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GameChanging Opportunities with Russian Technologies: Characteristics of Petroleum Technologies with Examples for

Investment & Supply Chain Transactions

Learning Curve Lessons in Developing the Russian Technology Sector

Presented by

Innovative Ventures Inc Grand Rapids, Michigan USA

Moscow, Russia Federation

28 July 2005

Information contained in this document is proprietary and confidential to Innovative Ventures Inc. It may not be reproduced electronically, in print, or distributed in any way whatsoever without the written permission of Innovative Ventures Inc. All rights reserved internationally.

; e-mail [email protected]

Russian GameChanging Technologies for the Petroleum Industry Prepared by Innovative Ventures Inc. 28 July 2005

Table of Contents Background............................................................................................................................................3

Introduction........................................................................................................................................3 Objectives & Technology Focus........................................................................................................3 Why this Report? ...............................................................................................................................3

IVI’s Purpose in publishing this Report ........................................................................................3 Why Care About Russia & Russian Technology?..........................................................................4

Target Readers for this Report...........................................................................................................4 Multinational Corporations & Global Technology Investors .......................................................4 Multilateral & Government Institutions ........................................................................................4 CIS Technology Developers...........................................................................................................4

About Innovative Ventures Inc..........................................................................................................4 The Russian Petroleum Technology Sector...........................................................................................5

Background........................................................................................................................................5 Facts & Figures on the Russia Potential for Corporate & Financial Investors..................................5

Deal Flow & Investment Opportunities in the Petroleum Technology Sector ..............................5 The Russian Technology Sector is Caught between Two Worlds ..................................................6 Transforming Russian Potential into Commercial Solutions & Investment Opportunities ..........7 IP Status of Russian Technology: Facts Contrary to Conventional Wisdom ...............................8

Future Outlook.......................................................................................................................................9 The GoForward™ Plan for International Corporations & Technology Investors.............................9

Conduct R&D to Build the Deal Pipeline......................................................................................9 Drive Innovation into the Market: Link Enabling Technologies with Platform Solutions..........10 Speed Commercialization: Mix & Match CIS & Foreign Technology Together .......................10 Upgrade CIS Technology w/Western Solutions for Russian Sales; then Attack Global Markets11 Capital is a Partial Solution: Provide Western Systems Skills to Russian Counterparties .......11 Patience is a Virtue......................................................................................................................11

The GoForward™ Plan for Russian Developers, Entrepreneurs & Managers of SMEs.................11 The Decision Process for Technology Selection & Investment: How Venture Capital Works ..12 Be Persistent & Get Your Technology Tested .............................................................................12 Link Your Technology Activities to the Business Development Needs of Local Customers........13 Leverage Your GameChanging Technical Capabilities into Development Opportunities .........13 Be Open & Transparent: Provide a Speedy Response to Information When Requested ...........14 Update Us to Your Progress: Make Contact with Us.................................................................14

Appendix..............................................................................................................................................15 Introduction & Explanation of Technology Examples ....................................................................15 Technology #01: Deep Separation of Binary Gas-Liquid Flow.....................................................16 Technology #06: Fuel Cells ............................................................................................................18 Technology #14: Software Package for Geophysical Data Processing. .........................................21 Technology #36: A System to Measure Temperature & Pressure at Varying Depths in Wells.....23 Technology #45: Plasma converters of hydrocarbons (liquid & gaseous) into singas...................25 Technology #52: Thermal Insulation of Pipelines in Extreme Cold, Off-Shore & Deep Water....27 Technology #58: Disc Crystallizer for De-Oiling - Dewaxing Processes ......................................31 Technology #61: Novel Techniques for Well Testing....................................................................33 Technology #70: Drilling Method for Straight Sections of Various Type Well Bores..................36 Technology #72: Technology for the Borehole Walls Lining by Rock Fusion & Vitrification.....38 Technology #74: Electro Drilling Technology for Deep Drilling: Onshore & Offshore Wells....40

Information in this document is proprietary and confidential. It may not be reproduced electronically, in print or distributed in any way without the written permission of Innovative Ventures Inc. International rights reserved.


Background Introduction

This report summarizes the results of Innovative Ventures Inc. (IVI) to identify and finance petroleum technologies (upstream & downstream) and renewables for venture capital (VC) investment in Russian small & medium size enterprises (SMEs) and institutes. In addition to market characteristics and examples of technology opportunities, it provides learning curve lessons for:

1. International corporations and financial investors that seek gamechanging technologies from CIS countries and strategies to develop and access the market;

2. Russian technology developers, managers/entrepreneurs of Russian SMEs and institutes that want to conduct business with international corporations and VC investors.

Objectives & Technology Focus

Identify Russian petroleum technologies for commercialization through:

1. A license/sale of intellectual property (IP). 2. The investment of VC into an existing SME or the creation/financing of a new company to

commercialize the technology to market. IVI makes seed and early stage VC investments with our corporate partners and co-investors. Technologies sought fell into three categories:

1. Downstream solutions 2. Upstream solutions 3. Renewable energy solutions

Why this Report?

Russia is a well-known developer of world-class technology. Multinationals are investing in, and incorporating Russian technology into their products, e.g., Intel, Siemens, Motorola, Microsoft, Boeing, IBM, United Technologies, Cadence and Sun. A few global VC technology investors capitalized Russian technology with the start-ups’ corporate headquarters in Europe/USA and the development team in Russia. They have done so to harness the technical and cost advantages of Russian developers with the ease of doing business in Europe or the USA. In spite of these successes, there is a lack of VC activity in the seed and early stage Russian technology segment for many reasons, e.g., lack of information on deal flow, actual and emerging seed & early stage VC opportunities, and how to channel the skills of Russian talent into R&D to create future deal flow and investment opportunities. Many financial and strategic investors are preoccupied with making investments in the USA, Europe, India, Israel and China with little interest to spend the time, resources and money to search-out hidden opportunities in Russia.

IVI’s Purpose in publishing this Report This document helps to correct some of these issues. It provides details on market characteristics, technologies, VC investment opportunities and developers of technical solutions; such detailed information on the petroleum industry did not exist prior to this IVI report.



We release this information to inform multinational corporations and co-investors to the potential that exists in Russia and with Russian technology, to demonstrate that seed and early stage deals exist, and that this potential can be accessed and developed for financial gain. IVI presents short and long-term trends so our investors and partners can benefit from promising developments.

Why Care About Russia & Russian Technology? Three reasons why:

1. To reduce cost and increase sales through new business models 2. To localize product content and reduce market barriers for operating in Russia 3. To develop the market and create new revenues

Target Readers for this Report

Multinational Corporations & Global Technology Investors Certainly they include multinational oil companies and their suppliers. Likewise for corporate and financial investors with a global search for technology, internal incubation groups and corporate venture capitalists; knowledge presented in this report is useful for those in aerospace, computer, IT, communications, microelectronics, chemicals, materials, medical and biotechnology since these are strengths of the CIS science system. Gamechanging technology investment opportunities in the petroleum industry are an indicator that potential exists in other technology spheres.

Multilateral & Government Institutions Others include multilaterals, NGOs and governments that develop knowledge based economies in Russia, Kazakhstan, Ukraine, and other emerging country markets as IVI documents the quality of information needed on technologies and SMEs to attract strategic and financial investors.

CIS Technology Developers Lastly it is the GoForward Plan™ for institutes & SMEs that seek business with foreign buyers. About Innovative Ventures Inc.

The business of IVI is venture capital; we manage institutional capital for direct VC investment and provide financial institutions with advisory services to create, invest in, and manage international and emerging market VC funds. IVI develops markets and entrepreneurs since the emerging countries lack the quality and quantity of companies for VC investment. Our CIS High Technology Partnership Initiative™ molds great technology from the Former Soviet Union into growing companies through cross-border partnerships, and IVI’s Russian Technology Investment Forum™ introduces early stage Russian technology enterprises to international strategic and venture capital investors. IVI continues its activities in the petroleum industry with the launch of the IVI CIS Oil/Gas Consortium™ to work with international energy companies and their service suppliers to finance and commercialize CIS technology to world markets and domestic customers.


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The Russian Petroleum Technology Sector Background

From May 2004-September 2004 IVI sourced deal flow from SMEs and institutes in Russia with some opportunities received from Kazakhstan, Ukraine and Belarus and E. Europe (Figure 1).

Figure 1

Countries of Innovation

Slovakia 1%(SMEs 1%)

Russia 90%(SMEs 56%; Institutes 32%; Individuals 2%)

Belarus 1% (SMEs 1%)

Ukraine 4% (Institutes 4%)

Kazakhstan 2% (SMEs 2%)Georgia 1%

(Individuals 1%)

Russia

Kazakhstan

Ukraine

Belarus

Slovakia

Georgia

© Innovative Ventures Inc, 2005

The table presents technologies sought for VC investment. Artificial lift & advanced drilling

Enhanced oil recovery Non-seismic exploration

Hydrocarbon processing

Novel well construction, smart fields & wells

Solutions to E&P conditions unique to Russia, (e.g., Artic cold, on & off-shore

Exploration flow assurance

Automated remote field operations

Earth modeling Off-shore Renewables Surface facilities Facts & Figures on the Russia Potential for Corporate & Financial Investors

Deal Flow & Investment Opportunities in the Petroleum Technology Sector Strategic potential exists in Russia as demonstrated by the quantity and quality of technology deal flow opportunities. IVI evaluated almost ninety (90) technologies and SMEs in upstream, downstream & renewables with technologies receive from fifty-six (56) sources; thirty-two (32) from enterprises, twenty-one (21) from institutes (& innovation centers affiliated with institutes) with three (3) from individuals. Some institutes and SMEs submitted multiple technologies for investment. Four (4) technologies are short-listed for R&D financing and two (2) short-listed for venture capital investment (Figure 2). As expected in evaluating investment opportunities, we rejected most due to poor definition of the technology, lack of information on its value and test data substantiating its performance, etc.



Figure 2

Russian gamechanging technical solutions with global value and international application include:

1. Distributed temperature/pressure system 2. Disc crystallizer 3. Enhanced oil recovery, two-stage combustion technology 4. Low frequency seismic-acoustics 5. Novel well testing 6. Ceramic vitrification of the borehole

Summary descriptions of these and other technologies are in the Appendix, pages 16-42. Approximately eighteen technologies still wait evaluation/decision and the final number of technologies selected and actually receiving investment depends on the outcomes of our due diligence and face-to-face meetings between all parties and the success/failure of negotiations and contract discussions. IVI thinks this is a terrific response from the market, but especially so given that these results were achieved in just five months of active deal sourcing from start-up. This number of technology proposals from both SMEs and institutes demonstrates the depth and breath of intellectual capital that exists in Russia and its ability to innovate. These technologies were created under less-than-ideal development and commercialization circumstances; little money for proper R&D, the difficulty in finding potential customers to conduct testing in actual field conditions and performed to international standards/practices. The ability of the Russian innovation system to achieve these results under these circumstances demonstrates its ability in creating technology of strategic importance.

The Russian Technology Sector is Caught between Two Worlds The Russian technology system is in a split stage of development, with some developers making the transition to serve industry with innovative products while others face extinction. While technology creation (Figure 3) is in the early stages of development, e.g., R&D (52%), 46% of technology is in the later stages of development/commercialization and more of a match to corporate venture capitalists and financial investors like IVI.



Figure 3

Stage of Technology Creation

R&D 52% (Institutes 21%;

SMEs 31%)Prototype 17% (Institutes 7%;

SMEs 10%)

Testing 18% (Institutes 6%;

SMEs 12%)

N/A (not available) 2% (SMEs 2%)

Selling 1% (SMEs 1%)

Ready for Mfging/Delivery to

customer 10% (Institutes 6%;

SMEs 4%)

R&D

Prototype

Testing

Ready forMfging/Delivery tocustomerSelling

N/A (not available)© Innovative Ventures Inc, 2005

This split stage of development reflects the Russian oil industry’s rapid growth the last few years as institutes and enterprises respond to market needs by creating new technologies (in R&D) while those in mature stages of development (ready for mfging, customer delivery) are older solutions developed under a (different) Russian E&P strategy (vs. international practices), before strong foreign attention/investment in Russia/CIS, and when oil prices were lower. In and of themselves, these ‘older’ and mature technologies offer zero value-added, and is the reason that such a high number were rejected (Figure 2). This dually of activity, i.e., obsolete vs. innovative technologies, exists in other sectors and is understandable: many institutes and SMEs were 100% focused on the Soviet defense sector, while others concentrated on closed Soviet markets; such isolation shut them off from leading edge technology developments in G7 countries and others. Denied the opportunity to learn and leverage from the technology experiences of global players and others’ successes, Russian R&D, application development, engineering and quality assurance lagged vs. the best from the West and the Far East. This situation is slowly improving as more SMEs integrate themselves into world markets, conclude supplier contracts with international companies, institutes compete for R&D contracts against West and Far Eastern universities, etc. IVI’s two (2) short-listed VC deals from SMEs are in the prototype & testing phase and reflect developers’ response to the business and financial potential from the growth in the petroleum industry these past few years. Russians’ ability to bring technologies to advanced stages of development also has value since it gives investors the confidence that Russians can commercialize; exactly what IVI and our corporate venture partners need to make investments, to generate strategic and financial return.

Transforming Russian Potential into Commercial Solutions & Investment Opportunities As expected with the majority of innovation in the R&D/prototype stage, Russian developers require financing to complete R&D and prototype development (Figure 4). ‘Commercialization assistance’ is a catch-all need of developers for business development, marketing/sales and financing to bring innovation to market. As Russian talent is directed to international needs and testing standards, technology in R&D will emerge as candidates for VC; it’s encouraging that a large % of R&D comes from SMEs, not just institutes since it’s quicker to market by investing equity into an existing SME vs. create a new company from institute technology.



Figure 4

What Developers & SMEs Need

R&D Financing 49% (Institutes 21%;

SMEs 28%)

Customer 1% (SMEs 1%)

Commercialization Assistance 23% (Institutes 9%;

SMEs 14%)

Production/Market Financing 10% (Institutes 3%;

SMEs 7%)Prototype Financing 15% (Institutes 8%;

SMEs 7%)

N/A (not available) 2% (SMEs 2%)

R&D Financing

Prototype Financing

Production/MarketFinancing

CommercializationAssistance

Customer

N/A (not available)


IP Status of Russian Technology: Facts Contrary to Conventional Wisdom Many believe that Russian technology is obsolete and outdated vs. international competition, yet the exact opposite exists. Russia continues to create innovation and innovative technologies as 55% of opportunities evaluated are patented in Russia and/or international countries (Figure 5).

Figure 5

IP Status of Technologies

In process for Russia/CIS 13% (Institutes 3%;

SMEs 10%)

Issued in Russia/CIS 43% (Institutes 17%;

SMEs 26%)

Not reported 2%(SMEs 2%)

None 29% (Institutes 15%;

SMEs 14%) In process for International (e.g., USA,

Europe, etc) 2% (Institutes 1%;

SMEs 1%)

International patent issued (e.g., USA, Europe, etc) 11% (Institutes 4%;

SMEs 7%)

Issued in Russia/CIS

In process forRussia/CIS

International patentissued (e.g., USA,Europe, etc) In process forInternational (e.g., USA,Europe, etc)None

Not reported




Future Outlook The GoForward™ Plan for International Corporations & Technology Investors Real and undeveloped potential exists in Russia and the CIS. Exploiting opportunities requires proactive strategies and investment for the long-term.

Conduct R&D to Build the Deal Pipeline R&D projects are the prelude to generating future VC transactions based on new technical solutions and approaches. Investors and corporations might want to contract with institutes and selected enterprises with the skill sets to work on defined problems of customers and users; Although their technologies were not shortlisted for investment, several institutes work in innovative areas of upstream and downstream technologies, e.g., the Department of Radiation Monitoring, Ural State Technical University; the Facility of Information Technologies, Novosibirsk State University; the Institute of Petroleum Chemistry, and the Institute of Oil & Gas Solutions. Russian institutes and SMEs need direction on emerging trends, where the industry is headed, customer direction and feedback at the early stages of technology development. A clear understanding of problems and potential solutions directs their R&D efforts to the needs for new technology and products. Such direction ‘jump-starts’ developers’ attention to opportunities in the petroleum sector. Commercialization of new technology starts with R&D and product development projects to demonstrate ‘proof of concept’ and the value of novel ideas. Targeting SMEs and institutes for upstream, downstream and renewable technologies is straightforward since three clusters of innovation (Figure 6) exist; Moscow/Moscow region, Tomsk, Novosibirsk and Nizhniy Novgorod in software, enhanced oil recovery (EOR), earth modeling and sensors as examples of E&P technologies. A secondary cluster is the Urals (cities of Yekaterinburg, Ufa, and Kazan) with technical development in crystals and crystallography for sensor applications, EOR and chemical processes for improving oil recovery in old fields.

Figure 6

Regions of InnovationOther 22%

(Institutes 7%; SMEs 15%) Yekaterinburg/Ufa/

Kazan(Urals Region) 7%

(Institutes 7%)

Nizhniy Novgorod 8%(Institutes 8%)

Tomsk/Novosibirsk Region 12%

(Institutes 9%; SMEs 3%)

Moscow/Moscow Region 51%


Moscow/Moscow Region

Tomsk/NovosibirskRegion

Nizhniy Novgorod

Yekaterinburg/Ufa/Kazan(Urals Region)

Other




Drive Innovation into the Market: Link Enabling Technologies with Platform Solutions Russian institutes and companies operate in innovation spheres that match the petroleum industry’s strategic priorities (Figure 7).

Figure 7

Opportunities & Strengths by Technology

Production 41%(Institutes 10%;

SMEs 31%)

Exploration 15%(Institues 6%;

SMEs 9%)

Refining 10%(Institutes 5%;

SMEs 5%)

Pipeline 4%(Institutes 3%;

SMEs 1%)

Alternative Energy 10%


Other 20%(Institutes 11%;

SMEs 9%)Exploration

Production

Refining

Pipeline

Alternative Energy

Other


Some of these technologies are stand-alone opportunities, while others require Western technology and skills as enablers and/or complementors to speed market introduction and customer adoption. Numerous foreign platform technologies can use Russian enabling or complementing technologies to maximize value creation and many of these technologies already exist in joint venture and portfolio companies of Western oil companies and their service suppliers. Rather than finance duplicate technologies and/or these skills, opportunities exist to mix and match imported technology/skills to make Russian and foreign technology more robust.

Speed Commercialization: Mix & Match CIS & Foreign Technology Together Russian developers are especially strong in specific technology targets of multinational petroleum companies and international service suppliers (Figure 8).

Figure 8

Targets of Technology DevelopmentDevices 27%

(Institutes 10%;SMEs 17%)

MWD Drilling 8% (SMEs 9%)

Refining/Oil Processing 15% (Institutes 8%;

SMEs 7%)

EOR 20%(Institutes 8%;

SMEs 12%)

Sensors 14%(Institutes 5%;

SMEs 9%)Software 16%(Institutes 7%;

SMEs 9%)

Sensors

Software

EOR

Refining/OilProcessingMWD Drilling

Devices


Mixing and matching Russian technology with complementary technology/skills from investors’ portfolio makes their technology more robust to leverage investments into new revenues, maximizing value creation and eliminates much of the Russian risk factor. It’s IVI’s strategy to invest in, and link Russian managers with Western companies and build management expertise in



Russian entrepreneurs as the prelude for the successful ones to ‘graduate’ and raise venture capital. As an example, risk, cost and time-to-market is less by integrating the Russian distributed pressure/temperature system with the technology one of our corporate partner’s investee companies to create the total solution. Linking these two companies speeds commercialization since the foreign SME has the international sales, distribution and service networks for global marketing.

Upgrade CIS Technology w/Western Solutions for Russian Sales; then Attack Global Markets Moscow (& CIS) offices of international oil companies seek technology solutions for Russia specific applications (e.g., cold water ocean environments, artic conditions, gas reserves in deepwater basins, pack ice, etc.) or price sensitive segments unique to the Russian market. A number of Russian technologies were developed for Russian buyers where the prices are significantly lower vs. Western solutions, yet these products are just a notch below world class, e.g., a gas separation technology from a Krasnodar company and a plastic sphere (cold weather) technology from a Vladimir company. Opportunities exist to upgrade Russian technologies to Western standards to expand their scope on the Russian market and later commercialize them to global customers, increasing value for international petroleum companies and the supply chain. Such home grown Russian technologies help multinational companies ‘localize’ supply content, substitute imports with domestic purchasing to reduce cost and comply with Russian Government requirements for doing business in Russia; increase the number of supply chain relationships with Russian technology and Russian suppliers.

Capital is a Partial Solution: Provide Western Systems Skills to Russian Counterparties Provide institutes and enterprises with proper customer direction and financing in the simple blocking and tackling activities of technology development like end-user guidance to focus design & development to performance, cost and price requirements & comprehensive testing to international standards. IVI expects that many technologies rejected (42%, Figure 2) due to poor technology description, lack of test data and information has a 2nd life as viable opportunities with proper guidance from corporate partners. Deal flow exists now, and deal flow can be developed with financing + western systems delivery & management execution in:

1. Project management & implementation skills 2. Testing & technical service/support 3. Business development, marketing & sales

Patience is a Virtue Time and patience is needed to develop the business relationship. The Russian culture is relationship driven with confidence and trust created through ‘face time’ vs. the western way of working with a free flow of information (e.g., info submitted without a non-disclosure agreement, NDA). IVI never signs NDA at an early stage of due diligence; we rejected some technologies due to Russian demand for an NDA prior to releasing information needed to make a decision.

The GoForward™ Plan for Russian Developers, Entrepreneurs & Managers of SMEs

There are several steps that Russian/CIS enterprises and institutes can take to develop their potential into actual opportunities for R&D financing, venture capital investment and/or supply contracts.



The Decision Process for Technology Selection & Investment: How Venture Capital Works IVI made decisions to short-list, select and finance opportunities based on a variety of criteria and expectations as to how the entrepreneur/scientist can and should work with us for mutual benefit. IVI used these criteria to make decisions and they include:

1. Technology: The technology must provide a step change (revolutionary) in performance and value creation, be better than alternatives available to the customer, whether the alternative is a directly competitive product or a different way of satisfying the need, a substitute. It’s expected that the entrepreneur/scientist can demonstrate how their technology creates advantages vs. alternatives & substitutes.

2. Market: We expect that the entrepreneur knows something about the market they are approaching.

3. Management & the team: The background, skills and behavior of the entrepreneur are the most important factors in making an investment decision.

4. Trust: There is an understanding of mutual trust and professionalism between the investor and the companies/developers that approach them for financing. Some of these unspoken, but important rules of behavior include:

• Non-disclosure agreements (NDAs) are not signed until serious interest is shown by the investor, and discussions begin.

• Confidentially documents are not accepted until a contract is signed. It is the responsibility of the entrepreneur/developer to decide whether the investor is reputable and honest to share information with them. Entrepreneurs/developers can determine if the investor satisfies these criteria by talking with them, to understand how they treat information given to them, and their reputation in the market. You accomplish this by spending time with the investor to get to know them, and talking with others to learn what they think about them.

Be Persistent & Get Your Technology Tested Lack of test data that demonstrates the performance characteristics is a major reason for rejecting technology proposals as was performance claims that seemed too good to be true without the data to prove the claim. With data that demonstrates actual performance, investors and commercialization partners can see what your technology can and can’t do vs. competitive alternatives and established procedures, its strengths and weaknesses in different situations, problems that remain to be solved, and where it might be best applied in the field. Most technologies have specific applications where they perform best and create the most value-added; you need to know the range of oil reservoir characteristics, drilling conditions, weather and location impacts, expertise and technical skills of the customer to realize the value that your technology provides, etc., to pinpoint the best applications for your technology. With this information, investors and partners can better understand its value-added, where it is best used, its prospects for adoption by customers in Russia and abroad, additional development and capital investment required to make the technology market-ready. So what can you do to get your technology in the hands of customers for testing when many are not receptive? Continue to contact them, asking for permission to test the technology, perhaps in limited situations, define their objections and work to overcome those obstacles, minimize or manage them to demonstrate the value-added of your technology. Make sales contacts to present the technology even when it is not fully developed. Your goal is to get the technology tested to demonstrate its utility and guide future development.



IVI is confident that several transactions are possible in the next year or so with institutes/SMEs that possess interesting technology but that require money, support and customer direction to test the technology to international standards and focus development to user needs. Many technologies that caught our attention were rejected because the test and performance evaluations were not done to international standards and proper benchmarking to competitive and alternative technologies.

Link Your Technology Activities to the Business Development Needs of Local Customers Exploiting Russian talent and its potential requires proactive strategies and investment for the long-term from both the Russian and foreign side. Generally speaking, IVI believes that a limited set of opportunities exist right now that exactly solve problems and match global investors’ requirements for VC investment (global state of the art technology). Over time this number will increase as more international companies seek Russian talent to develop new technology with customers guiding product development for prototype creation and testing conducted to international standards. But getting selected for global applications is the most difficult, costly and time consuming strategy for technology developers, regardless of their solution, experience, nationality and geographic location. An alternative strategy is to get your technology accepted by local customers so they can purchase Russian products and services to help satisfy local content requirements for doing business in Russia. Opportunities exist to help international oil companies purchase technology to solve technical problems in finding and extracting oil in Russia due in part to its cold weather, large size and unique market conditions. We evaluated a number of Russian technologies developed for Russian buyers where the applications do not require world class technology and prices are lower vs. Western solutions. One technology from a Krasnodar company is almost, but not quite world-class, and it has great potential to be used locally where world class technology is not needed and/or for more price sensitive segments of the market. As this and other technologies are adopted locally, sales to customers provide the cash to improve the technology to global standards and for marketing to global customers.

Leverage Your GameChanging Technical Capabilities into Development Opportunities A number of institutes and SMEs demonstrated to us that they possess the capabilities and personnel to develop innovative R&D projects as the prelude to future VC investment and commercialization opportunities. Although their technologies were not accepted they (and others) are working in innovative areas and IVI placed them on the ‘watch’ list for continued interaction. A number of strategies exist to create new opportunities for yourself and us; one is to present your capabilities as solutions to solve a range of problems that the industry seeks to solve. These problems are discussed at industry conferences, seminars and workshops held in Russia and abroad; talk with users, read trade journals to identify emerging trends that create the need for new solutions and new approaches to do things not possible before, to simplify exploration/production vs. competitive technologies or established practices, reduce cost or improve the yield of oil production. With a clear understanding of industry problems, target your R&D efforts to needs for new technology and products for the oil/gas industry. Commercialization of new technology starts with R&D and technology development projects to demonstrate ‘proof of concept’ and the value of novel ideas.



Be Open & Transparent: Provide a Speedy Response to Information When Requested Patents are a testimony to the uniqueness of an idea and innovation. Once patents are issued, they are public information available for viewing, analysis and evaluation on the Rospatent, the US Patent & Copyright and EU patent databases to name three. Patents give the patent holder exclusivity to the idea and innovation, and in exchange are publicly disclosed to help prevent infringement of the idea and innovation by others. IVI asked developers to provide copies of their patents so we could determine the value-added of the technology for investment. Some complied, yet other developers refused to send the patent unless a NDA was signed. Others were slow and took three months to send. The purpose of an NDA is to ensure the confidentially of confidential information, but information in a patent is not confidential since it’s publicly disclosed. The unwillingness of some developers to send patent information resulted in several interesting technologies being rejected since we could not make a determination of their uniqueness. Likewise test data demonstrates the performance of a technology and value-added; examples of performance data include the amount of increase in oil production from a technology and amount of cost reduction to name two. Performance data is neither proprietary nor confidential information; a competitor or others can’t use it to copy a technology, it only tells how well the technology works or does not work. Some developers refused to send performance data unless a confidentially agreement was signed; those opportunities were rejected.

Update Us to Your Progress: Make Contact with Us IVI works to develop the market for technology VC, to implement new solutions into the industry and create supply chain relationships to improve the capabilities of local operating units. While your technology may not be ready for investment or commercialization now, it may be in the future as you make progress in development, conduct field tests to better learn its strengths, weaknesses, limitations and benefits. Complementary technologies, testing to international standards in addition to capital and management can be provided if we see progress and your commitment to see the technology commercialized; so please, inform us to your progress and continue to ask us for help. We have a long-term patient view of the market and know that opportunities rejected can have a new life with persistence, dedication and entrepreneurial commitment. Continue to educate us.



Appendix Introduction & Explanation of Technology Examples

Provided on the next pages are summaries of technologies submitted to IVI by developers, both institutes and SMEs. These are provided to give the reader a view of the range of technologies from Russia and their value-added to solve industry problems. Some include technical and business due diligence questions asked by IVI to the developer, some do not. These technologies fall into the categories of oil/gas exploration & production (E&P) and alternative energy with one pipeline technology highlighted. The intent of presenting these technologies is to show that sufficient depth and breadth exists in the Russian/CIS innovation system to create technologies and products for commercialization through a transfer of IP, the venture capital (or joint venture) investment into an existing company or the creation of a new enterprise (to implement the technology). A 2nd objective is to demonstrate that new supply-chain links between Russian/CIS enterprises and multinational petroleum companies and their service suppliers is possible so they can better satisfy local content regulations between themselves and host governments.



Technology #01: Deep Separation of Binary Gas-Liquid Flow

Describe your technology & its application in the oil/gas industry The Company developed a highly effective vertical gas-liquid separator of a whirling type design that is intended for deep separation of binary gas-liquid flow. The separator performs gas flow purification of oil, gas condensate, moisture, mechanical particles as well as removing gas from liquids. This separator can be used in technological processes of: 1) Oil and gas field development and exploitation, such as separation at the wellhead and the bottom hole of a well; 2) Reduction of carbon dioxide burst. The centrifugal separator has real advantages over today's gravitational separators in several areas, P = 64 bar, productivity Q = 25 000 cfm, its dimensions are d = 8,6 inch; h = 31,5 inch; w = 214,5 lb. We guarantee steady work of the separator even in those rare cases when an amount of moisture goes through the separator (plug regime). Separators of the Company’s fifth generation design differ greatly from its analogues as they do not have any rotating elements or changeable filters. The small size of the separator is of great importance when performing separation on the wellhead and bottom hole of a well as well as when developing oil-gas fields on sea shelf. Separation on gas and gas-condensate wells (with high pressure) shows low content of moisture in gas. Benefits of the product, technology or service At present, there exist separators of gravitational and inertial design as well as metal-ceramic filters. Compared with them, centrifugal separators have advantages based on the different principle of operation – separation of binary gas-liquid flow by means of centrifugal forces. This innovation decision has considerable greater economic effect. The main problem of gas-companies and gas-transport companies is the removing of moisture and solid particles. Our separator can easily solve this problem. A great amount of gas is dissolved in oil and is extracted from it during processing and transportation; separator effectively removes gas from oil and purifies gas so that it can be used as fuel for gas-piston and gas-turbine power stations. The main benefits of our equipment for the oil/gas industry are: additional power saving resources, efficient division of binary gas-liquid flow, gas purification, removing gas from liquid, gas dewatering, conservation of environment. Separator is small and generates high operating efficiency which makes it possible to perform separation under high pressure.



Advantages vs. Competition Solutions or Existing Methods Our equipment is highly competitive in the market. There is a great demand for our separators as they have the following advantages:

• Low price • High quality • Easy maintenance and exploitation • Guarantee period 10 years • No changeable filter elements

To copy our equipment there should be a sample and even in this case the separator can be copied only with the parameters which the sample has. To produce separator for other parameters one should know principles of calculations which is possible only after trials of the separators with various parameters on P (pressure) and Q (productivity). To copy and produce our equipment one should hold lab tests and trials of separators for various parameters during minimum 1 year provided there is special technological and laboratory equipment, which in our opinion is rather difficult. Besides the separator has four separation stages which make it difficult to copy it. Product/Service is currently: In the Selling Stage Intellectual Property Rights The Company has developed, produces and sells centrifugal vertical separators of various designs. Technical specialists continue to improve the existing models and to develop new ones. The founder and director is the patent holder for the separator. Additional Development to Use Technology in the Industry The advantages of the separators are proved by trial acts from enterprises of various industries. There are comparative tables which show the advantages between our equipment and that of other producers (including foreign producers), and this document can be supplied on request. The Company lacks the production capacity and capital for manufacturing and cost reduction. There is a need for investments to purchase a plant. It is worth noting that no risks exist in the production or distribution of the separators as:

• The production of introduced models is highly technological; • There is no need for expensive materials or special alloys to produce the separators; • The marketing risk is low as the separators for oil/gas purification are in demand, both

from in Russian and foreign markets. Seeking: Additional customers for product, and licensees of the separator technology



Technology #06: Fuel Cells

Describe your technology & its application in the oil/gas industry Company (Co) is a designer and manufacturer of Electro-chemical generators, which use fuel cells to deliver electrical power and usable heat. A fuel cell is a device that converts the chemical energy of a fuel (hydrogen, natural gas, methanol, etc.) and an oxidant (oxygen) directly into electricity through electrochemical reactions. Unlike a battery, a fuel cell does not require recharging since it provides power as long as fuel and oxidizer are supplied. The Co. focuses on alkaline fuel cell (AFC) technology, which uses liquid alkaline electrolytes. AFC technology has excellent robustness, reliability and ability to perform in harsh environments. AFC generators operate temperature of -20ºC-+40 ºC. AFC systems have quick start-up and a shut-down time, and offer extraordinary high efficiency of 50%-60%. Major achievements of Co include:

• Designed, constructed & tested a 6 kW industrial prototype AFC, and incorporated it into their branded electro-chemical generator, CASCADE; testing of the CASCADE generator successfully performed in Belgium.

• Designed a PULSAR 6 – a co-generative version of CASCADE with combined heat and power (CHP) capabilities. The CHP capability increases the overall efficiency of the system to 80%.

• Secured substantial intellectual property including patents, and know-how in design of fuel cell products;

The Co identified two main markets for its products:

• Stationary applications (residential and commercial distributed power generation in various combinations with solar/wind power sources or as stand-alone systems);

• Marine applications (small commercial vessels, fishing boats and pleasure crafts). Benefits of the product, technology or service Major benefits of Co’s product includes: reliability; durability; low cost of materials and components; simplicity of design; easy service and maintenance; long operating life; ability to work in harsh environment and severe cold conditions; readiness for mass manufacturing in the near term. Other benefits include:

• Scalability: due to its modular nature • Environmental benefits: no harmful emissions • Silent power: no combustion effects

The Co also believes that its technical design achievements will help accelerate AFCs to commercial adoption, including reduced cost/kW, use of carbon dioxide ‘scrubbing’ technology, and advancements in non-noble metal catalysts applicable to alkaline technology.



Advantages vs. Competition Solutions or Existing Methods Multiple companies are focusing on fuel cell technologies (e.g., PEMFC) and/or certain fuel cell markets (e.g., transportation), and include Ballard (Canada), UTC Fuel Cells (U.S./Japan), Toyota (Japan), Siemens (Germany), Fuel Cell Energy (U.S.), Proton Energy Systems (U.S.), Plug Power (U.S.), Nuvera (Italy), and Avista Laboratories (U.S.). To-date no competing fuel cell companies have been established in Russia. The Co’s competitors also include established combustion technology companies – traditional grid, as well as distributed generation – and other alternative power technologies. Current and future competition for Co’s fuel cell generators is expected to come from the following areas:

• Established technology companies in the fields of diesel gensets & micro-turbines) • Other AFC manufacturers • Non-alkaline fuel cell manufacturers

In its chosen market niches, Co competes against existing technologies such as diesel gensets and commercial/industrial batteries. In the longer term, platinum shortage is likely to lead to production limitations for PEMFC manufacturers and may prevent them from competing. Because Co’s generators are based on AFCs, they do not use platinum as catalyst, and thus frees Co from price/supply/availability considerations of platinum. As a result of its recent advancements in AFC technology, Co is well positioned to commercialize AFC generators as an alternative to PEMFCs and other fuel cell technologies. Product/Service is Currently: In testing (mostly complete), ready for Mfging & pilot production Intellectual Property Rights Russian patents: XX, XX, XX, XX (useful model); XX (pending), XX (pending), XX (pending), XX (pending). International PCTs: WO XX, USA XX, XX Additional Development to Use Technology in the Industry Co accomplishments at the engineering design stage include:

• Technical documentation written • An industrial prototype of the generator designed and constructed • All principal technical problems have been solved • Lab testing and a partial field testing have been conducted in the EU

Co’s production capacity of alkaline fuel cell modules is 0.5 MW/year, sufficient to manufacture about 80,000 6 kW generators. Still required is a small-scale production facility to produce peripheral components, e.g., electrolyte pumps, gas pressure reducers & solenoid valves. At the next stage of development Co needs to finalize design and start a pilot production of the generators (10-20 units). Additional testing (longevity, climate, etc.) will be performed on the pilot units. A serial production of the generators will follow. Seeking: Capital to initiate production & marketing, a corporate partner (desirable, but not necessary) & customers



IVI evaluation notes 1. Why do you think that your FC is better than competing FC?

• There are few real players in alkaline FC market with working prototypes or working models like ours vs. just plans. Our FC has two strong advantages: cost of $3,000-$4,000/kW, and environmental safety: our unique scrubber removes CO², does not contain toxic absorbers and can be easily re-cycled. MTBF of CO. generator is 10,000 hours.

2. Information about CO. • Company is privately held, and in operation since 2002. Total investments of US$8MM

were made by founders. Number of employees is 23. Company has offices in St. Petersburg, Moscow and rep in Belgium. Russian partner of Co. is Aerospace Corporation ‘XX.’



Technology #14: Software Package for Geophysical Data Processing.

Describe your technology & its application in the oil/gas industry This software processes data, obtained through electro-magnetic logging. First, the logging curves are simulated (calculated numerically with advance algorithms) on the basis of 2D geometry of soil structure around the well. If the thicknesses of layers are known, the software determines electric characteristics of the soil in automatic mode. This is the unique feature vs. competitive products. The software provides the ability to solve the direct problem and geophysical data interpretation (inverse problems). The package is being designed for organizations searching for, and the mining of oil/gas. Benefits of the product, technology or service At the moment, advanced numerical algorithms are used to calculate the electro-magnetic logging curve under assumption of plane and parallel layers (cylinder symmetry case). The calculation process with 2D models takes around one minute for five (5) layers with given penetration zones, and we believe this is very fast compared to alternative products. We’ve benchmarked our technology to test examples as published in literature. Our most innovative element of the software is that inverse problems are also numerically solved, i.e., the values of physical parameters are not supposed, but rather directly calculated from the shapes of logging curves. This new quality makes it possible to provide the operator with the decision support information. Advantages vs. Competition Solutions or Existing Methods Our solutions, based on theories of numerical methods, make data processing very fast, compared to competitive alternatives. Complex 2D and 3D models used in the package allow precise comprehensive interpretation of geophysical data. Modern algorithms which exploit model peculiarities provide high performance in process modeling and data interpretation. Moreover a solution to the inverse problem (direct calculation of physical parameters that process measured curves) gives new quality to the product. Therefore, the proposed technology is innovative and has never been used in commercial products. Our software package is “science intensive” and difficult to duplicate even if it is known how it works. Our main advantages are: new quality of data processing (solution to inverse problem); efficiency and performance of data processing. Our team of developers includes both students and scientists so we can access cutting edge knowledge from university in advanced modern algorithms and implementation of new theoretical ideas into applied products. Note that alternative types of logging (like induction and acoustic logging) could be easily implemented into our software. Moreover 3D problems can be calculated on the clusters or supercomputers. Product Service is currently: In the R&D stage Intellectual Property Rights All the rights on the product belong to the developers. At the time being, only software tools are under development. We presented general description on results (realization of numerical algorithms) at several conferences on mathematical modeling.



Additional Development to Use Technology in the Industry To implement our technology in the market, it is necessary to deliver the prototype and to market the product to potential users. The technology is completely developed at the level of lab installation, and the system is ready to process field test data. Capital is required for system improvement and design according to customer needs. Seeking: Prototype financing IVI evaluation notes 1. Why you are sure that your software is better than other? Why you are sure that your

software show true results? We took data from XX Institute and process it by our software. Calculations took 1-2 minutes while the same calculations took IGP software about 1 hour. 2. What is the current state of development of your software? Direct problem solving is optimized and minimal coding is necessary to make it more user-friendly, test it and make benchmarking. Inverse problem is not yet optimized. We are working with close cooperation with XX company (one of the most famous Russian software company). They are ready to work in close partnership with us on this project if some customer will be ready to finance it. They are able to provide international level of quality of programming and we will input scientific/math basis. Other application of our algorithms used to accelerate calculations. Our algorithms can be easily and quickly ‘retuned (1-2 months)’ for other types of logging, e.g. acoustic logging.



Technology #36: A System to Measure Temperature & Pressure at Varying Depths in Wells

Describe your technology & its application in the oil/gas industry This system utilizes the latest in fiber optic and measurement sensor technology to measure both the temperature and pressure of wells at varying depths. Currently, there are two methods available to measure the temperature at various depths in wells. One method is to simply shut down the well and lower a probe to different depths and take measurements. This system is economically expensive as the well must be shut down to make measurements. In addition, after the inspection, there is no continued monitoring of pressure changes that may occur. The second method (which is becoming more popular) is to permanently install a fiber-optic cable into the well which has sensors mounted at various points to provide constant monitoring of the temperature at various depths. The Company has developed a system based on fiber-optic cable that, in addition to being significantly less expensive than currently available temperature measurement systems, also provides for measurement and monitoring of both temperature and pressure at varying depths in wells. Benefits of the product, technology or service The primary benefit of this system is its ability to constantly monitor temperature and pressure (competing solutions can only monitor temperature) at various depths in a well during production. It enables the operator to instantly detect any changes in the environment that may affect the well’s operation. An additional benefit of this system vs. measurement systems using probes lowered is that there is no need to shut down operation of the well in order to take these measurements. Advantages vs. Competition Solutions or Existing Methods

1. There are other systems available based on fiber optic cable and sensors that allow for constant temperature measurement in wells (including one produced by us). There are no competing systems that allow for the measurement of both temperature and pressure. Currently available systems (temperature only) sell at prices from 30%-90% higher than our solution. Our system has both a significant cost advantage as well as a performance advantage vs. competing alternatives.

2. While the fiber optic cable, temperature sensors and system management (software / hardware) are based on technology similar to other available systems, the pressure measurement sensors and system management are designed and developed by the Company. The physical components could eventually be reverse-engineered, but the unique algorithms used are much more difficult to copy.

Product/Service is currently: In development Intellectual Property Rights This system is currently not protected by any Russian or international patents; however some elements of the algorithms and software can be applied for.



Additional Development to Use Technology in the Industry This system is under final development. (Note that a temperature measurement only system is fully developed by the Company and in commercial operation). Based on market analysis, it is estimated that this product has a market potential of US$25-US$30 million/year. Assistance needed for this product includes:

1. Resources for final development and testing; 2. Resources to manufacture the product – either as outsourced manufacturing or by

obtaining physical space and staff for this purpose; 3. Resources to finish development and testing that will increase the operating parameters

of both the temperature and pressure as well as the temperature only measurement systems;

4. Assistance to protect intellectual property rights 5. Marketing and promotion of the product – especially outside of Russia

Seeking: Prototype/testing finance, capital for production and commercialization into CIS and world markets



Technology #45: Plasma converters of hydrocarbons (liquid & gaseous) into singas

Describe your technology & its application in the oil/gas industry Plasma stimulation of different processes of hydrocarbons conversion into singas (H2+CO), in particular, steam and CO2 reforming processes, partial oxidation, steam-oxygen conversion; for these last two it is possible to use pure oxygen as well as oxygen from air. The technology is based on the reagents treatment by plasma of non-equilibrium microwave discharge. Process energy requirements are provided by low potential heat while plasma is used for chemical reaction acceleration, i.e., is acting as a catalyst. Plasma conversion process can be apply to different fractions of natural gas (methane, propane-butane mixture) and to products of oil rectification – petroleum, kerosene, diesel fuel. Syngas can be additionally treated for production pure hydrogen, methanol, synthetic fuel etc. (depending on Customer requirements). Benefits of your product, technology or service In comparison with ‘traditional’ catalytic technologies of hydrocarbons conversion, the method of plasma conversion has no inertia, and is thus acceptable for mobile applications: hydrogen transport, autonomous energy systems and so on. Plasma converters can be put in operation, stopped, productivity changed very quickly (i.e., without any delay), many times and at any time. In our opinion, these features (benefits) are not be achieved by traditional catalytic technologies. Advantages vs. Competition Solutions or Existing Methods Main advantages in comparison with existing catalytic methods are the followings:

• High specific productivity • Without inertia • Pollution free • Unlimited number of cycles "start/stop" without catalyst activation • Absence of necessity of catalyst technological service • Absence of carbon deposition on the catalyst surface

The principal benefit of suggested plasma-catalytic methods of hydrocarbons conversion is also a low energy (electro) expenditure - 0.1 – 0.15 kW*h per 1 m3 of singas. Product/Service is currently: In prototype stage, with prototype of industrial plasma reformer with productivity of 20 – 50 m3/h of syngas. Intellectual Property Rights Patents: 1. PF patent № XX 2. International Patent No. EP XX The scientific basis of suggested technology was published in several Russian and international journals and presented at international conferences, however a specific (key) technical and technological information concerning this technology is a “Know-How” of our Institute.



What Additional Development Is Needed to Use your Technology in the Industry? For creation of an industrial pilot plant (demonstration unit), it is necessary to carry out the followings R&D:

− integrated system of exhaust gas heat recuperation for plasma converter; − power supply unit of the source of microwave radiation (magnetron) with high frequency

converter based on modern (MOSFET and IGBT) transistor; − control and adjusting system; − increase the power of the plasma converter and create the unit with productivity up to

100 – 500 m3 per hour. To produce pure hydrogen (if the process is not limited by production syngas only), it is necessary to built a full technological scheme (multistage) setup. The plasma converter should be investigated, tested and optimized within this setup. In the plasma converter the active zone of discharge and zone of chemical reaction (conversion) are combined. This feature allows to develop combined plasma membrane converter, where Pd (or Pd based) membrane placed in the vicinity of active zone will increase the efficiency of the converter by removal of hydrogen from reaction zone, i.e. because of the shift of chemical equilibrium. Seeking: Prototype financing and the joint funding of the IP and pilot plant development



Technology #52: Thermal Insulation of Pipelines in Extreme Cold, Off-Shore & Deep Water

Describe your technology & its application in the oil/gas industry XX plastics, “XX” grade, is a novel class of thermal insulation & waterproofing materials well adapted for insulation of pipelines employed under sever & extreme cold or heat conditions. The above XX plastic is a high – strength closed pore, waterproof material based on modified epoxy binders & hollow micro XXs. Specifications: TU 6-55-221-1426-96. Basic characteristics: density: 350-450 kg/m3; strength: 15-50 MPa; heat conduction coefficient: 0.052-0.06 W/m К; absolute waterproofing; durability: 50 years. The company specialists developed a technology & design documentation for the equipment used for the commercial-scale production of XX plastic & continuous application of XX plastic having any preset thickness for pipe-lines of any diameter under factory conditions; a process for the insulation of shaped products for XX plastic was also developed. We’ve developed the technology & documentation for the equipment suitable for sealing of welded joints on the routing using XX plastic too. “XX” grade XX plastic is best suited for thermal insulation & waterproofing of pipe-lines & pipes used in oil & gas fields in the cold climates (e.g., Russia Far North, off-shore and deep water), in boggy areas, at the bottom of rivers, lakes & seas, for thermal insulation of casing strings of wells drilled in the permafrost area (to eliminate a rise in soil temperature), for underwater pipelines used in shelf mining & the mining of mineral resources at the sea bottom, for heating systems in irrigated areas & in the areas where inundation occurs.



Benefits of your product, technology or service XX plastics, “XX” grade, ensures the complex protection of a pipeline using a single material; in terms of technical characteristics, reliability, stability of performance & service life, it is superior to all recognized thermal insulation & waterproofing materials for pipes. Benefits of the XX plastic unattainable by conventional thermal insulation & waterproofing materials:

• Corrosion protection of pipes due to epoxy binders; • Insulation layer is firmly attached to the pipe and traces any pipe deformations without

damage (XX plastic elasticity is much higher as compared to that of a steel pipe); • Absolute water tightness up to the depth of 2 km (upon request – up to 6 km & more); • High strength (comparable to concrete), a protective enclosure is not required; • Capability to operate in any types of soil including permafrost, under any mechanical

loads on a pipeline (thermal insulation of casing strings of wells); • Maintains pipeline serviceability under any degree of the pipe penetration internal

corrosion within the XX plastic service life due to inherent high mechanical strength; • Offers a wide working temperature range: from -230ºС to +150ºС (upon request – up to +

170ºС & higher); • Durability is at least 50 years (according to the results of accelerated climatic tests, 27-32

years proved by field tests). XX plastics have been evaluated & tested in terms of the exposure to all external factors: they are resistance to UV & solar radiation, irradiation, fungus- resistant, not attacked by rodents, not subjected to encrustation by seaweed, they exhibit chemical resistance to all media, are non-combustible (self-extinguishing), offer resistance to vandalism and environmentally safe. The application of XX plastics adapted for severe & extreme conditions of pipeline operation is as much as 8-12 times better from an economic standpoint vs. conventional materials since it eliminates failures, does not require repairs & maintenance expenses and extends the pipeline service life from standard 25 years to an actual 50 years. 40-years of experience of the commercial-scale application of XX plastics for defence purposes enable us to tailor XX plastic formulations for any tasks & requirements of the customer. Advantages vs. Competition Solutions or Existing Methods The company is a monopolist in Russia in the field of XX plastics & products. No competitors are available in this range of materials. Foreign manufactures of similar products, i.e., syntactic foamed plastics, do not possess a continuous process for pipe insulation while ours is, and this is another user benefit of our technology. The closest competitors on the market for pipeline heat insulation appear to be companies engaged in pipe insulation using foamed polyurethane (PU foam) in a protective shell under the “pipe-in-pipe” pattern. XX plastic is a different class of materials. It is several times superior to insulation of PU foams in a protective shell in terms of a complex of technical characteristics, performance & service life. Under severe & extreme conditions of pipeline operation waterproofing & thermal insulating, XX plastic is beyond competition with other materials in terms of the whole complex of technical & economical performance.



We’ve studied the market, defined demand, short and long term prospects for thermal insulation & waterproofing XX plastics, and are confident of our competitive stability for the future. The material’s uniqueness, uniqueness of manufacturing equipment as developed by the company, know-how with respect to a number of key aspects of the production process, formulations, potential for the expansion of the range of exclusive products, patent protection, and difficulty of competitors to duplicate our results due to the high scientific- technical level of the technology are all aspects of our competitive advantages. Investment attractiveness of the project includes the potential for monopolization of the market niche for waterproofing & thermal insulation of pipes used under severe & extreme conditions followed by a gradual extension of the range of products & fields of application for the material. Product/Service is Currently The process for the continuous production of XX plastic & pipe insulation is protected by RF patent No. XX. “XX” trade mark certificate No. №XX. The process for the production of polymer micro XX is protected by RF patent No. XX. “XX” trade mark certificate No XX. In 2003 the company passed the competitive selection & participated in the XX, submitting the “XX plastic” project for arranging the commercial facilities for thermal insulation & waterproofing of pipes. What Additional Development Is Needed to Use your Technology in the Industry? Testing of XX plastics, “XX” grade was conducted with Gazprom. The product was used for the thermal insulation of a casing string 426mm in diameter with the length of 144m, well No. XX belonging to XX gas field in XX. The product outperformed previously employed materials and provided the elimination of rising the permafrost temperature (test report DP XX). Company specialists have developed a technology & design documentation for the equipment suitable for pipe insulation by XX plastic under factory conditions & for sealing of welded joints on the routing. At Gazprom’s request a feasibility study was performed for the construction of the factory for the current demand in the amount of 100 km of XX plastic-insulated pipes per year on the basis of 530 mm diameter. In compliance with the resolution adopted by a special department of Gazprom Scientific-Technical Council No., XX, XX plastic was recommended as a basic pipe waterproofing & thermal insulation material in the course of functional preparation of gas condensate fields & distribution networks within the Gazprom system. The production capacity we seek to provide is 120 km of XX plastic-insulated pipes, up to a size of 530 mm diameter/year. Production facilities are planned in our production buildings in XX region (40 km away from the city of XX). The level of the required investment is $2,998,000, invested in two tranches:

1st tranche – $1,745,000 for the launching the first production complex with 50% output capacity & for conducting marketing activities; the period for use of funds is 16 months; 2nd tranche – $1,253,000 for launching the 2nd production line to full capacity, for conducting R & D and cost reduction; 8 months.



The company intends to attract an equity investor to finance this project. IVI Follow-up Questions/Issues and Due Diligence XX makes a number of performance claims, some based on historical data from as long ago as 1995. Questions/Issues:



Technology #58: Disc Crystallizer for De-Oiling - Dewaxing Processes

Describe your technology & its application in the oil/gas industry The new crystallizer can be used for replacing existing double-pipe scraped-surface exchangers and, with some modifications, chillers (Texaco technology). It focuses on optimizing the crystallization process, with crystals of paraffin having the best shape and size to facilitate their filtration and, thus, increase the filtration rate. Disc crystallizers that are installed in the beginning of the plant process are used to optimize nucleation/crystallization process. Further improvements will function as effective heat exchangers thus contributing to filter use optimization (either decrease the number of filters used or increase the overall productivity with the same number of filters). Benefits of the product, technology or service The innovation is in the testing stage, and it targets operational improvements. Its advantages compared to Texaco technology include:

o Higher product yields o Output of base oil and wax increased by 3-7% o Content of oil in gatch decreased by 2 times o Filter rate increased by 2-3 times o Energy consumption decreased by 30-40% o Improved environmental safety o Smaller size and weight of equipment by 20%-30% o Surface density is reduced by 2-2.5 times as a result of the highly increased overall heat

transfer coefficient o Lower pressure differential for raw mix (pressure drop from the slurry side less than

10%) o Simpler design (1 rotating shaft instead of 12-14 normally used in double-pipe blocks),

lower maintenance and operating costs (by 2-3 times) o Equipment can be implemented in both horizontal and vertical designs o New crystallizer can be installed without a break in a plant's operations. Full installation

period 1-2 weeks. Advantages vs. Competition Solutions or Existing Methods Texaco technology with its 80%+ share of the market is the main competitor. DillChill technology (Exxon Mobil) is not a serious competitor since it requires high investment in drying the solvent and does not offer significant improvement in filtration rates. Hydro-treatment technologies are used to fully destroy paraffin in slurry. The technology is difficult to copy. Product/Service is currently: In testing Other: The technology has been lab tested. The design of the industrial apparatus is completed. There is an agreement to beta-test the apparatus. Intellectual Property Rights The technology is protected Additional Development to Use Technology in the Industry



The next step is to manufacture the industrial prototype and beta-test it. All the preparation work for this has been completed. Lab tests completed and confirmed by independent experts. Seeking: Prototype financing



Technology #61: Novel Techniques for Well Testing

Describe your technology & its application in the oil/gas industry We have developed a whole set of novel science-intensive techniques for well testing. Its innovation includes multiphase well testing and 3D interference testing procedures. Interpretation algorithms are based on effective optimal control theory techniques. The oil well testing procedure is a 2 stage process:

1. First, the injection of water; and then 2. Production of formation fluids (water+oil)

This process creates bi-directional two-phase flows. Bottom hole pressure and water cut are recorded, as are measurements of water saturation near the well-bore region. Interpretation of this test data allows the customer to identify in-situ relative permeability functions for oil and water along with formation permeability, porosity and skin. The same procedure can be applied to a gas well allowing for non-Darcy’s flow for a gas phase. The proposed approach is also useful for the problem of determining the type of a carbonate reservoir, i.e. porous, fractured single porosity or dual porosity. All the required parameters for two-phase dual porosity simulations are also identified, including those defining the fluid exchange between fractures and porous matrix. Similar well testing techniques and interpretation procedures are also being designed for some other special cases. We’ve created a special technique for testing a well in the oil rim of a gas-oil field. It is based on the creation of 3D multiphase flow in the reservoir; three-phase (oil-gas-water) relative permeabilities are identified. For single-phase flow, 3D interference testing and horizontal well testing techniques have been developed in order to identify the components of the absolute permeability tensor, including the non-diagonal elements. Benefits of your product, technology or service Modern oil and gas field development planning is based on 3D multiphase computer simulations. Although computations are performed on rather detailed grids and the results are quite accurate, such an approach suffers from high uncertainties in predicted field performance scenarios. The main source for that is unreliable input data. The proposed well and formation testing techniques enable reliable in-situ identification of key flow characteristics for a 3D multiphase reservoir model. These are two- and three-phase relative permeability functions and absolute permeability tensor coefficients. Relative permeabilities being functions of saturations are the governing flow characteristics of a multiphase fluid system. Specifically, they determine the recovery of hydrocarbons, sweep efficiency, water and gas coning development. Permeability anisotropy, given by the tensor, determines dominant flow direction, rate of bottom water encroachment, productivity of horizontal and inclined wells.



In the case of a carbonate reservoir, our well testing technique enables the determination of its type. Therefore it gives a means of choosing the most suitable development scenario. If the reservoir has the dual porosity structure, the parameters defining two-phase fluid exchange between fracture and matrix are identified. These are the key characteristics defining the oil recovery in a water-flood project. Reliable in-situ determination of these properties by the provided well and formation testing procedures and the corresponding algorithms for data interpretation gives a means for reasonable decision making in field development planning, reduces risks and uncertainty. The use of these data leads to more appropriate field development scenarios, maximizing production, recovery and reducing costs. Advantages vs. Competition Solutions or Existing Methods Current procedures for relative permeability determination include core experiments and history matching. Core data are point-wise and do not represent flow on the reservoir scale. History matching requires a representative multiphase history, e.g., preceding water-flood data which is rarely available until mature stage of field development. On the other hand well testing techniques provide an efficient way of in-situ determination of reservoir flow properties. However, their potential is currently limited, almost merely, to single-phase problems only. Only in the cases of natural multiphase flow regimes, such as solution gas drive or gas-condensate system can relative permeability functions can be estimated. Even testing of injection wells provides little information about relative permeabilities due to low sensitivity of bottom hole pressure to the saturation distribution behind the waterfront. The creation of bidirectional multiphase fluid flows according to the provided well testing techniques enables to change saturations gradually in a significant range. Therefore relative permeability functions can be reliably identified by means of effective optimal control techniques. Another problem of modern computer simulation is the lack of data on permeability anisotropy. Although tensor nature of permeability is recognized, even diagonal components are rarely properly determined. Again, core experiments provide no means for doing that on the reservoir scale. Interference and self-interference tests and horizontal well tests are sometimes capable of estimating vertical or lateral permeability anisotropy, but never both simultaneously. As for the full tensor components, no in-situ procedures for measuring them are available. Our specially designed 3D interference testing and horizontal well testing techniques in conjunction with optimal control algorithms used for interpretation enable this option. Current procedures for identification of the type and parameters of a carbonate reservoir include core analysis and single-phase well tests. Core analysis gives inadequate results for fractured systems. Data obtained from single-phase well tests is insufficient for the characterization of two-phase flow. Our well testing technique provides all the information required to characterize two-phase flow in carbonate reservoirs. Product/Service is currently: In testing



Intellectual Property Rights All the provided techniques have been presented as scientific papers at Russian and international conferences or published in Russian scientific or technical journals. The two-phase well testing technique is protected by Russian patent What Additional Development Is Needed to Use your Technology in the Industry?

Field test data according to the provided techniques are required to prove efficiency of the interpretation algorithms for real field applications. For the time being, we’ve only conducted numerical testing. Some techniques are now in the development stage and need further numerical testing. Technological operations while well testing have to be worked through for multiphase well tests with injection. Current well testing operation do not involve both injection and production stages. Accuracy of water cut and near-wellbore saturation measurements also have to be clarified. A service company specialised in well testing could help in field application of the technology. We want to develop commercial (user-friendly) grade software for the interpretation of data from our well testing techniques. So far only domestic programs are available.

Seeking: R&D Financing & Field application financing IVI Follow-up/Due Diligence Issues/Questions

1. What are the three problems that the developers will solve from a user or customer perspective?

2. What is the value of this technology vs. competitive methods and products? What new information does the technology provide vs. competition or alternative methods, e.g., new data that others cannot generate, lower cost, better characterization, improved accuracy, etc? Do they have quantitative data that proves the value of their enhancements, e.g., amount of cost savings, amount of productivity enhancements vs. qualitative statements like lower cost, maximizing production?

3. Why XX for this technology vs. one of the service suppliers like Halliburton (Landmark), Schlumberger, Roxar, etc? Have they approached service suppliers?

4. Need electronic copies of the patent 5. Do developers have any actual, field test data that demonstrates the performance of the

technology? 6. What will the developers develop? A software product? A testing service? What are the

components of this technology? 7. What do the developers want to sell? A license to the technology? A finished product or

service? A testing service that does well testing? 8. Do the developers have a project plan (all tasks specified) and budget (cost) to complete

the development and testing?



Technology #70: Drilling Method for Straight Sections of Various Type Well Bores

Describe your technology & its application in the oil/gas industry New method to maintain straightness of well bore vertical sections, stabilized sections of inclined wells and horizontal holes are being devised. Until recently the exact solution of a differential equation of lateral vibrations of elastic compressed-stretched weighting rod was unknown that, in turn, did not give an opportunity of exact drill string (DC) design. The known procedures of BHA design are unsatisfactory even in static case and do not give opportunity for rather complete description of vibrations, peculiar to the real behavior of a string in oil-field mechanics. We have for the first time found such solution, which has been published in details in XX (Russian Academy of Science, XX) and mathematical editions abroad. With adoption of obtained results the controlling factors are centralizer design and place of installation into BHA.

On the basis of such analysis centralizers of a new type and their installation locations can be created, providing for stable DC operation by means of its lateral vibrations localization. By localization we mean minimization of vibrations amplitude in the region just above the bit.

The geometrical theory of the well bore as a three-dimensional space hole is now being developed for the purpose of design and control of the directional well drilling. Basing on this work the complex three-dimensional stress analysis of the well conditions in static and dynamics is being executed.

Benefits of your product, technology or service Most works studying borehole deviation did not consider dynamics. First of all, it refers to the problems of bottom-hole to bit total reaction force effect on dynamic behavior of DS with a bit. It should be pointed out that "static" treatment of DS bending results in the elimination of real dynamics by its principle character of bit/rock interaction, defined by summation of forces effecting separate rock-destructing element (bit tooth or cutter). In fact, static treatment does not take into consideration known bit type and design, nor even drilling method. Furthermore, static treatment is characterized by its inherent internal contradictions, making the problem unsolvable by Euler treatment after elementary, but physically justified changes of boundary conditions. Our technology solves two highly important and interconnected drilling problems. The first one is drilling maximum straight regular shaped boreholes of vertical and horizontal wells, or stabilization sections of directional wells; the second one is bringing to minimum various types of DC oscillations transferred to the bit. Besides, it makes possible to use diamond-set hard alloy drilling bits in hard formations, increase of roller bit life time, conditioning of the well bore for running the casing in the process of drilling, and solves a number of other problems relating to drilling and subsequent well operation. Advantages vs. Competition Solutions or Existing Methods The authors of the project for the first time found exact solution of lateral oscillation equation for a long elastic compressed-stretched rod, effected by uniformly distributed load of its own weight and realized limit transfer in multi-point boundary problem for design calculation of a DC with stabilizers. It was demonstrated that the torque (distributed by the string or reactionary one from BHM) is one of the main factors due to which DC becomes unstable with lateral oscillations of increasing by time amplitude (flutter). On the basis of this new scientific idea it has become possible to suggest simple realization technology and corresponding hardware equipment devices, providing zero DC cross-section turn angle in the locations they are placed.



The offered solutions have priority and cover much more broad problems vs. modern systems similar to “Power Drive”. In case of rotary drilling the string is always rotating, and in case of motor drilling we have a powerful reactionary torque source, static (or close to them) problems for DC should be always properly provided for.

We have worked out available convenient mathematical formulation of DC lateral vibrations and special study results for multiple-point boundary problems arising in course of simulation of any number of supporting centralizers. The preliminary field tests of a method on the depth up to 4000 meters have shown its efficiency and simplicity. Intellectual Property Rights All the proposed design solutions and methods of their application are protected by patents in the Russian Federation. Additional Development to Use Technology in the Industry Info to be provided by developer

Seeking R&D financing Prototype financingMoney for Production & Marketing Corporate Partner Investor Business Development Customer IVI Questions for developers: 1. Developers claim to have found “a solution of lateral oscillation equation for a long elastic

compressed-stretched rod effected by uniformly distributed load of its own weight and realized limit transfer in multi-point boundary problem for design calculation of a DC with stabilizers” but they do not say what the solution is. Questions: What is the specific solution that the developers will offer to the market, to customers? What product and services do they propose to create and sell? Who are the target customers for their product or service?

2. “On the basis of this new scientific idea it has become possible to suggest pretty simple in realization technology and corresponding hardware equipment devices.” Questions: What scientific idea are they talking about? What specifically is meant by the phrase ‘simple in realization’ and what hardware device are they referring to?

3. “On the basis of such analysis centralizers…” Question: What are centralizers and what is their function? What kind of centralizers?

4. “The preliminary field tests of a method on the depth up to 4000 meters have shown its efficiency and simplicity.” Question: a) Please provide all test and performance data that proves technological efficiency & simplicity? What is the user and customer benefits from ‘efficiency & simplicity?’ When, where and who tested the technology, and were the field conditions?



Technology #72: Technology for the Borehole Walls Lining by Rock Fusion & Vitrification

Describe your technology & its application in the oil/gas industry This project aims to develop a drilling technology that would enable casingless lining of a borehole by fusion and the ceramic vitrification of a borehole. A glass-ceramic cake is formed on borehole walls to provide stability to a borehole and eliminating various complications while further drilling to TD. With our technology only a production string is run down and cemented, required for a long operation of a well producing oil or gas. We’ve resolved a number of problems in the use and application of this technology, and demonstrated the scientific base for this new technology. A special tool (essentially a high-temperature generator), is run downhole on a wireline or regular pipe for electrodrilling. Then while the tool is pulled up to the surface, it fuses borehole walls along the whole interval or in the interval with various completions. This suggests that the tool may be operated after every bit run or after several runs, whichever is required in specific geological conditions of drilling a particular well. We developed the design and special heat and corrosion-resistant materials for the high temperature generator to allow stable operation of the tool at temperatures inside the borehole up to 1500°C, which, as test results indicated, is sufficient for vitrification of rocks of all main categories. Our specialists have determined physical and mechanical characteristics and properties of aggregation, state of formed devitrified glass. We also suggest a method of HTG lateral stability in a well to form a vitrified borehole of a regular shape and stabilize the tool at various RPM. The results, obtained from theoretical and experimental studies, laboratory and field tests, confirmed its applicability in most of geological and technical conditions of drilling.

Benefits of your product, technology or service

1. Possibility to use a more simple well design, which results in material and energy resources saving;

2. Elimination of the most typical complications in well drilling such as lost circulation, rock sloughing, cave-in, tight borehole intervals, etc;

3. Reduction in inventory in the number of typical sizes of drilling equipment used in the field and the possibility to employ lower capacity rigs;

4. Higher quality of cemented casing strings; 5. More wells drilled with water circulation thus making drilling cheaper with drilling

parameters improved compared to drilling on clay mud; 6. Possibility to more widely use air drilling and as a result, way higher parameters of well

drilling; 7. Lower environmental impact of drilling due to elimination of intrareservoir

communication and redundancy of reactive drill mud systems and cement slurries; and 8. Better working conditions for drilling crews.

Advantages vs. Competition Solutions or Existing Methods Lining of a borehole without cementing materials while drilling in complicated conditions is a significant advantage with our technology, even for wells with a single-string design. Besides,



final cementing of a production string takes place in an already stabilized hole of a regular shape, to improve quality of well cementing and durable well operation. Our technology can be used in fields composed of unstable argillaceous rock, which leads to rock sloughing and caving in, tight sections in boreholes, formation of caverns, especially in horizontal wells. Our method makes it possible to use single or two-string designs, rather than multi-string designs, in wells with deep and complicated cross-sections. If a more simple well casing program is used, this will result in reduced costs of running one string. In areas with fields that are mostly composed of stable rocks, our method is efficient only in intervals with complications, primarily, such as lost circulation in sandy and sandy-argillaceous rocks.

Product/Service is currently

In R&D Stage In Prototype Stage In Testing Ready for Manufacturing/Delivery to the Customer in the Selling Stage Intellectual Property Rights All the proposed design solutions and methods of their application are protected by patents in the Russian Federation. Additional Development to Use Technology in the Industry All raw materials as well as OEM suppliers and required partners for specific manufacturing and testing are identified. Preliminary agreements with them are achieved. Gross requirement for development type production and testing is under US$150,000.

Seeking R&D financing

Prototype financing Money for Production & Marketing Corporate Partner Investor Business Development Customer Other (please specify): Testing financing IVI Questions Follow-up

1. Provide test data on the technology, effects and results in different conditions and fields, costs to implement and longevity of the technology in field work.

2. What specifically do the developers want to do with the technology? License/sell IP? Create a new company around the technology?

3. Developers return from their holiday end of August. We’ve contact them then; we are told that test data is available, and we’ll attempt to secure.



Technology #74: Electro Drilling Technology for Deep Drilling: Onshore & Offshore Wells

Describe your technology & its application in the oil/gas industry Our electro drilling technology is intended for the construction of oil and gas wells as well as long crossings underwater barriers and surface structures. Our technology is most efficient for drilling deep directional, horizontal and horizontally branched oil and gas wells as well as for drilling additional boreholes from existing wells. The main distinctive feature of our technology is the fact that electric downhole motor (electro-drill) is used as part of the drill-string bottom-hole assembly to rotate the drill bit. The power for the electro-drill is supplied through an electric cable located inside a drill pipe. Simultaneously the cable is used as a channel of communication with downhole telemetric system sensors located near the well-bottom to monitor the drilling process. The electro-drilling process control is carried out with the help of a surface computerized system. More than 12 million meters of rocks have been drilled with electro drilling technology in various geologic conditions in Russia and the former USSR. The experience gained has proven the technology’s high efficiency in drilling wells in complicated geological conditions. Our proposed development is the next step in advancing existing electro-drilling technology. The object of our work is to decrease oil/gas production cost in Russia and other countries. The latest achievements in aerospace engineering are used as the basis for our development. Benefits of your product, technology or service Our technology decreases well construction costs and operating expenses for E&P productions in several ways: 1. Fundamentally new designs of regulated electro drill and drilling process control system are

used in our technology. This design provides the following benefits; a). To provide for a combination of well drilling parameters to increase technical and

economic indices of drill bit operation. b). A decrease in unproductive expenditures during drilling by preventing failures related to

drill string sticking. c). A decrease of expenses for remedial work and operation of drilling equipment and the

drilling tool. 2. There is an economical and reliable stationary cable communication channel between the

telemetric drilling parameter monitoring system sensors (located in the well) and the surface drilling control system. The communication channel in combination with existing bottom hole telemetric systems enables users to; a). Lower cost for drilling horizontal and horizontally branched sections of boreholes. b). Decrease risk of production losses due to mistakes made in choosing the correct

parameters in making horizontal and horizontally branched sections of the hole in thin productive formations with complicated geological features.

c). Reduce expenses for well logging by integrating this procedure into the drilling operation itself.

Advantages vs. Competition Solutions or Existing Methods 1. The developed electro drill is capable of providing smooth regulation of drill bit rotation

from10-400 rotations/minute independent of drill bit torque value as well as the volume and properties of drilling mud.

2. Electro drill efficiency is 90%, approximately 80% higher vs. all types of existing hydraulic



downhole motors and several times higher than that of surface rotor drill bit drives. 3. Service life of our electro drills before regular maintenance is 400-500 hours, approximately

2x longer than the average service life of existing electro drills and 2x-3x better than hydraulic downhole motors.

4. In comparison with existing types of electro drills, our electro drill has no abrupt multiple increase of starting current. Absence of this abrupt change of starting current enables us to increase service life and reliability of the electro drill cable and the entire electro drill control system.

5. Our developed electro drilling technology operates on different principles vs. existing drilling technologies; it enables users to receive reliable on-line & real time information on changes of forces of resistance in the movement of the drilling string in the borehole during the drilling operation. This information allows users to monitor and prevent the most frequently encountered troubles and reasons for failures related to the seating of the drilling string during drilling.

6. Our developed electro drilling technology vs. competitive drilling technologies incorporates an economical and reliable stationary cable communication channel. The performance of this communication channel (reliability and transmission capacity) is independent of geological and technological conditions. The communication channel provides the transmission of an almost unlimited amount of on-line drilling information from downhole telemetric system sensors located in the well. The communication channel allows operators to monitor and optimize automatic control of drilling and almost all logging operations without interruption.

Product/Service is currently: In Testing Intellectual Property Rights Our technology is protected with the following patents: Additional Development to use your Technology in Industry The electro drill and electro drilling control system is in the development stage. We’ve conducted laboratory tests prototype units. We estimate a financing need of US$6MM to commercialize the prototype technology with the categories of expenses as follows: 1. Complete development and laboratory tests of electro drill components of a single standard

size as well as the control system for drilling and drill pipes equipped with cable sections (US$3MM).

2. Construct three electro drill prototypes, one set of drill pipes for electro drilling and three drilling control system (US$500,000).

3. Purchase and modernize two bottom hole telemetric systems (US$1MM). 4. Implement field tests of electro drilling prototype in deep wells (US$500,000). 5. Implement production (US$1MM). We employ the personnel for development, testing and serial production of the equipment. Seeking: R&D financing IVI Due Diligence Questions:

1. Are your patents issued in Russia or for international countries (which ones)? Please provide electronic copies of patents issued.

2. What specifically do you mean when you say “To provide for a combination of well



drilling parameters to increase technical and economic indices of drill bit operation.” 3. What is the amount of decrease in unproductive expenditures during drilling by

preventing failures related to drill string sticking? Specifically how much cost reduction will your technology provide, for example, it will increase drilling by XX hours or decrease cost from XXUS$ to XXUS$.

4. What is the amount of dollar cost reduction from decreased remedial (maintenance) work and operation?

5. The Company says that its cable communication channel reduces cost for horizontal drilling, deceases risk of production losses and integrates well logging into the drilling operation to lower operating expenses. Specifically what is the dollar amount of cost saving from the communication channels and what is the expected increase in production by making the ‘right’ decisions in horizontal drilling? What specifically do you mean when you say that your technology enables the user to choose the correct parameters when horizontal and horizontally branched sections in the hole. What parameters are you referring to?

6. What is the electrical current needed to start and operate your electric drill?


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