of such im-
Institutional regime pairment. These regimes create strong commitment in stakeholder groups. Such commitment establishes
Co-evolution dominancy around technological routines, which is the result of low absorptive capacity of stakeholders and
Institutional analysis their lack of awareness regarding new technological scenarios. In some cases, political conditions surrounding
Developing countries a project as well as personal gains lead to the stakeholder's deliberate action against a new technological scenario.
Iran The negative co-evolution contributes to the supply side change of strategy in order to safeguard their market po-
sition which ultimately engenders dominancy of obsolete technological routines in the rms diminishing techno-
logical learning in the oil and gas industry.
2015 Elsevier Inc. All rights reserved.

1. Introduction Despite the considerable investment, it appears that little technolog-

Oil and gas have been the main sources of supply of energy to the
global markets for several decades, and the consensus is that they
will continue to keep this leading role into the current century. Con-
sidering such signicance, development in this industry becomes a
high priority since it is the driving engine of meeting the world's
energy demands through increasing production by exploration of
new reserves and use of advanced technology to extract additional
resources from the abandoned reservoirs because of high cost of
extraction.
Oil and gas industry is considered to be a large socio technical system
as it involves several complex exploration, development and production
megaprojects. Iran, as a country rich in oil and gas reserves,1 has carried
out many megaprojects like the South Pars gas eld development
phases with a total capital of approximately 40 billion USD. These pro-
jects should help Iran to make progress in towards development
(Soo & Ghazinoory, 2013).
Corresponding author.
E-mail addresses: m.mirmoghaddam@gmail.com (M. Mirimoghadam),
Ghazinoory@modares.ac.ir (S. Ghazinoory).
1
In 2010, Iran, which exported around 2.6 million barrels of crude oil a day, was the
second-largest exporter among the Organization of Petroleum Exporting Countries.
ical learning (TL) has taken place in the industry. It is estimated that this
industry's yearly requirement reaches to about 2.5 million pieces of
equipment, about 70% of which is being imported from foreign sources.
This equals to 7 billion dollars of capital which is paid to foreign
resources.
As an example of inadequate TL in the petroleum and natural gas
industry in Iran, we cite the inability of the Iranian Oil Company in TL
in spite of renewing for 35 times, the license to use the sulfur recov-
ery technology from abroad. The inadequate technological learning
of the rms in the industry has created a puzzle. This paper aims to
solve this puzzle by identifying the reasons for such poor learning
performance.
While studies point out that TL can improve the economics of in-
dustries; a simple contradicting incidence in the oil and gas industry
of Iran is the sulfur recovery license. Our data reveals that this license
has repetitively been purchased from foreign sources 35 times with-
out any domestication achievements or any reduction in procurement
costs. Such issues make TL a stimulating phenomenon and this paper in-
tends to investigate what happens to it in the oil and gas industry of
Iran.
A rich literature about technological learning exists. During re-
cent decades, TL has become a crucial challenge for the developing
countries in the processes of technological progress and improvement

http://dx.doi.org/10.1016/j.techfore.2015.12.004
0040-1625/ 2015 Elsevier Inc. All rights reserved.

Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
2 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx
(Lundvall, 1992; Nelson & Rosenberg, 1993; Viotti, 2002). Moreover, TL
is considered important in different analysis of innovation systems
specically in technology upgrading and development (Lundvall,
1992; van Sark et al., 2010).
The goal of this study is to open the black box of TL in the oil and gas
industry of Iran. Socio-technical systems theory will provide a useful
lens through which to explore TL. Institutions are the most appropriate
area to focus our analysis on, since they are the main determinants of
the sector's strategy and orientation. We particularly aim to focus on
regulatory institutions. The targets of our analyses are the oil and gas
megaprojects since they are single, legitimate aggregations with inter-
related sub-sets interacting to realize the complex tasks assigned to
them. We aim to broaden the existing studies on the subject by investi-
gating how these megaprojects contribute to TL in socio-technical sys-
tems. We explore how they affect co-evolutionary processes of TL in
the oil and gas industry.
After this introductory section, Section 2 will provide a review of TL
insights in the micro, meso, and macro levels of a socio-technical
system. A brief study of institutions as the major determinants of TL is
also provided in this section. This will be followed by a case study
method described in Section 3, proposing a case study of different
phases of the South Pars Gas Field Development Project. Section 4
presents the results of our institutional analysis based on the major
characteristics of the institutional regime of oil and gas industry. In
Section 5, ndings and results are discussed and study limitations
are explored and in Section 6, nal conclusions are presented.
2. Technological learning and institutions: a multi-level review
One main point regarding TL is that it is associated with system im-
provement. As TL is among the accomplishments that occur in systems
(Lundvall, 1992), a logical point of departure for addressing the goals of
this study is a review of socio-technical systems literature. In the
present context, we explore three consistent research strands that
are relevant to TL.
2.1. Determinants within micro studies
The rst strand examines TL determinants at the micro level (rm
level), focusing on the criteria affecting rms technological base. Bell
(2007), in a study of the developing countries, proposes some com-
mon principles for learning and capability development in the
rms including: Human resources and training, use of technology
and operation, R&D, design and engineering practices, international
scientic and technological co-operation, technical standards, and
metrology (Bell, 2007).
Absorptive capacity of the rm is another key determinant. Ab-
sorptive capacity is the rm's ability to pinpoint organization needs,
information value and external knowledge or acquiring and applying
required external knowledge for economic purposes (Cohen &
Levinthal, 1990). It is signicant for internal and external knowledge
transfers in a rm level (Szulanski, 1996).
Finding it highly relevant, seminal literature on TL focuses on factors
driving absorptive capacity in the rm level. They point to knowledge,
personal absorptive capacity, diversity of backgrounds (Cohen &
Levinthal, 1990); organizational training level (Vinding, 2000; Roth
et al., 1994); R&D investments (Veugelers, 1997; Vinding, 2000);
presence of gatekeepers (Lerch et al., 2010); organizational structure
(Welsch et al., 2001; Jansen et al., 2005); intra-organizational commu-
nications and team work (Cohen and Levinthal, 1990; Jansen et al.,
2005); organization bureaucracy (Nonaka & Takeuchi, 1995); organiza-
tion culture (Lloyd, 1998); organization size (Welsch et al., 2001);
organization inertia and human resource management (Davenport &
Prusak, 1998).
Technology related factors include scale of technology complexity
(Calantone & Gross, 1990; Lin & Berg, 2001; Lia & Tsai, 2009; Simkoko,
Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
1992); technology life cycle (Lin & Berg, 2001) and technology
document-ability (Lin & Berg, 2001; Lia & Tsai, 2009).
2.2. Implications within meso level
The second strand examines TL through a systematic lens. This re-
search level explores how the complex nature of industries and sec-
tors affect technology development/upgrading/adoption processes
(Ngar-yin Mah et al., 2012; von Bock und Polacha et al., 2015;
Spinardi, 2015; Geels, 2004; van Sark et al., 2010).
The insights within systemic (meso) studies of innovation refer to
the capital, engineering and infrastructure assets integral to the socio-
technical systems (Gil et al., 2012; Miller et al., 1995; Hobday, 1998),
which are mostly the outcome of megaprojects in that system. How-
ever, less attention has been paid to the demand side as well as social
factors. Potentially, the deliverables of a megaproject provide an
opportunity window for the new/domesticated technologies to
enter the socio-technical system (Geels, 2004), and therefore shapes
and is shaped by the system (Gil et al., 2012). These projects deal
with a variety of stakeholders e.g. the client, contractors and subcon-
tractors, vendors, consultants and the user side as well. Hence, deci-
sions to initiate and pursue a learning opportunity in the project
require multi-lateral reconciliations. Difculties to reach jointly
inter-rm, multi-lateral agreements can be compounded by uncertainty
and ambiguity in the project requirements (Miller & Lessard, 2000), in-
adequacy of codied knowledge, limited opportunities for prototyping
(Cacciatori, 2008), lack of routines for inter-project transfers of tacit
knowledge (Gann & Salter, 2000; Prencipe & Tell, 2001), and inade-
quate feedback loops between project teams and operational staff
(Geyer and Davies, 2000).
Other intersecting meso-level factors are the infrastructure
(e.g. Information Technology) (Holsapple & Joshi, 2000; Nazmun
et al., 2006; Mohamed, 2010); values and norms institutionalized with-
in the system (Waroonkun & Stewart, 2008; Mohamed, 2010); and the
linkage among different entities and stakeholder groups. Multilateral
interactions among these groups provide orientation and coordination
to the activities of different actor groups; hence, projects account for
the performance of socio-technical systems on multiple dimensions
such as technology, scientic knowledge, markets, infrastructure, cul-
ture, industry networks and sectoral policy (Elzen et al., 2004).
2.3. Macro implications
The third strand applies a macro assessment of TL in the socio-
technical system. While some studies have underlined the changes im-
posed by socio-political and technical forces (Ferlie et al., 2005; Bijker,
1995; Miller et al., 1995; Geels, 2004; Peine, 2008), others have revealed
how effects are made by economic forces (Markard & Truffer, 2008;
Watson, 2004).
In the macro studies, we encounter technological trajectories located
in a socio-technical landscape, consisting of a set of deep structural
trends. As Elzen et al. (2004) argue, the socio-technical landscape com-
prises several factors. First heterogeneous, slow-changing variables
namely cultural and normative values, broad political coalitions, long-
term economic developments and accumulating environmental prob-
lems. Second, shocks and surprises (Elzen et al., 2004) like wars and in
the context of this paper, rapidly falling oil prices and sanctions. Land-
scape is an external context for the rm and socio technical levels.
While micro and meso factors can be changed (to some extent) by ac-
tors within the system, it is not easily possible to alter landscape factors
(Miller et al., 1995; Elzen et al., 2004; Kemp & Rotmans, 2001).
2.4. Institutions in innovation studies literature
Many of the innovation studies highlight institutions as a key ele-
ment associated with technological processes; institutions play a key
 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx
role in different innovation approaches namely sectoral innovation
systems (Malerba, 2004); socio-technical systems (Elzen et al., 2004);
national innovation systems (Lundvall, 2007); regional or territorial in-
novation systems (Moulaert & Sekia, 2003); technology-specic inno-
vation systems (Carlsson, 1997; Hekkert et al., 2008).
NIS studies try to understand variations of technological capacity
and innovation patterns between countries and even industries
(Lundvall, 1997; Adeoti, 2002; Krammer, 2009; Castellacci & Natera,
2013; Mahroum & Al-Saleh, 2013). Pursuant to these studies, institu-
tional settings and their characteristics and structure are the main
reasons for functional differences in countries and sectors, which affect
their capacity and ability to innovate (Balzat & Hanusch, 2004). Institu-
tions are generally identied as key explanatory factors for understand-
ing why some innovation processes in certain regions, countries or
sectors fare better than others (Edquist & Johnson, 1997; Edquist &
Borrs, 2014).
Institutions play a key role in sectors and industries as well. They are
associated with professional competencies, shared cultural beliefs, mar-
ket structures or even regulative institutions (Cooke et al., 1997).
Despite their importance, there are only few systematic studies for
conducting an institutional analysis in a complex innovation system.
However, in an article by Jacobsson & Johnson (2000), institutional
failures are among the key factors that may impair technology devel-
opment and diffusion (Jacobsson & Johnson, 2000). Therefore, key
questions remain unsettled: How are institutions relevant to the
technological outcomes? How such institutions determine specic
strategies of actors in socio-technical systems?
In this paper, in order to carry out our analysis, we have considered
classication by Scott (2008) for institutions. According to Scott (2008),
institutions are ... comprised of regulative, normative and cultural-
cognitive elements that, together with associated activities and re-
sources, provide stability and meaning to social life. Referring to the
Scott's classication, the authors' focus in this paper are mainly regula-
tive institutions namely contractual clauses, laws, sanctions, targets and
restrictions.
2.5. Insights from extant literature and identied gaps
Having reviewed the literature, it is noticed that the research strands
have seldom intersected with institutional studies, and have been hard-
ly applied to explore TL in complex socio-technical systems. Broadly
speaking, extant studies targeting sectoral structures reveal that tech-
nological issues are inuenced by national policies, path dependencies,
vested interests of powerful constituencies, legal issues, and politics
(Edwards et al., 2007; Malerba, 2004), which all constitute parts of the
institutional regime in the country or sector level.
However, as mentioned above, these studies have not explored
much about how institutions shape and determine TL in sectoral struc-
tures. In general, technology incentive and hindering mechanisms with-
in the institutional regime are not analytically reviewed and identied.
Moreover, the analytical focus of the innovation literature has turned
towards system functions in recent years (Bergek et al., 2008; Hekkert
et al., 2008) and an explicit analysis of institutions as the structural com-
ponent of innovation-associated systems has rarely been on the agenda.
Most studies have exclusively analyzed the success or failure of in-
novations and the rms involved in innovation networks. Successful
technological efforts appear to depend on the structure and formation
of networks with actors from different institutional sectors (Castilla
et al., 2000) and government agencies promoting and moderating
networks (Giesecke, 2004). They suggest using a multilevel approach,
especially if a socio-technical system is being studied (Geels, 2004).
In the Iranian oil industry investment in several active megaprojects
takes place frequently. Upstream development projects are good exam-
ples. However, in spite of recurrence of the same types of investment ac-
tivities, TL has not taken place in the industry. On one hand, they are
considered to be fundamental supporting activities for the economy;
Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
3
on the other hand, they have a recurrent nature due to the availability
of hydrocarbon resources in a country. In Iran the plentitude of oil and
gas reserves make development projects a frequent regular practice.
Hence, they are supposed to act as supporting mechanisms of TL in
the sector.
In the South Pars gas eld, which is the subject of our case study,
14 similar development projects have been undertaken. However,
little evidence of TL has been observed. Browsing approved subcon-
tractors and vendors list, there is inconspicuous improvement ob-
served at the domestic rms' side (rms do not participate in
technology upgrading and development processes), and the rate of
foreign outsourcing (circa 84%) has remained still during the execu-
tion of these projects. The question is why? We aim to answer this
question next.
3. Data and method
3.1. Research method
Examining the phenomena focusing on institutional arrangements is
highly contextual and therefore requires triangulation of multiple forms
of evidence that have been subjected to internal and external validity
testing (Yin, 2009). As such, the research strategy followed in this
study is an inductive multiple-case analysis within a socio-technical
and sectoral context.
The empirical setting of this study is the South Pars Gas Field Devel-
opment Project. This natural gas condensate eld is located in the Per-
sian Gulf. It is the world's largest gas eld, shared between Iran and
Qatar. According to the International Energy Agency (IEA), the eld
holds an estimated 1800 trillion cubic feet (51 trillion cubic meters) of
in-situ natural gas and some 50 billion barrels (7.9 billion cubic metres)
of natural gas condensate. The eld covers an area of 9700 km2, of which
3700 km2 belongs to Iran. The Iranian portion of the eld amounts to
roughly 7.5% of the world gas reserves and approximately half of
Iran's gas reserves.
In recent decades, some sophisticated megaprojects have been
designed for development of 24 phases to produce 790 million cubic
meters of gas per day. Out of these development phases, phases 1, 2,
3, 4, 5, 6, 7, 8, 9, 10 and 12 are brought to production and the outstand-
ing phases are ongoing in different development stages. There have
been some considerable delays and cost overruns in the development
of the projects. Among those projects handed over, there is an average
delay of 15 months and $1320 million cost overrun per phase. One
major incident for these overtimes and overruns is the phase 12 devel-
opment project, which encountered an approximate cost overrun of
$5500 million and 47 months of overtime due to imposition of interna-
tional sanctions.
Sanctions imposed by the United States and the European Union
(EU) not only led to the displacement of more than 1.0 million barrels
per day of crude oil on the global market,2 but also changed the techno-
logical conguration of Iran's oil and gas industry. As mentioned before,
Iran imports more than 70% of required equipment and tools for execu-
tion of oil and gas projects which adds to an approximate yearly amount
of 7 billion dollars. Therefore, sanctions act as a key macro-political cri-
terion creating serious restrictions upon absorption of required technol-
ogies for domestic use.
It should be noted that sanctions created a major shift in Iran's im-
port policy. However, imposition of sanctions did not force the industry
to technology domestication. This was mainly because Iran's demand
side shifted from original technologies to Chinese equipment and tech-
nologies. This had signicant impact on the quality of equipment
imported and did not create willingness to develop technologies inter-
nally. Even if infrequent efforts were made in this regard, they could not
2
Source: EIA Iran Report.
4 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx
accomplish because the developed technologies had issues gaining in-
ternational standards (which, again, was out of reach due to sanctions).
As this is a contributing factor, the three cases are selected so that
their total time span covers the pre- and during sanction periods. It is
worth noting that the data gathered from respondents have taken into
account the conditions of sanctions. Hence, many of the incidents ob-
served and interpretations made are under the inuence of imposing in-
ternational sanctions.
The South Pars development phases are suitable cases for exploring
TL in oil and gas industry for various reasons. First, this eld is divided
into 24 development phases with similar structure, which provides
good opportunities for TL. Second, these projects constitute the major
part of upstream sector of oil and gas industry. In fact, phase 12 is the
largest megaproject of Iran's industrial history.
We have selected three independent projects (phases 67-8, phase
12 and phase 1718 drilling) as cases in order to cross-compare and
conrm any inferences drawn from each case. The selection of cases
were based on 1) the author's permission to access the projects' data-
base, and 2) time span of the projects with regards to macro changes
(major items like imposition of sanctions, the prevailing exchange rate
of Rial, rising/falling oil prices). We chose cases that varied in time in
order to distinguish the impact of major underlying factors (see Fig. 1).
Table 1 summarizes for each case, the information on the time,
capital costs and current status:
For each case, one of the authors was authorized to access to the
projects' database and archives. Most of the eldwork was carried out
during 2008 to 2015. Eighty six semi-structured interviews with
open-ended questions were carried out during which the authors
discussed the technological routines, strategies, and scenarios in each
case.
On one hand, our respondents were top executives, experts, and
technical staff. On the other hand, they were selected from all parts of
the industry value chain in order to cross-check and obtain complemen-
tary viewpoints, ll gaps in understanding, and modify potential biases
of individual respondents.
The petroleum industry includes different actors namely rms,
universities, research centers, government and other specialized
academies. One of the structural characteristics of petroleum indus-
try is that all sub-categories such as upstream, midstream and down-
stream as well as all R&D activities and commercialization efforts are
carried out under direct supervision of the petroleum ministry and
the mother companies. These companies have a specic strategic
mission. The petroleum industry entails three structural levels as
shown in Table 2:
Those actors in levels 1 and 2 are governmental and those in level 3
are mainly private companies. General contractors, developers and
operators are large organizations and vendors and service companies
are mainly medium or small sized rms.
Interviews were recorded and converted to text. Annex 1 provides a
list of core professions and positions of the respondents. Data from in-
terviews, archives and literature review were gathered, documented,
Fig. 1. Time span of cases studied in this paper.
Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
codied, narrowed down and classied into several emergent sub-
themes. Distinguishing the patterns was a process grounded in the par-
ticulars of our multi-case study data. We looked for recurrent themes by
continuously cross-comparing data against dened codes and catego-
ries, modifying codes and developing categories that encompass main
underlying patterns. These patterns are mainly the cost, time, risk and
management processes dominant in the execution of oil and gas indus-
try projects. These overarching congurations are observed in all three
cases studied through this paper.
3.2. Data collection and analysis
The Project archives as well as other external documents were used
to gain a better understanding the research setting, the TL concept, the
megaprojects, and their technological strategy. The interviews were
semi structured and the questions were designed for gathering data in
line with the research questions and deriving the most suited inferences
regarding each case.
As the research was designed for the oil and gas industry in Iran, the
respondents were selected from all sections of the sector covering two
main axes: The value chain of upstream industry, and the organizational
hierarchy. The value chain includes Ministry of Petroleum, NIOC,3 GC4s
(main contractors), subcontractors (service contractors and vendors),
research centers and universities. The second axis includes positions of
the respondents in the enterprises ranging from management to techni-
cal staff.
A total number of 86 interviews were conducted within this study.
The technique used for choosing respondents was snowball and emer-
gent sampling. First technique is a non-probability sampling technique
where existing study subjects recruit future subjects from among their
acquaintances. As a consequence, the sample group appears to grow
like a rolling snowball (Mack et al., 2005). Emergent sampling occurs
when the researcher makes sampling decisions during the process of
collecting data and in the processes of gaining more knowledge about
the case, thus taking full advantage of events as they unfold (Hesse-
Biber & Leavy, 2011).
Having gathered qualitative data, we used thematic analysis as our
analytic approach to process the data. Thematic analysis is a method
for identifying, analyzing and reporting of themes existing in the infor-
mation (Braun & Clarke, 2013). It is a systematic method to analyze and
make sense out of qualitative data (Mills et al., 2010) obtained through
multi-case study research. As we had a theoretical framework for the
study, the research questions and the interview questions were de-
signed according to this framework, while some of the themes already
existed. Consequently, a mix of theoretical/deductive and inductive
coding has been used.
Following Braun and Clarke's (Braun & Clarke, 2013) six phases of
thematic analysis, the authors familiarized themselves with the data
by making transcripts through conducting cross-case analyses and tri-
angulating the respondents viewpoints against archival datasets and
extant literature. The cross-case analysis was helpful in creating a pre-
liminary understanding of how TL was perceived within the socio-
technical system of the sector. In phase 2, initial codes were generated
using theoretical framework of the study as well as the notions per-
ceived from transcripts. Once the data were coded, our search for sub-
themes and themes started. We gathered the codes into themes and
sub-themes (phase 3), and reviewed them (Phase 4); these two phases
were iterated back and forth in order to avoid repetition, to make sure
that the identied themes were in conformity with the coded data with-
in them, and to build a more realistic characterization of the TL process
in megaprojects Then, we dened each theme according to the story
they tell and identied the overarching narrative themes (Phase 5).
3
National Iranian Oil Company.
4
General Contractors.
 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx 5

Table 1
Details of Cases Studied in this Paper.

Project Cases Project Start Date Actual Capital Costs Project Completion Date Current Status

Phases 67-8 2000 3.1 b$ September 2008 under production

Phase 12 2005 8.9 b$ March 2015 under production
Phases 1718 Drilling 2012 0.9 b$ March 2016 45% progress

Finally, a written report was compiled based on the data extracts and
theoretical framework of the study (Phase 6).
4. Analysis and ndings: institutional arrangements affecting TL in
socio-technical systems
In the Iran's oil and gas industry, there are sets of human actors who
are embedded in social groups. Fig. 2 shows actors and social groups ac-
tive in the socio-technical system of oil and gas industry. Each of these
groups have on one hand their own rules, principles, terminology and
atmosphere, and on the other hand are linked to the normative, cogni-
tive and legal rules and regulations of the whole system (the institution-
al regime).
Our study shows that TL in the industry is guided through megaproj-
ects and is, in particular, affected by some key characteristics including
time, cost, risk and management strategy, which are called the CTRM
square in this paper. These items provide the opportunities the projects
render for technological learning, and evaluate different technological
alternatives.
Table 3 yields the identied themes and sub-themes:
4.1. Cost
The three cases we studied in this paper are good examples of oil and
gas megaprojects with budgets of around 1, 3 and 9 billion USD. These
huge gures make the nancial structure of the projects very signicant.
Moreover, we noticed several regulatory mechanisms in the service
contracts, which were accepted by the contractors. The high cost of
the projects as well as requesting guarantees from the subcontractors
that they full their obligations to complete the specied projects
have created a conict. On one hand, applying careful and diligent con-
tractual clauses for managing cost and budgetary issues is deemed a
requirement for effective execution of megaprojects within budget. On
the other hand, analysing the nancial structure of these contracts re-
vealed that this structure is in most cases a burden against technological
learning in the industry.
A major regulatory term is the ceiling for the total cost of the in-
vestment, which is dened as all costs incurred by contractor that
are directly related to carrying out development operations until
completion of the investment project. The typical contractual clause
is as follows:
To comply with the requirement of the Master Development Plan,
Capital Costs shall be equal to or less than US Dollars ($... in gures)
during this Contract in order to carry out the Development Operations
and achieve objectives thereof according to the provisions of this
Contract.
A second term of the contract is the project's annual Work Program
and Budget. Pursuant to the contractual regime of upstream megaproj-
ects, contractor proposes its work program and budget for every year
before the start of the project. If the said program is approved by the
client (in our case NIOC), then contractor is obliged to follow this pro-
gram and may make minor changes to it not more than +/ 5%.
Another important item in the contracts for outsourcing of tasks for
completion of the megaproject is the xed ROR on investment, which is
xed in the contract and cannot be changed due to any reason. As a con-
sequence, in case of any decisions with a positive impact on ROR,
contractor's entitlements such as the remuneration fee must be adjust-
ed (decreased) to keep the ROR xed.
As perceived in this study, different nancial arrangements forcing
contractor to conform to certain cost limits have led to a conservative
approach regarding technological decision-making in the megaproject.
The case of Measurement While Drilling (MWD) services for SP 17-18
project is a good illustration. The directional drilling subcontractor
used chrome plated motors for their services. The operation manager
proposed changing them with ceramic motors. The new motors had
better performance and could drill almost twice the speed of classic mo-
tors. As a result, the drilling progress would be doubled and the opera-
tion time of the drilling unit would decrease considerably leading to a
great amount of saving in drilling cost and time (in terms of rig days).
The new arrangement also had ceramic components which could un-
dergo higher temperatures compared to the regular ones. Consequently,
the new components would last longer and the contractor would re-
place them less frequently. This could also save the cost of new backup
components and save some time (in terms of rig standby) for replacing
the parts less frequently.
The operation manager's proposal cost almost 40% higher than
the regular equipment. The new proposal raised doubts both in the
contractor's organization and the service company. The service com-
pany was concerned about his organization and acknowledged that
he needed to recongure his organization according to the new
technology:
We need training sessions for our technical staff and management. This
is going to take some time. We have to make new arrangements and it is
going to have a certain cost impact on our rm. The client is not willing
to accept all charges and we cannot apply this reconguration without
thinking through its long run consequences.
(Service Company's CEO).

The drilling contractor had a conservative approach. They did not

Table 2
structural level of petroleum industry in execution.
want to jeopardize their contractual commitments:

Level 1- policy making and
strategic leadership
Level 2- coordination and
planning
Level 3- execution, operation
and evaluation
Policy Council for Research and technology,
Deputy of Research and Technology in Pet.
Ministry
4 mother companies:
National Iranian Oil Company (NIOC)
National Petrochemical Company (NPC)
National Iranian Gas Company (NIGC)
National Oil Rening & Distribution Company
(NIORDC)
General contractors, Developers, Operators,
Vendors, Service Companies
As the project is behind schedule, our rst concern is to meet the dead-
lines; besides, we are not willing to apply the new technology for the
rst time, there is no record of applying this technology in the South Pars
drilling projects. Our strategy to encounter an issue is to rst use existing
technologies to resolve it.
(Phases 1718 Drilling Manager).
The new proposal would have a + 40% cost overrun with direct im-
pact on the upcoming annual work program and budget. According to
the contract, they could not modify the program more than 5%. It

Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
6 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx

Fig. 2. Actors & social groups associated with oil and gas industry.

required JMC approval which would prolong the operations. Further-
more, as the contract had not envisaged any reward mechanism for
time savings in the operation, the contractor did not have any motive
for convincing the client regarding such technological choice.
Furthermore, this scenario would also lead to an ultimate cost saving
increasing the project's ROR and as the ROR should remain xed,
contractor remuneration would decrease automatically. Also, the client
also did not show any willingness for amending the contract:
Other South Pars contractors are abiding by the same contract. We are
not in the position to change the contract terms of one contractor. This
would bring chaos in the system and other contractors will object to.
(Client's Legal Manager).

Analysis of data regarding nancial regime of development mega-

Table 3
Identied Institutional Themes and Sub-themes.
Theme
Project Capital Costs
cost constraints and the
governing authority of cost
items in the project which
affects TL
Project Time Schedule
Time limitations and the
consequences of exceeding
project schedule and its
effect on TL
Sharing of the Risk and
Responsibilities
Division of responsibility
between various actors of
the value chain,
Managerial and Strategic
Characteristics
Attributes related to the
management team,
decision-making process
and strategic issues, which
affect TL in the value chain
In the following sections, we analyse our data conceptualizing the above illustration.
Sub-theme
ROR
Project's rate of return which shall remain xed
during the project term
Capital Costs Ceiling
A ceiling set for capital costs, which is explicitly
stated in the contract
Annual Work Program and Budget (AWPB)
Contractor's annual program submitted before
project start which may be modied +/ 5%
Development Phase
The duration set out in contract from the effective
date until all development operations have been
completed, which shall not exceed a certain
period.
Master Development Plan (MDP)
the scheduled plans for development operations
to be performed under the contract
Amortization Period
A specic period for the recovery of contractor
costs
Realization of objectives of development
operations
These objectives are specically dened within
the contract for production and transportation of
a certain amount of hydrocarbons.
Sharing of the risk among actors
Unbalanced Contract; contractor shall bear the
risk of not sufcient production of hydrocarbons
all by himself; which leads to partial recovery of
costs and remuneration
Attitude towards risk
Stakeholders openness to consider novel
technological scenarios not specied in MDP
Diversity of the stakeholders
Difculty in aligning the stakeholders' opinions of
technological scenarios
Joint Management Committee (JMC)
participating members not from all over the value
chain; JMC's intention to develop, transfer or
internalize knowledge within the project
Specicity of Knowledge
Lack of sufcient knowledge transmittal among
technical and managerial staff
projects shows that exerting non-negotiable and uncompromising
restrictions and ceilings for capital costs, ROR and AWPB leads to
disregarding megaproject's objectives5 and therefore explicitly priori-
tizes the contract over the project. While the contract should be a tool
or mechanism designed for proper and fruitful performance of the pro-
ject, it gives rise to schemes that can prevent selection of new cutting
edge technologies which can improve project objectives and lead to TL:
All efforts are made to respect cost ceilings. The decision making
scenarios are based on contractual commitments and not the project.
They are all about time and cost. There is no place for technological
improvement, especially when the results are coming in the long run.
(The project planning expert).
4.2. Time
In the institutional regime of Iran's oil and gas industry, time is a cru-
cial matter. One reason for that is the nature of South Pars Gas Field,
which is a common eld between Iran and Qatar and hence, the devel-
opment projects are forced to be executed on schedule so that the coun-
try can properly realize its output share of the eld. In the institutional
scheme of our cases, there are specic timeframes envisaged for devel-
opment operations: Production from the eld and payback period (see
Fig. 3).
If development operations of the project are not fullled in due time,
there will be two major consequences. First, contractor is not entitled to
any bank charges in the extended period of operations. Second, such
time extension will postpone rst production, which is the starting
point for contractor cost recovery as well as the remuneration fee. As a
result, the project team does its best to achieve objectives of develop-
ment operations according to schedule and avoids any impeding events.
The pressure for on-time delivery also creates a sense that adopting a
new technology adds risk of further adaptation and derailing the project
schedule (Hobday, 1998).
5
The objectives include the development plan through which contractor shall develop
those upstream facilities (platforms, pipelines and associated onshore processing trains
and related facilities) capable to produce, transport and process an adequate quantity of
raw gas equivalent to a minimum daily capacity and the associated products as it relates
to the project.

Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx
Fig. 3. Typical Project Timeframe and Applicable Costs.
Additionally, the megaprojects timeline set forth in the contracts are
xed, inexible, and any modication to that requires NIOC's approval,
which is unlikely to be granted. Signicantly, our study reveals that rm
and xed project milestones provide little opportunity for the project
management team (PMT) to consider technological development. The
team, in this case, is not open to consider the innovator's ideas. The de-
cision in-favour becomes more unlikely given that domestic R&D and
technology efforts are often inconclusive, increase the uncertainties as-
sociated with the projects. The inexibility in altering the timeline of the
completion of the project is compounded by the weak interaction
between R&D team and the PMT. Under the circumstances, the PMT
decision to avoid cutting-edge technological opportunities gets more in-
stitutional feasibility:
...we are trapped in a production race. There is an uncalled-for compe-
tition among the phases and I can see that all everybody cares for is de-
velopment; that is achieving the objectives of development operations.
This is an ailing development; this is so not technology based.
(Phases 67-8 offshore manager).
In order to achieve rst production within the schedule, the project
director is not ready to change any MDP-approved technology with a
new option. He doesn't risk it. What we usually hear is why do we have
to modify or change this? We are already on our way towards rst pro-
duction, as planned. I have never seen anyone say we have improved the
technological base of this plant or we gained the know-how.
(Phases 678 senior process engineer).
The application of improved vessel services is a good illustration of
how applying a modied technological option was considered an obsta-
cle for the timely delivery of megaproject. Phases17-18 project utilized
2 drilling units on two platforms and an average number of 4 supply
vessels were simultaneously providing services to these drilling units.
There was a proposal from the subcontractor company to use an insula-
tion ceiling panel as well as upgrade and repair the GIS satellite system.
The new panel did not require separate insulation for the joints and for
the panel itself. It would save labour by reducing installations to
one simple lay-in for the panels and maintains access to the front sec-
tion by removing each panel without anything laying behind it. The
upgraded GIS SAT is the analytical tool for both long-term management
of offshore operations and for immediate operational matters. Conse-
quently this system should be developed to realize the requirements
of regional operations.
The original proposal to modify and x the installations required ap-
proximately 1.5 day for each vessel, which made a total of 6 operational
days to vessel standby. All senior managers were implicitly agreeable to
integrating the new equipment systems. However, such decision would
Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
7
affect the operations in two major respects: First, the relevant modica-
tions should be incorporated in the project drilling plan and such action
would require the operating committee and the client's approval (due
to its cost impact). The process of getting approval would require at
least 2 or 3 months (as estimated by the drilling project manager) and
such delay would not only prolong the drilling operations but also has
a huge cost impact for the project in terms of additional drilling days
(the project incurred a minimum of 180,000 USD per day for each dril-
ling unit). Second, the implementation of upgraded equipment and fa-
cilities required several training sessions for the operational staff. Also,
new spare parts and backup sets both in the unit and in the onshore
base (which was Kish base) were required. Insurance of the new system
as well as conformity with standards were another set of actions re-
quired to be done before. These additional and corrective actions
would also need further time and cost, receiving approval for which
seemed difcult to obtain.
Coming across the above considerations and given the heterogeneity
of PMT members' viewpoint regarding upgrading and modication of
current technological routine, the matter could not gain a conclusive
vote in the operating committee and hence was not proposed in JMC
to the client. Subsequently, the subcontractor's technical manager dis-
puted the operating committee's decision:
Our company pursued the execution of these modications, because it is
perceived to reduce a considerable amount of workload in the future.
We would also provide better services with this conguration,
while at the same time the chances of applying back up sets would drop
greatly.
Technical Manager's viewpoint was conrmed by the senior instru-
ment engineer of the project:
We could benet from this proposal in the long run. The project lacks an
expert procurement sub-committee under the operating committee
who could justify technological advantages of an alternative and
evaluate proposals thoroughly.
Our data signify that setting rm and xed deliverables and dead-
lines in the institutional regime of a megaproject limits the ability of
the PMT and JMC members to approve the use of new technological
options. Other than the contractual obligation, which bounds contractor
to meet the time schedule, cost recovery mechanisms become due by
the time contractor meets the rst production deadline (as shown in
Fig. 3). At this time, contractor can get back the amounts invested for
the development of megaproject including capital costs, bank charges
(interest of his investment) and remuneration fee. This creates another
pressure forcing contractor to make any decisions in favour of realizing
the deadlines.
8 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx

To sum up, the mega nature of the oil and gas development projects,
extreme competition with Qatar, the contract's time constraints to com-
plete the project are key decision factors for PMT regarding application
of new technologies in the project.
4.3. Risk
The study shows that risk associated with investments in the oil and
gas industry in Iran works as a major barrier for TL. The project's risk can
be classied in three categories: by the split of risk among stakeholders,
arrangements for the realization of objectives of development opera-
tions and the attitude towards risk itself.
The explicit term of contract holding the subcontractor responsible
for their failures reads as follows:
Contractor shall bear the risk that, should they fail to achieve the
Objectives of the Development Operations, sufcient production may
not occur to recover all Petroleum Costs and Remuneration Fee of the
Contractor. It is understood and agreed that Contractor shall achieve
the Objectives of the Development Operations and should they fail to
do so at the end of the Development Phase due to any reason not attrib-
utable to the Client, then Contractor shall pay the decit at his own costs
and expenses.
As above, the risk of not achieving the project's objectives is assumed
by the Contractor and the Client indemnies himself from any conse-
quences thereto. This arrangement leads to tension between active TL
actors in the project value chain and conservative actors (Smith, 2007)
in the established regime, who try to oppose promising novelties to
safeguard their vested interests.
Open-hole completion method is a good counter-case in this
regards. Applying open-hole versus cased-hole completion is a demon-
stration of an upgraded completion technology which was used for the
rst time in Iran for phases 67-8. According to this method, instead of
covering reservoir layers and perforation, completion is performed leav-
ing an open hole.
Instances show that the production rate of wells completed open-
hole is 30% higher than similar wells completed otherwise. In the
open-hole method, the wellbore will not be cased and cemented;
while in the cased-hole method and for measurement purposes, a
metal pipe is inserted in the well during completion.
The open-hole method involves some risk, as in some structures the
mineral composition and texture bulk of sedimentary rocks is not hard
enough and may collapse if the well is completed open-hole. In case of
South Pars reservoir, the structure composition is carbonate dolomite,
which reduces the chances of collapsing. Applying open-hole completion
in phases 67-8 resulted in production of more than 90 million cft3 (com-
pared to 75 mcft3), which is a signicant achievement for the project.
Furthermore, this method saved a considerable amount of drilling
days (30% reduction in rig days) for the project. Consequently, it is con-
sidered as a success TL case in drilling practices. It should be considered
that the negotiation power of the operator played an important role in
convincing the PMT as well as the Client to permit the change in the tech-
nology. Good justication techniques along with the operator's technical
expertise (strong knowledge base) created a trusting bond between op-
erator as the initial decision maker and other project stakeholders lead-
ing to a less conservative approach in the performance of the project:
This was a win-win decision, both in terms of input (cost) and output
(production). Positive cooperation of the project director with offshore
manager and the offshore manager's condence in the technical solu-
tion created a positive atmosphere supporting the offshore team's
technical approach.
(The drilling superintendent).
negative effect on the rms' absorptive capacity in the upstream sector.
This setup creates a conservative approach in the contractor side, as
the overall share of risk with respect to technical and nancial as-
pects of the project lies upon contractor. As a result, contractors en-
counter new technical solutions or technological approaches with
high degree of uncertainty. This reduces the rm's motive to try in-
novative solutions to the technical problems. Consequently, the con-
tractors reduce the risk by using the proven, less risky conventional
technology.
Our analysis also explains that the PMT mind-set towards risk could
lead to different viewpoints of a technological solution. In the case of
new completion method, the offshore team spent almost a year and a
half to convince the PMT and the client that their excessive concerns re-
garding the structure collapse was unwarranted. Of course, studies have
shown that unrealistic concerns in these cases lead to prioritizing the
application of proven off-the-shelf technologies (Clark & Wheelwright,
1993; Massini et al., 2005; Rogers, 1983).
4.4. Management structure
Development megaprojects in the energy sector in Iran have specic
management structures. They include particular management concepts
and tools. In this section, the management structure of the megaprojects
is introduced.
The Operator: the party responsible for the conduct of all operations
and decision making regarding all technical aspects of the megaproject.
The operator is also liable for all negotiations with the client on behalf of
the project.
The Joint Management Committee (JMC): comprising members
from client and contractor which nalizes and approves the project ac-
tivities exceeding a certain cost impact.
The Joint Operating Committee (JOC): comprising of members from
operator and non-operator parties who decide regarding the internal
project affairs.
The overall management structure for a typical megaproject is
shown in Fig. 4:
Our study reveals that the options for technological achievements in
megaprojects are proposed by those actors who, by rule, are not consid-
ered as key stakeholders with a voting right in the megaproject's strate-
gic planning. Their proposals are often overlooked due to three main
reasons: rst, these proposals come from the operational groups,
which are active in the supply side who do not contribute in the decision
making process of the project (which occurs in the PMT, JOC and JMT).
Second, if the proposal is approved by the PMT and even JOC, there
still might be good chances of being refused in the JMC; as each of
these committees includes members from various stakeholders with
conspicuous different interests, liabilities, risk attitudes and knowledge
base. As a consequence, technological proposals with the lowest degree
of uncertainty and high compatibility with the institutional regime
(conforming to cost, time, risk and technical specications of the pro-
ject) have a good chance of receiving approval.
The timing to present technological proposal is another item which
might be often neglected. In some cases, they may bring operational
benets during execution of the project. Like the case of ceramic coated
MWD motors, which improve the quality of drilling operation and re-
duce drilling time; whereas in other cases, they are proposed to upgrade
the project's post-handover capabilities like the quality of deliverables
(technological decisions improving production scenarios leading to
OPEX6 reductions). Our data show that proposals falling into the latter
category have less approval chances as their benets are of a visionary
and futuristic nature. The latter nding implies that the megaprojects
are institutionalized in a way that jeopardizes technological scenarios
targeting post-project features.

The institutional regime of oil and gas industry shows that the risk
aversion by the client requiring the contractor to accept all risks has a 6
Operating Expenditures.

Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx
Fig. 4. Typical megaproject management structure.
It is important to consider the fact that the technological character-
istics in the oil & gas industry differs signicantly with many other sec-
tors due to consequences and impacts that such technology might have.
Such differentiation has been a decision criteria in various management
levels and has led to a more diligent decision making approach. Due to
the mega nature of oil and gas projects, the risk of technology failure
might impose serious consequences and even lead to world disasters.
This is a major factor which reveals that in an underlying industry like
oil and gas, innovative activities are of a much complex nature entailing
different opposing criteria and therefore, it is very challenging to deal
with innovation and at the same time, taking care of all these issues.
4.4.1. Role of NOC
NOCs play a contributing role in determining the strategic and oper-
ational decisions in the oil and gas industry. While some NOCs are being
partially privatized, NIOC (which acts as the NOC in Iran) is conrming
its' national control over the oil and gas industry. There are a number of
missions associated with NOCs including training young people to the
highest standards, developing local technological capability, creating
opportunities for the private sector and developing the country's infra-
structure. However, the historical and political context of Iran for na-
tionalization of oil throughout the country has made NIOC a politically
sacred (Marcel, 2006) rather than an economic or technology-driven
entity. As a result, NIOC has not had major contributions in realizing
those missions.
In NIOC, the priorities are the production of hydrocarbons and their
operational role in national economic challenges. Indeed, NIOC is quite
busy with realizing society/government needs and also capital chal-
lenges to the industry.
The quality and structure of interactions between foreign companies
(as sources of technology) and NIOC have a signicant impact on the
technological level of the industry in Iran. However, as there was little
direct participation between NIOC and foreign companies, we cannot
observe major progress in the technological capability of NIOC. There-
fore, the opportunity of NIOC to learn the operational aspects of the pro-
ject has been lost so far. This ultimately prevented NIOC from becoming
a good operator of his own elds.
In Iran, the historical dimension of oil nationalization is quite heavy
due the difcult process of nationalization and violent battles for inde-
pendence (Marcel, 2006). Therefore, the industry actors are not opti-
mist towards attendance of foreign companies in the industry and it
creates an atmosphere lacking trust. Therefore, foreign companies'
plans and decisions are not openly considered and it creates structural
challenges among NIOC and development operators.
As expressed in Section 4, it is revealed that decision-making in NIOC
as the project client tends to be slow and conservative. Managers want
Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
9
to protect themselves from the consequences of a bad decision; this
careful attitude is reinforced by the bureaucratic approval processes
mentioned in this section. The slow processes in NIOC and their conser-
vative behavior lead to few entries of novel technologies to the industry.
Considering that it might mean projects may not start up timely.
In conclusion, when it comes to making decisions regarding a new
technological strategy, it is difcult for NIOC to make an involvement
to the new choice. The situation is so critical that even routine technol-
ogy choices are encountered with slow bureaucratic processes. There
are instances where NIOC spent more than one year to approve a tech-
nological proposal and by that time, the feasibility criteria had changed
considerably. As there is a close work connection between NIOC and the
Ministry of Petroleum, the situation is quite the same in the ministry as
well.
The other major observation in this aspect is the intellectual proper-
ty regime. According to the contract, the ownership of any industrial
property rights developed or obtained in connection with the services
shall belong to NIOC. Our data show that this condition is a major set-
back against the outcomes of technological efforts made by contractors
and subcontractors, which might lead to a patent or license.
5. Discussions
Importantly, this study advances conceptualizations on TL by rec-
ognizing how misalignments in the institutional regime constrain TL
within the system. The results indicate that TL in upstream mega-
projects of Iran is affected through four elements: cost, time, risk and
management structure (CTRM square). Fig. 5 shows a schematic view
of the consequences:
Our data suggest that the institutional regime is the prevailing
governing mechanism in a socio-technical system. The regime domi-
nates those scenarios which are in line with it. It forces all stakeholders
in different parts of the value chain to commit so that their commitment
to the regime becomes stringent and they prioritize the megaproject's
nominal objectives to technological capabilities. This is mainly due to
the fact that capital costs and project schedules are of essence in the
oil & gas industry. Therefore, managers have to make coordination
and equilibrium among various cost, time and technology related
factors.
Consequently, decision makers are compelled to vote for the techno-
logical routine, even if there might be more benecial outcomes with
choosing another technological path. Consequently, unlike most lock-
ins which occur as the result of regional proximities (Boschma, 2005;
Tdtling & Trippl, 2004), lock-in within the institutional regime occurs
due to domination of governance eventually binding novel technologi-
cal scenarios.
10 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx
Fig. 5. Negative co-evolution in oil and gas megaprojects.
Our realization yields that CTRM Square in the institutional regime
of oil and gas industry has created a negative co-evolution in the
socio-technical system leading to impairment of TL. The CTRM arrange-
ment in the institutional regime governs the sector's technology policy7
as well as the rms' strategy in micro level. It would also regulate actors'
interactions within the socio-technical system.
Data shows that formation of negative co-evolution occurs within
time and due to a chronological set of events in the socio-technical sys-
tem. This is generally consistent with major trends conrming techno-
logical traps within locked-in paradigms (Mulder et al., 2001) making
them irreversible and path dependent. This process is illustrated
through three main phases:
Initiating formation:
When a megaproject is founded in the industry, expert groups in dif-
ferent levels of the project value chain try to enhance their technological
capability in order to propose novel technological options. Technologi-
cal proposals might be justiable when studied by PMT in the opera-
tional level. But in higher governing levels within the megaproject, the
evaluation measures become more strictly and conformant to the insti-
tutional regime. It often makes proposals infeasible due to exceeding
CTRM measures.
Spreading domination:
As the project moves forward, the institutional regime exposes its
domination over the project blocking new technological options. With
other projects dened in the socio-technical system, the institutional re-
gime spreads its legitimacy over the whole socio-technical system.
Here, the component of plurality in the oil and gas sector (with multiple
similar projects) acts as a stabilizer supporting the institutional regime
preventing innovators and technology developers to enter the regime.
Forcing reconguration:
At the supply side, rms as business entities require remaining in the
regime to guarantee their survival. As a result, after several inconclusive
efforts to enter/maintain their position in the meso level, rms recong-
ure their technology strategy to be in compliance with the regime's pol-
icies and requirements in order to safeguard their strategic position in
the market. During time, the absorptive capacity of these rms dimin-
ishes leading to dominancy of obsolete technologies as imposed by
the regime. We call this process the negative co-evolution of actors
in the socio-technical system. It leads to path dependency on the supply
7
Though it might not be a codied and explicit.
Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
side, reinforcing the institutional lock-in within the socio-technical
system.
An important implication of our ndings is that novel technological
scenarios could not grow in systems and structures which are locked
into their old routines. These results concur with studies carried out in
the micro level (Lundvall, 2007; Boschma, 2005) as well as those appli-
cable to small countries (Edquist & Hommen, 2008) which highlight or-
ganizational transformations in the rms in order to reach technological
change. Otherwise, technology choices become local and TL will be
constrained within the system.
However, in the context of socio-technical systems, we challenge
sufciency of rm transformations. We argue that due to heterogeneity
of social actors and the complexity of systemic interactions, success of
TL strategies and actions hinges on whether the rms can develop a
whole collective with socio-technical setting. Without such perquisite,
conceding that they acquire magnicent technological capabilities,
their contribution within the system will be trivial. These insights
are important as, in contrast to various micro level opportunities
(Vinding, 2000; Nonaka & Takeuchi, 1995; Cohen & Levinthal, 1990),
the failure of TL within the regime can delay transition of overarching
socio-technical systems for a long time.
Considering TL studies in sectors (Smit et al., 2007; Junginger et al.,
2008; Junginger, 2005), the originality of our work is to explore TL in
the complex socio-technical setting through an institutional lens.
Whilst in the micro level, technological capability building depends
highly on the rm's knowledge and technology efforts to upgrade itself,
in the socio-technical regime, such criteria tend to be invariably depen-
dent to the institutional structure. In particular, we show that 4 main
institutional elements (CTRM square) affect stakeholders' attitudes to-
ward new technological scenarios which invariably shape TL in the
regime.
Based on the negative co-evolution, we infer that the technological
proposals requiring capability building, promotion of knowledge base
and technological upgrades are not welcome in the regime and any
decision to approve such proposals is regarded against the institutional
arrangements of the system.
Our study supports insights which the literature has provided about
innovation challenges of the micro level in socio-technical systems
(Fagerberg et al., 2013; Cox & Rigby, 2013; Ferlie et al., 2005; Nelson,
1995; Dosi, 1997; van der Zwaana & Sagara, 2006; Gil et al., 2012). In
order to confront this issue and develop a more technological demand-
ing setting in the meso level, we require more legitimacy for expert
technologists, innovators and developers at the supply side (micro
level). Consistent with previous studies, actors and rms acquiring
higher learning-related scales, knowledge diversity and absorptive ca-
pacity are better options for introducing new technologies to the system
(Rogers et al., 2015; Fichman & Kemerer, 1997; Rice & Rogers, 1980).
Hence, our study calls for new policies supporting micro level in the in-
stitutional regime both in motivating technological activities and in
maintaining their survival.
A chief contribution of our study to the socio-technical systems re-
search is to point out how general and implicit institutional characteris-
tics can establish underlying boundaries for TL, even if technological-
specic criteria are all at place. Some of the previous studies explore in-
novation challenges in socio-technical systems (Geels, 2004; Markard &
Truffer, 2008) and in projects (Hobday, 2000b; Prencipe & Tell, 2001).
However, the implicit and overall institutional constraints of a system
for TL have mainly remained vague.
The other implication of this study is for the developing countries.
In these countries, the actors often have limited internal capabilities
to identify what they require. Consequently, to ll their knowledge
gaps and map alternatives to their needs, they absorb new technolo-
gies relying on third-parties mainly foreign vendors (Prencipe & Tell,
2001; Flowers, 2007). Furthermore, socio-constructivist studies sug-
gest that to learn a new technology, actors need to mobilize the re-
sources capable of transforming current institutional regime (Ferlie
 M. Mirimoghadam, S. Ghazinoory / Technological Forecasting & Social Change xxx (2015) xxxxxx
et al., 2005; Peine, 2008). Politics and power games are inherent to
this domestication process (Elzen et al., 2004) due to rm differences
in socio-cognitive boundaries, path dependencies, and sunk costs
(Bijker, 1995).
Consistent with research strands on the challenges of new techno-
logical developments and on the non-spread of innovations in complex
settings (Ferlie et al., 2005), we reveal that it can be challenging to
maintain and improve TL within a locked-in institutional regime. This
is true mainly if powerful actor groups and stakeholder's position and
status is weakened by an institutional transformation, in such case any
decision in favor of TL processes becomes twisted with the lobbying
power of stakeholders.
Importantly, our study suggests that exible institutional structure
can be inuential for making compromise regarding a technological sce-
nario and spread of novel technologies; while previous studies claim
that non-spread of technologies throughout the regime is mainly due
to conicting objectives of groups and social actors (Bijker, 1995;
Geels, 2004; Bergek et al., 2008; Ferlie et al., 2005).
5.1. Limitations
As typical of inductive studies, there are normally limitations to the
generalizations derived from case study insights (McGrath, 1982;
Eisenhardt & Graebner, 2007). However, the purpose of this research
was to develop an explanatory approach focusing on institutional ar-
rangements. The institutional structure, upon which this paper expands
its' study, belongs to the specic characteristics and context of the oil
and gas sector rather than to exist all over. Therefore, any further appli-
cation of the results is subject to thorough studies of other sectors and
industries.
A criterion, which determines if the approach can be used, is the
particular conguration of institutional regime within an industry
(Reay & Hinings, 2009). The ndings of this study may be applicable
in industries whose main functionality is achieved through execu-
tion of megaprojects with deliverables affecting largely the macro
characteristics of socio-technical system. Upstream segment of the
Iranian oil and gas industry with several enormous oil and gas re-
serves, which play an instrumental role in the country economy, is
one applicable instance. Hence, it is vital to keep our contribution
grounded on these illustrations.
One other limitation includes the degree of reliability of our data. As
the case study relied on semi-structured open-ended interviews, it was
difcult to administer the same process to check the consistency of the
results. In order to deal with this, we used different secondary materials
and documents; and cross-checked the respondents' accounts on a reg-
ular basis.
The other limitation relates to the rst author who carried out the in-
terviews. She had been part of the project teams and had met many of re-
spondents, so it might have been possible that demand characteristics8
were displayed, even though, her familiarity with the empirical setting
contributed to the development of conceptualizations. Remedies used
in this study for demand characteristics pitfall included for some respon-
dents minimizing the author's interpersonal contacts with them to
reduce the expectancy effect (Rubin & Badea, 2010) and for others apply-
ing indirect and informal measures not requiring to sense the research
clues (Lewis-Beck et al., 2004).
6. Conclusions
This study represents an empirical exploration of TL within a socio-
technical system. The objective of this research was to carry out a
multi-case study in the context of Iran oil and gas industry. It was
8
It happens when respondents form an interpretation of the researcher's purpose and
subconsciously change their behavior to t that interpretation
Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004
11
intended to examine the function of institutional arrangements to arrive
at a conceptual understanding about TL, rather than test theory.
This paper broadens existing studies by investigating how the insti-
tutional regime can affect TL in socio-technical systems and structure
co-evolutionary processes in the system. Our institutional analysis
posits that TL is disregarded in the oil and gas megaprojects creating a
static atmosphere resistant to change. We discussed the reasons,
which diminish TL in the empirical setting of our research.
The ndings of this paper suggest that the institutional regime inca-
pacitates TL mainly through four key elements: cost, time, risk and man-
agement structure referred to as the CTRM square. The institutional
arrangement of these elements supports a systemic process, which we
call the negative co-evolution. It contributes to reconguration of
technology strategy at the supply side which leads to dominancy of ob-
solete or old technological routines in the rms diminishing TL in the
micro and meso level.
Based on the ndings of this paper, a reconguration in the institu-
tional structure of the regime is required. To do that, the socio technical
system needs a transition from a pure command and control state to a
technology supportive state through the institutional regime. In such
regimes, application of cutting edge technology is considered as a deci-
sion factor along with other criteria. Incentive based regulations would
ensure more efcient outcomes in the sectors concerned, since it would
remove unnecessary restrictions imposed on the micro level and, at the
same time, encourage efciency in the socio-technical system.
Annex 1- Number and professions of the respondents.
Number of respondents 74
Number of interviews: 86
Organizational information: 6 senior managers
21 managers
14 consultants
8 professors
25 experts
Professional information: 25 Operational
20 R&D within operation
8 Universities
15 Research centers
6 Institutes
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Sepehr Ghazinoory is professor in department of management and economics in Tarbiat
Modares University. He tutors innovation systems and technology policy and has pub-
lished various papers in esteemed journals in the eld of innovation and S&T studies. He
is the former deputy for vice presidency of science and technology and editor in chief
for science and technology policy journal in Iran.

Mojdeh Mirimoghadam is a PHD candidate for science and technology policy making.
She is a TA and RA for science and technology policy courses. Her main eld of research
is innovation and technological learning in sectoral systems. She has written two confer-
ence papers in this regards which is presented in GLOBELICS 2013.

Please cite this article as: Mirimoghadam, M., Ghazinoory, S., An institutional analysis of technological learning in Iran's oil and gas industry: Case
study of south pars gas eld development, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.12.004