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Roman Abramovich Invests $15M In New US Fracking Technology

Roman Abramovich Invests $15M In New US Fracking Technology

Are the Russians coming to Texas riding the tailwinds of fracking? That depends on who you ask, as some believe Russian forces were behind the anti-fracking vote in Denton, while a $15 million investment in new Texas fracking technology by Roman Abramovich perhaps tells another story.

When the anti-fracking campaign started to heat up late last year in Denton, Texas—the heart of the shale revolution—conspiracy theories were spread from within the pro-fracking community that the Russians were behind the whole thing. The logic was that the American shale revolution threatened Russia’s market share.

Yet just months after a successful vote to ban fracking in Denton, Russian billionaire Roman Abramovich has invested $15 million in Houston-based Propell Technologies Group, Inc. (OTC:PROP) and its new fracking technology from wholly owned subsidiary Novas Energy. Significantly, this new enhanced oil recovery (EOR) technology enables ‘clean’ hydraulic micro/nano fracturing of oil reservoirs—that is, without water, without polluting chemicals and without earthquakes.

According to Propell, the Plasma Pulse patented downhole tool creates a controlled plasma arc within a vertical well, generating a tremendous amount of heat for a fraction of a second. The subsequent high-speed hydraulic impulse wave emitted is strong enough to remove any clogged sedimentation from the perforation zone without damaging steel. The series of impulse waves/vibrations also penetrate deep into the reservoir causing nano fractures in the matrix which increase reservoir permeability for up to a year per treatment.

Related: Inefficiencies Abound In U.S. Shale

In the die-hard conspiracy theorist community—particularly in the latest ‘Cold War’ atmosphere the media has latched onto once again—there will be continued rumors of Russian scheming here. Some might say that the Russians laid the foundation for a ‘no’ vote on fracking and then swooped in to invest in ‘clean’ fracking technology.

It may or may not be a coincidence that Propell’s Plasma Pulse Technology is licensed from Novas Energy, a venture capital-backed Russian energy technology company.

There is also another Russian element to this: PPT has been very successfully employed in Russian injector wells. This is perhaps the most significant aspect to consider. Russia does not have draconian fracking regulations pressuring companies to use environmentally friendly technology. Instead, they are using PPT to improve enhanced oil recovery (EOR) and reduce production costs.

Conspiracy or not, Abramovich does nothing small or half-heartedly.

Abramovich is a metals magnate who also happens to own the Chelsea football club. He is the 143rd wealthiest person in the world and is worth about $9 billion, according to Forbes. He is the main owner of UK-registered Millhouse LLC, a private investment company whose assets have included major stakes in stakes in Sibneft, which is now Gazprom Neft. In 2005, Millhouse sold a 72% stake in Sibneft to Gazprom for more than $13 billion.

Abramovich has now invested in Propell’s PPT. The investor is Cyprus-registered Ervington Investments Limited, whose ultimate beneficial owner is Abramovich.

“This will not merely be a $15 million investment,” said one source close to the deal. “You have to read between the lines here. Abramovich doesn’t do anything small. He’ll get the infrastructure in place and then look to acquire a significant position in the US oil sector at today’s fire sale prices. We’ll probably be looking at hundreds of millions in investment at the end of the day.”

An anonymous source with knowledge of the deal said that an initial $5 million of the $15 million investment would be working capital, while $10 million would be for acquisition of oilfields. The overall idea is to apply EOR technology and double the output with Plasma Pulse technology.

For Abramovich, this deal is not merely a whim: The billionaire is a strategic investor who has quite profitably invested in a number of energy technology companies. Abramovich—again through Ervington--is the largest shareholder in AIM-listed AFC Energy, which is working to commercialize clean fuel cell technology. He has also invested in Oxford Catalysts, which is close to commercializing the GreenSky London Project to supply renewable jet fuel made from London’s household waste. The system is to be used by British Airways to create fuel for its planes. London-based Weedingtech—which makes herbicide-free weed killer—and AIM-listed Clean Air Power are also among Abramovich’s strategic energy investments.

The Propell investment may be the most strategic—on two fronts.

On the first front, we have increasing controversy surrounding fracking in the US.

While Denton, for instance, is just a small town and the ban on fracking is only within the city limits, this small-town vote has much larger implications. This was where the shale revolution kicked off, and banning fracking here could snowball and empower other anti-fracking movements and efforts.

The state of California is also gearing up for stringent new regulations that are set to take effect in July.

Plasma Pulse Technology foregoes toxic chemicals and harnesses plasma pulses that would once have been reminiscent of science fiction weaponry. It may indeed be a weapon of sorts—one that could bring the industry and environmentalists together finally.

PPT is deemed to be an environmentally friendly way to clear clogging sedimentation from well drainage areas to allow the oil and gas to flow. The technology uses vibrations, or electrically generated plasma impulses to reduce viscosity, increase permeability and improve the flow of oil and gas to the surface for extraction.

And this is where we find the ‘second front’: The technology is not only designed to be environmentally friendly; it is also designed to increase production and reduce production costs.

After all, Abramovich isn’t looking to spend an initial $15 million on an investment that is strictly friendly to the environment—there has to be more, and it would appear that there is.

Related: Can Technology Save Fracking?

This is all about enhanced oil recovery (EOR), and plasma pulse technology is one way to improve EOR processes to get even more oil and gas out of the ground.

The average increase in production for the initial 27 US wells treated with plasma pulse technology is 295%. The company is also reportedly working versions of its plasma pulse tool for horizontal shale wells and much shallower water wells as well.

Abramovich will be getting in very early in this game, which would allow him—for instance--to comply with California’s new anti-fracking bill and its tight restrictions on acid washing for injector wells. The regulations will have a profound effect on key producers in the area, such as Chevron Corp. (NYSE:CVX), ExxonMobil (NYSE:XOM) and Occidental Petroleum (NYSE:OXY), who will have to go through a long and costly permit process for each individual acid wash procedure. If they employ plasma pulse technology, however, they comply with the water-injector cleaning restrictions that kick in July 1. In California, major oil and gas companies are already paying $20,000 a pop for PPT pilot tests, according to our industry sources.

What Abramovich sees is brilliant math here. Plasma Pulse technology could easily turn into a $1 million/week business just in the state of California, and as anti-fracking gains momentum countrywide, these millions turn into billions. The Russian billionaire also sees a new technology that is not experimental, but already commercially viable.

When Abramovich makes a new investment, everyone pays attention. So many will be asking why a Russian is investing in this Houston-based technology. The answer is simple and all about the bottom line. This ‘clean’ fracking technology could storm the market. Abramovich thinks so, and he has been wildly successful.

It will be hard for the conspiracy theorists to digest, but for the investor looking for the next big thing, it goes down pretty smoothly, from Russia with ... a great deal of pragmatism.

By James Stafford of Oilprice.com

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  • John B on February 25 2015 said:
    It doesn't matter one jot how clean the new fracking technology is, the eco terrorists will not be interested. For them stopping the burning of fossil fuels is a religion, it not based on logic.
  • Lee James on February 25 2015 said:
    I would like to be excited about this plasma pulse technology, but does it work? When I do an online search, I get the same headline from a large number of news services. They all repeat the original news release from Propel. Meanwhile, the penny stock Propel keeps going down. What gives? Anybody?
  • Scott on February 26 2015 said:
    Lee, the stock has risen over the last few days after the announcement but I understand what you are saying about the same news stories rehashed multiple times, sometime acknowledging article was written in the past, sometimes not. From what I can gather the technology was developed in Russia and used about 200 times in Russia/China, only in the last couple of years has it been used in the states several dozen times. Does it work? Yes, but can't be used in all wells, they test wells to certain specifications before performing the treatment. Is it a good investment? Who knows, it could go nowhere or be a ground floor opportunity. I first found the stock in December and began researching the technology and company. If legit, it really could turn into something. But I am bothered that it appears the marketing campaign has been on for several years, look at the March 2014 run up to $.50, which happened to be the recommended 'buy up to' price a well known paid marketer recommended, and is still recommending. I believe it was buy up to $.50, 2 year potential $2. Abramovich basically paid $5-15 mil ($.125 per common share)to get half the board seats and become a partner but I would guess its like partnering with a gorilla, when push comes to shove who do you think is in charge? The guy has apparently made several other eco-friendly energy technology investments, but he can get the technology and company without it being a profitable investment for the street. $2 maybe a reasonable expectation at sometime, just like if its winter I bet it will snow, sometime. On the other hand, at $.25 a share he just doubled his money, adding another 0 each multiple of $.125 the stock goes up. Current multiple hat director who just gave up half his power(half of board seats), has 10 million reasons to see the stock price go up over the next two years(equity in lieu of salary compensation, salary is $180,000). For every $1 of stock price, he can make $10 mil. It is a little proven concept stock in its infancy. Speculating about the price decline before the announcement, I'd say the little birds were chirping about the $.125 conversion price, and the market price began to retrace to that point. $.15 had held for a while, then $.14, then dip before the announcement and resulting run in price. The $.10 day end was a fluke day end trade, but then traded around $.125+ as a floor before the run. Coincidence? I enjoy the tv show 'Shark Tank', so I envision Propell standing before the sharks. The company was worth $.125 per share for $5-15 mil plus half board seats plus 4% interest until conversion to one of the sharks. He just happens to be a billionaire oligarch Russian shark. I have invested in it, and look at it this way. For every $1 in in stock price 2 years from now, previous top dog makes $10mil and Abramovich makes $35-105mil. In 2 years if it doesn't seem to be viable and these guys take their money out its time to take mine out also. If in 2 years it becomes a successful company providing a service valued by its customers with even more room to grow, I'll be evaluating it along the way and stay as long as they keep their skin in the game.
  • Lee James on February 26 2015 said:
    Best of luck to you, Scott. I look for independent reviews. I became concerned when I could not find anything but Propell and Novus sources. Along the same vein, in my mind at least, is today's WSJ article about Ed Presley in Wyoming and his "Gazmo" technology. It's an enhanced gas recovery device for wells that tap coal seam methane. He picked the name because it sounds cool. Needless to say, I have been unable to find out how the gazmo works. Front page, WSJ -- because the technology is touted to be so environmentally friendly. Really, it's more about how to handle all the abandoned wells in the Gillette area. Wonder technology is the answer for keeping the wells working and lease holders happy!
  • Scott on February 28 2015 said:
    Same to you Lee, and thank you for the article I just checked it out. I live in SouthCentral PA and have some family in NW PA in the natural gas business, so I found the article interesting. I believe the general technology you are referring to also called CO2 injection. I know Wikipedia isn't worth much, but here is its basic definition: Enhanced coal bed methane recovery is a method of producing additional coalbed methane from a source rock, similar to enhanced oil recovery applied to oil fields. Carbon dioxide (CO2) injected into a bituminous coal bed would occupy pore space and also adsorb onto the carbon in the coal at approximately twice the rate of methane (CH4), allowing for potential enhanced gas recovery. I Googled 'enhanced recovery coal seam methane' and that was my first result but that is a start if you want to read more about the general technology. I just looked at another that said both nitrogen and CO2 could be used, this article is footnoted from a Russian source.
    Back to Propell , check this out: http://www.petromin.safan.com/mag/pnovdec13/t50.pdf
    Just found it by Googling 'plasma pulse enhanced oil recovery', its an industry paper on Enhanced Oil Recovery entitled 'Optimizing Extraction. The pulse plasma section starts off"Plasma-Pulse technology is the newest technique
    used in the USA as of 2013. The technology originated
    in the Russian Federation at the St. Petersburg
    State Mining University with funding and assistance
    from the Skolkovo. The development team in
    Russia and deployment teams across Russia, Europe
    and now the USA have experienced this technology
    in vertical wells with nearly 90% of wells showing
    positive effects. "
    Besides the existing vertical well use, Propell is developing a horizontal shale device and regular water well device. The Russian articles I've been reading talk about the shale and bringing the technology back to Russia. That is Abramovich's interest in Propell, the developing shale application which is Propell's intellectual property above and beyond the licensed Russian intellectual property. Propell licenses Russian technology, and then Propell will license its technology back. That is why the employment agreements made in December were just updated before the announcement with noncompete agreements and such. The Russian articles have pointed out sanctions don't last forever. Abramovich want to aquire oil and gas assets here, I wonder if that may include orphan well like you are talking about. Thanks Lee, I've spent some time on this response but you got me thinking and finding out even more about the deal and potential for Propell. I found Propell by accident in December and got in before the Abramovich deal announcement, so if anything comes of this I'm happy. Hope you find something in this useful.

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