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The Master of Frac
The meeting with officials of Machinoimport, the purchasing arm of the Soviet Ministry of Oil, had been scheduled for a Monday morning. It was now Wednesday, and Ron Bullen (Mechanical ’61) was in his third full day of waiting, in the hard-backed chair in the Ministry reception area, for his promised meeting to discuss oil field equipment sales. He had asked the receptionist late in the afternoon the previous Monday if the senior official, Mr. Michailoff, was available for his meeting. The receptionist flatly advised that Mr. Michailoff had left for the day. “I didn’t know it then, but the Soviet office had a back exit that allowed their officials to leave the office without ever having to walk through the reception area,” Bullen laughs, recalling that fateful week back in 1984. Western Siberia’s legendarily rich oil fields, considered to be second in size only to the Middle East, had beckoned Bullen for years. Now, with words like glasnost (openness) and perestroika (restructuring) tripping off the lips of western business, and praises being sung to new Soviet leader Michail Gorbachev and his program of uskoreniye (economic acceleration), Bullen was intent on establishing business relations with the Ministry of Oil. “The Soviet Union was a plum waiting to be picked,” says Bullen, president and founder of Calgary-based Canadian Fracmaster Ltd. “Still, back in the early ’80s, Russia was still a Communist state, the KGB were monitoring our every movements, and most people were afraid to go over—particularly the Americans.” Intent on striking a deal to sell oil field equipment to the Soviet Union, Bullen doggedly returned day after day to the reception office of Machinoimport. “I got the same story on Tuesday, on Wednesday, on Thursday. Friday at noon, Mr. Michailoff walked out of his office and stood right in front of me. He looked at me and asked, ‘Why are you still here? Everybody else leaves!’” Not Bullen. Raised on a family farm in Alberta’s Peace River Country, Bullen won the Governor General’s award for the top marks for his Provincial Grade Nine Departmental exams, though he didn’t see the inside of a classroom until grade eleven. He did his schooling by correspondence—his education happened on the farm alongside his father, fixing and building machinery. Bullen says he loves building, and build he has—hotels, houses, oil field equipment, fracturing methods, businesses, and relationships. He's been recognized for his achievements as the only winner of two Canada Awards of Excellence in one year, and the Frank Spragins Award from APEGGA. That Friday, when Bullen concluded his first $6-million equipment sale into Russia, he began to build what, five years later, the international business press would hail as a “dream deal.” He would create the first joint venture between the Soviet state oil company and a Western company. It was struck not on the industry tradition of pay-per-service, but on a groundbreaking agreement that saw Fracmaster winning a share of the increased Soviet oil production Bullen assured the Soviets his equipment, technology, and staff would deliver.  The Leningrad shipyards. By the mid-80s, the long shadow of Canada’s National Energy Program had stalled oil production back home. Bullen had already been to India, China, and North Africa selling his Fracmaster-developed oil well servicing equipment and hydraulic fracturing technologies. (Fracturing, known in the industry as “fraccing” is a process in which special fluids are pumped at high pressures into the well, fracturing the formation rock to produce channels through which oil can flow back into the pipe to be pumped to the surface, thereby increasing oil production.) “It wasn’t as bad over there as everyone thought,” says Bullen. It just wasn’t North America. “AMOCO was the first to use fracturing in Kansas back in 1948. They used a 300-horsepower pumper, river sand, and water. When I went to the Soviet Union, they were using 300-horsepower pumpers, river sand, and water to fracture their wells. I was very confident that we could do better with our 2,000-horsepower pumpers and our enhanced fluid technology,” Bullen says. Bullen could have settled for the sale of oil field equipment, but he was thinking of building something much bigger—a partnership with the Soviets and a share in the extra oil he said his technology would yield from their wells. “I proposed a deal based on us seeing their geological data. They were very secretive in those days and there was no way they would share that information. They agreed that if we provided everything—the money, people, equipment, and technology—the Soviets would provide the land, the water, and the air. “The deal was done on a handshake,” says Bullen. He and a translator sat on one side of an expansive boardroom table with the Minister of Oil, the Chief Engineer (equivalent to a company president), and a dozen or more Soviet bureaucrats lined up along the other side. Bullen returned to Canada, loaded an entire trainload of his trademark yellow Fracmaster oil field equipment, shipped it by land to Montreal, by boat to Leningrad, by rail to Siberia, and then by barge up the Ob River to the western Siberian oil fields. Bullen and his men arrived and moved into one of the stark prefabricated cement apartments that dotted the Siberian landscape. “The standard of living there was about the poorest you could imagine,” recalls Bullen. “There were no hotels as we know them, little or no fresh fruit or vegetables. At one location, in the morning you had to go down to the front door, push away the snow, and go outside to turn on the electric heater to get hot water. If you were lucky, you would find a sheet of newspaper left for the toilet.” Soviet Oil Ministry officials greeted Bullen, directed the Canadian men and equipment to an oil well, and essentially said “Show us what you can do.” Bullen’s crew began the process of fraccing the well, anticipating the rush of crude to the surface to amaze the Soviets.Nothing happened. The well was dead. Undeterred, Bullen said they’d try again. When they fracced the second well on the next day, the oil surfaced, producing 350 barrels a day from what had been a 70-barrel a day well—more than a four-fold increase in production on one well alone. “The Soviets were happy, but very conservative in showing it. That night we found out they had purposefully given us a dry well to start with,” says Bullen. All told, the company had gambled $3 million to show the Soviets how they could increase their oil production up to five times using Western equipment and technology. After a year of hard-nosed negotiations, broken off three times, Canadian Fracmaster Ltd. and the Soviet oil agency signed a deal in the spring of 1989 creating Uganskfrac-master, a 51 percent Soviet and 49 percent Canadian-owned joint venture. The state-owned oil industry paid Uganskfracmaster for the increased oil produced using the fraccing process. Those proceeds were divided between the partners. “I said to the Soviets that if we did well and made a profit, we would donate $1.25 million back to the community. I had a list of what I wanted the money to go for—dental care, school for the kids, housing, playgrounds, hospitals. When it came time to put the money into the community we exchanged lists. The Soviets didn’t want what I offered. They wanted us to build a brewery.” Breweries had been destroyed as part of Gorbachev’s unpopular efforts to fight the Soviet Union’s high rate of alcoholism. Instead, vodka consumption rose even higher. Bullen tells of fishing trips with the Soviets, where eight men shared one flimsy rod with no line and several bottles of vodka. “We agreed to put the $2 million they asked for into the brewery on the condition that our name wasn’t part of it and that they didn’t call us to help operate it or repair it,” said Bullen. His formal obligation to the Soviet officials met, Bullen invested an additional $5 million directly into the Siberian community, buying hospital equipment, building kindergartens, supplying police forces with Western-made security gear and medicines, and building a 140-suite apartment for oil field workers. Two years after signing the deal, the Soviet government let the Canadian company pay itself a hard-currency dividend from oil exports. The move was touted as yet another coup, as Western companies were mostly forced to re-invest earnings from the Soviet Union within the country or try to trade for Soviet-made goods. By then Fracmaster’s operation employed more than 500 people—most of them Siberians—and provided an economic spinoff in Alberta, creating between 200 and 300 new jobs. Bullen made dozens of trips to the Soviet Union. He specifically recalls the day he was on hand in Red Square to see the legendary May Day parade of Soviet Union military muscle. “The equipment came rolling by, and most of it was just belching out blue-tinged smoke from these old diesel engines. It made me think you could call it Blue Square,” Bullen chuckles. “But their missiles were ominous and impressive.” After leaving Fracmaster in 1992, Bullen started over again in Russia, selling over $200 million worth of oil field equipment, and building hotels and housing in Siberia and the Black Sea region. “The Russian people are a genuine pleasure to work with. They are wonderful people.” It’s now been many years since Bullen has been to Russia, the result of a changing political and business landscape. Not that the man who loves to build has stopped building—there’s the 35 large aircraft hangars he and his son-in-law are building at the Calgary Springbank Airport and the 400-unit gated resort community he is building in Poland. He also builds as a hobby—the adult-sized wooden carousel rocking horse he carved and painted for his granddaughter, and the many pieces of fine furniture he’s making in his home workshop. As if that weren’t enough, he is also serving as the general contractor constructing a new house for a friend in Calgary. “I guess I just like building,” smiles Bullen. Gail Gravelines is an Edmonton-based communications consultant.
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Spring 2007
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