TURKMENISTAN: SCHLUMBERGER FACES PROBLEMS, BUT

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001224

SIPDIS

STATE FOR SCA/CEN; EEB;
ENERGY FOR EKIMOFF/BURPOE/COHEN
COMMERCE FOR EHOUSE

E.O. 12958: DECL: 09/25/2019
TAGS: EINV EPET PGOV TX
SUBJECT: TURKMENISTAN: SCHLUMBERGER FACES PROBLEMS, BUT
STILL SUCCEEDS

REF: ASHGABAT 425

Classified By: Charge d'Affaires Sylvia Reed Curran. Reasons 1.4 (B) a
nd (D).


1. (C) SUMMARY: French-based petroleum service giant
Schlumberger has been in Turkmenistan for ten years and does
the majority of its work conducting training programs. They
face many of the same issues that other foreign companies do,
including worries over the safety and health of their
employees and keeping up with new laws. They have found a
competent local partner and they respect the Turkmen
government's views, both of which have helped them succeed in
a tough environment for foreign companies. END SUMMARY.


2. (C) Schlumberger representatives called on the Charge
September 25 to give an overview of Schlumberger operations
in Turkmenistan, the majority of which are located in
Balkanabat (reftel). They mainly offer training services and
support international oil companies that are investing in
development. They have 300 employees in Turkmenistan, 250 of
which are in Balkanabat. Approximately 75 percent of their
employees are local, to comply with Turkmen law that permits
no more than 30 percent of employees to be expatriates. In
fact, the representatives said they purposely try not to
exceed 25 percent foreign staff in order not to run the risk
that Letter of Invitation requests would not be approved.


3. (C) Schlumberger faces the same problems as many other
foreign companies in Turkmenistan, including keeping
employees safe and healthy. One of their concerns was how to
get flu vaccine for their employees before the winter.
Vaccines have to be brought in, and there is probably only
enough storage for 100-200 doses in Balkanabat, but they
would need close to 1000. Their regional doctor is trying to
get employees, particularly the expats, to Baku to get
vaccinations there.


4. (C) Another common problem for companies, Schlumberger
included, is ever-changing legislation. When Schlumberger
first started working in Turkmenistan 10 years ago, the
problem was that legislation did not exist to govern foreign
business activities. Now, when new legislation is passed
(including the revised Labor Code),it goes into effect
immediately, with no grace period for the company to prepare
for the new regulations. The Schlumberger representatives
did mention that they were sometimes granted a few extra
months to get into compliance with new laws. The grace
period, however, is never extended.


5. (C) Schlumberger representatives noted that there is a
competent work force in Turkmenistan and they have been lucky
to find a local partner, NebitGeofizika, that has standards
on a par with those of Schlumberger itself. They also
claimed that corruption in Turkmenistan is not as bad as in
Kazakhstan or Azerbaijan. Schlumberger does all of its
training in English, and will send employees to intensive
English classes if they do not have enough language to
participate in the training. They have considered doing
training in Azerbaijan, where language is not a problem.


6. (C) COMMENT: Schlumberger is an example of how important
relationships are in doing business in Turkmenistan.
Schlumberger has learned to develop a thick skin and adapt to
rigid Turkmen business practices. In addition, large
petroleum service companies like Schlumberger continue to
position themselves for their own contracts with the GOTX,
possibly putting themselves in competition with big,
international oil and gas companies. Schlumberger seems to
be doing relatively well because it has been in Turkmenistan
for 10 years, works through a local partner, hires Turkmen

ASHGABAT 00001224 002 OF 002


employees, and understands the local culture, including the
importance of respect to the Turkmen. END COMMENT.
CURRAN