Vortex Oil Engineering raises €550,000 from Polish investors, doing field trials with European clients.

Siberian scientists and Latvian businessmen of Vortex Oil Engineering have started field tests of their technology, which they say will improve oil field utilization 5-6 times and reduce the water pollution. Will this Latvian startup change the oil industry?

What is the problem?

Many of us imagine oil fields as big underground lakes, but CEO of Vortex Oil Sergey Jakimov says it is more accurate to compare them to large sponges soaked with oil. To get to the sponge (the production layer), oil companies drill a hole in the ground and usually extract about 10-15 percent of oil thanks to underground pressure. Then, to get out the rest one would commonly drill another hole, a so-called injection well, and pump in water. It creates pressure and squeezes the oil out of the sponge and up through the initial hole.

As a result, a mix of water and oil is extracted, which then has to be separated. The separated water (produced water) is repeatedly pumped back into the production layer. The problem is that you cannot perfectly separate oil from water at the moment. So, with every pumping cycle the water and the extraction well both become muddier and harder to purify. The extraction well gets clogged and becomes less effective as a pressure stimulator. The water has to be eventually replaced, and used water cannot be purified and used for any other purpose, which creates additional costs and environmental hazards.

How does it work?

Vortex Oil offers a device, which is installed on extraction well, uses water’s own force to treat and purify it before pumping the water back into the production layer.

Vortex device is basically a pipe with a giant mill that blends the biggest oil particles and reduces the viscosity of the water, making it an even emulsion.

The water then penetrates wider scope of production layer, widens the range and boosts the extraction amounts. It still needs to be eventually replaced, but it can be used 5-6 times longer. On top of the cost savings, the device provides increase in extraction amounts. Currently, if a company is using 200t of water on its field to extract 60t of oil after separation, installing Vortex device increases the output to 100t, while still using the same 200t of water.

Vortex devices have undergone tests in harsh Siberia and proven to perform consistently over the course of 5 years within temperature range from -40 to +40°C. The team is now running field trials in Romania with an Austrian oil company and is confident to sign up several European and American clients in 2016.

Where is the money?

Vortex has a revenue model common for the industry: they sign a deal with an oil service company, explore the field, install a vortex device and let the client try it for free over the first 4 months. During this time Vortex provides support and adjusts the device as needed. After the free trial, the company may continue to rent the device as long as necessary, and Vortex will take it back in the end.

What’s next?

Vortex Oil had initially arranged their first field trial before pre-seed investment from Imprimatur Capital. Since the additional €550,000 raised from Startup Hub Poland, the startup has expanded its plans. The new investors have also assisted in setting up Vortex Oil Engineering offices in Poland and other EU countries to be more approachable to existing and potential clients.

The funds have also strengthened team’s R&D activities. To avoid being one-technology company, Vortex Oil diversifies its offering and provides extraction well unclogging service alongside their Vortex devices. The bundle is well-received by initial clients.

“We made it a point to go as long as possible without raising external funding. We only raised our pre-seed round when we had our first client ready to sign the deal, just because it is rather hard to appear reliable with $0 account balance”

The company has persevered their entire development cycle on bootstrapping, and plans to spend 2016 in field trials with first clients. Despite also exploring opportunities in Latin America and Russia, the team decided to focus on the EU market first, and then step-by-step move into the US.

Currently their competitors are other increased oil retrievement solutions and fracking. The first are complex and costly, involving either chemical compounds or elaborate devices. The second uses significant amounts of propellant and equipment, as well as a range of potentially cancerogenic chemicals that may contaminate groundwater around the fracking site.

“Fracking is discouraged in the EU and even illegal in some member states, and we start from here. Once our value proposition is proven, we will move to the US and other regions.”

Vortex Oil offers a technology in the sweet spot of both cutting costs and reducing the environmental impact of oil extraction companies. With global oil prices staying low, it is an attractive value proposition to make the most out of existing fields without investing in new ones.

The company is developed at region’s biggest science accelerator Commercialization Reactor, working with IP-protected startups from advanced industry software to health tech and nanotechnology. Vortex Oil will be present at Commercialization Reactor Investors’ Day on April 12 in Riga. Join the event here.