POWER ULTRASONIC SYSTEMS (VIATECH ) Sector: ultrasonic oil-service Location: Moscow, Nizhnevartovsk Stage: business development Investment year: 2012 Envisaged exit: 2017 Company at a glance:  The Viatech Group (TSUT-Service, Ltd, Viatech Ltd., SoNovita Ltd.) develops an advanced ultrasound technology for enhanced oil recovery from failing oil wells*. The use of the new oil well treatment technology allows oil producers to increase considerably output from aging oil wells by at least 3 tonnes/per day.  Owing to its effective organizational structure consisting of three main business units (production, research, and service), the Company is capable to offer different kinds of oil well treatment services (including services aimed at enhancing and stimulating oil recovery from failing wells with heavy oil) to oil producers doing business worldwide.  The Company’s research and production facilities are located in Russia (Moscow and Nizhnevartovsk).  At present, the Company’s business is concentrated mainly in West Siberia and the Volga region of Russia where the Company works extensively with such oil companies as Rosneft and RITEK (Lukoil Group). The Company holds final talks with the Gazprom Neft Group to apply Viatech’s ultrasound method to stimulate oil production from the company’s declining wells.  The Company’s advanced ultrasound technology has received the positive approval from the U.S. Department of Energy and has been permitted for testing in the United States.  The Company owns numerous patents and licenses covering all equipment and technologies the Company manufactures or sells.  The Company actively participates in different international exhibitions, conferences, and seminars in order to promote its advanced ultrasound method around the world. Not once the Company and its ultrasound products have won different academic and industry awards in Russia and globally.  The Company is managed by a highly professional management team with extensive industry experience. To date, ultrasound equipment and technologies which have been designed by the Company’s team in the past successfully operate in more than 15 countries worldwide, such as USA, Japan, Germany, England, Austria, Switzerland, Israel, Finland, China, Egypt, etc. *Unique technology Oil well ultrasonic treatment is an advanced, hi-tech, reagentless, geophysical method of controlled and selective stimulation performed on bottom hole formation zone for the intensification of production and oil recovery improvement, applicable in a wide range of geological and technological conditions, with quite long (up to 2 years or more) and significant (often multiple) effects. The method is almost free of defects for reservoir and wells, environmentally clean, and easy to combine with other known methods of production stimulation and oil recovery improvement. The technology allows restoring effectively the filtration properties of the productive layers without any damage to the oil-bearing reservoir and with minimal time and material costs. Market characteristics and trends:  The overall size of Russia’s oilfield service market is estimated at ca. USD 22b in wholesale prices.  Since the early 2000s, Russia’s coefficient of oil recovery (COR) which indicates the ratio of recoverable oil reserves to geological reserves (normal range from 0.4 to 0.5) has steadily decreased and continues to decrease with every day that passes (from 0.39 in 2001 to 0.33 up to date). According to the industrial experts, the only possible way to slow down the decline of Russia’s oil production is the active implementation of advanced oil well treatment technologies and the application of innovative methods aimed at improving the efficiency of oil recovery from failing oil wells, which is among the lowest in the world.  According to the Economic Development Ministry's official forecast, the oil production in Russia is expected to reach a record level of about 514 million tonnes this year while the oil output will edge down by 0.8% to 510 million tonnes. Oilfield service market in Russia, 2003-2015F, bUSD 35 31 28 30 25 25 20 20 15 10 8 9 11 13 15 16 18 20 22 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F Development strategy: In the next 2-3 years, the Company plans to accelerate the development of ultrasound technologies and related equipment for optimizing oil recovery from failing heavy oil wells; to diversify its customer base; to start providing a full range of its services to Russia’s major oil companies such as Rosneft, Gazprom Neft, LukOIL, etc; to expand its operations abroad. With its advanced ultrasound technology the Company intends to leapfrog its main competitors in Russia using more expensive and less effective traditional means of oil production intensification (chemical treatment, hydrodynamic methods). The Company means to occupy the leading position in the local oil well stimulation market by 2017. Contacts at VIY Management: Mr. Vyacheslav V. Ivanov Head of Hotel Investments Office in Russia +7-812-449-74-74 [email protected] Mr. Sergey A. Volchenkov Head of Investment Department +7-921-964-1892 [email protected]