Russian oil and gas giants struggling to acquire hydraulic fracturing equipment due to international sanctions will be cheering as the Kremlin enlists the country's military missile technology to lend a helping hand.
According to a governmental resolution signed last week by Prime Minister Mikhail Mishustin, authorities will finance Moscow Institute of Thermal Technology efforts to design and build a fracking unit prototype by the end of 2023.
The Institute is best known for designing and manufacturing Soviet and Russian intercontinental ballistic missiles, known in the West as Sickle, RS-24 Yars and SS-N-32 Bulava missiles.
According to the resolution, at least 80% of parts for the fracking units will have to be sourced from Russian suppliers.
Moreover, the document charges the institute with arranging commercial production of its fracking units, with the gross profit margin — calculated from the initial amount of state investment into the project — to run at 300% in the first three years after the start of sales.
The institute's chief design officer, Yuri Solomonov, told Moscow daily Kommersant that he expects oil producers Rosneft and Gazprom Neft as well as gas monopoly Gazprom to become the first customers.
These Russian companies already face — or expect to face — international sanctions, limiting their access to US and European fracking equipment. The sanctions were brought in after Russia's annexation of Crimea from Ukraine in 2014.
While the institute has competence and prior experience with designs, a key challenge lies in the next phase of the task: manufacture.
Seven out of 34 launches of Bulava missiles conducted between 2004 and 2019 ended in fiasco, with the prime cause identified as errors and defects during manufacturing of the missiles at a plant controlled by the Institute and now identified as a potential assembly point for the planned fracking units.