In 1989, Canadian Fracmaster Ltd. entered into a joint venture agreement in the Soviet Union to stimulate oil wells in Western Siberia. This agreement was the culmination of years of effort by both Canadian Fracmaster Ltd. and the Ministry of Oil in the Soviet Union. This paper will discuss an overview of the scope of the joint venture, as well as the details of the work being performed and plans for the future.
The technical portion of the paper includes the major areas of concern in the introduction of hydraulic fracturing technology to the Soviet Union. Although principles of hydraulic fracturing were understood in the Soviet Union, technology had not properly been applied prior to the involvement of Canadian Fracmaster. This paper discusses formation geology and reservoir characteristics of the Western Siberia area, as well as design procedures of the treatments being completed. Finally, it will detail the results obtained to date and how they may benefit Western operators.
On January 13, 1987, the Council of Ministers of the Union of Soviet Socialist Republics (USSR) announced Decision #48 and #49 concerning the establishment of joint ventures on Soviet territory. These history making decisions would set the framework for a proposed restructuring of the Soviet economy.
On March 30, 1989 Canadian Fracmaster entered into a Joint Venture Agreement with a division of the Ministry of Oil of the Soviet Union. The agreement took place after more than one year of negotiations with the Soviet officials. A new enterprise was formed, named Uganskfracmaster, which is 51% owned by the Uganskneftegas Production Association (UPA) and 49% by Canadian Fracmaster (Offshore) Ltd. and Shell Internationale Petroleum Mij. B. V. This new corporation's task is to stimulate wells in the oil and gas fields of the Soviet Union.
To date over 50 fracturing jobs have been performed by Uganskfracmaster in Soviet oilfields. Oil production has increased substantially in those wells selected for fracturing treatment Uganskfracmaster is an example of increased cooperation with the USSR and illustrates the opportunity available to companies who want to broaden overseas markets.
Under the new laws of the USSR, many Soviet associations have been given the rights to negotiate directly with foreign corporations for the purpose of establishing joint ventures. Unlike the past, these foreign corporations may now be consortiums formed by several foreign companies.(1) A joint venture is generally structured similar to Western companies with a Board of Directors and a General Director (Similar to position of President) to control the affairs of the corporation. The Chairman of the Board as well as the General Director may be foreign citizens under the new laws.
Each new joint enterprise will be subject to the scrutiny of the ministry which grants permission for its formation.(2) In order to establish a joint venture, a long involved process of negotiations is required to draft submissions of:
Foundation Documents – stating the general operation guidelines of the enterprise, including:
the structure of managements
procedure of making decisions
establishment of accounting principles
principles of operations of the company