TURKMENISTAN: U.S. OIL AND GAS EQUIPMENT FIRM

C O N F I D E N T I A L ASHGABAT 000301

SIPDIS

SCA/CEN; EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER

E.O. 12958: DECL: 03/05/2019
TAGS: PGOV EINV EPET TX
SUBJECT: TURKMENISTAN: U.S. OIL AND GAS EQUIPMENT FIRM
HOPING GOVERNMENT WILL PAY UP

Classified By: DCM Sylvia Reed Curran for reasons 1.4 (b) and (d).


1. (C) POLOFF met on March 4 with Cameron country manager
Gurban Seyitli to hear how things were going for the US-based
oil and gas equipment company. Seyitli said the company's
main contracting partner here is Turkmen State Oil Concern,
for whom he claimed Cameron currently provides for 75 percent
of their technical needs. The company has also periodically
contracted with Turkmen State Gas Concern and Turkmen State
Geological Corporation. He said that Cameron competes with
only two other companies for surface field development
equipment. Cameron is deeply interested in helping the
Turkmen government develop two other promising oil field
areas: the Dervaza fields several hundred kilometers north of
Ashgabat in the Karakum Desert, and those just a short
distance northwest of Ashgabat, he said.


2. (C) In November 2008, Turkmen State Oil Concern's vice
president for production told Cameron representatives that,
based on the company's established reputation, the Concern
would contract with Cameron without a tender in a deal worth
$56 million. Cameron executives in Germany and the U.S. were
surprised and pleased with the deal that their little office
of four people in Ashgabat successfully closed. In 2009,
Seyitli said, his primary business development goal will be
to contract with the Turkmen government to provide Cameron's
artificial lift system technology, which helps get oil out of
the ground at old, established fields by introducing an
artificial source of pressure at the wellhead. Senior
Cameron executives will be coming to Turkmenistan the week of
March 16 to assist with a presentation on the technology in
the Oil Concern's Balkanabat office, he said.

3. (C) Seyitli also said that the company has become quite
concerned, however, by the Oil Concern's failure to initiate
payment on the 2008 contract, and the Concern also owes
Cameron money associated with a smaller $20 million contract.
He said the Concern had not made payments on either contract
since November 2008, and believes the problem lies in the
Concern's difficulties selling its crude oil abroad. Both
Turkmen Oil and Turkmen Gas are financed by their earnings
from oil and gas exports, respectively, but because of the
drop in global oil prices, in particular, Turkmen Oil
immediately began to have financial difficulties, he said.

4. (C) Seyitli described Cameron's technology as "the most
expensive, but also the most high quality technology of its
kind" available, and said landing contracts here was always
difficult, because the poorly-educated government officials
he deals with do not understand most of what the company
does, and they only look at the cost page. He said that he
was able to reinforce with officials the importance of
quality after a serious blow out on December 27 destroyed an
oil rig and injured three people at a field near Apatlawuk,
near the Iranian border on the Caspian coast. Although a
German company, Bentek, had been operating the rig, all of
the equipment was of a cheap Russian make. Seyitli opined
that the Turkmen would regret the use of cheap Russian and
Chinese equipment on their oil and gas fields, because of the
costly damage it risked. The destruction of that rig, he
said, had probably cost the Turkmen State Oil Concern
director his job in January.

5. (C) COMMENT: This is the second time post has heard
companies express concern about the Oil Concern failing to
pay on its contracts. If, indeed, the Concern is cash-poor,
the pace at which the government signs contracts with foreign
service companies it wants to entrust with field development
in the near term will be slow, if at all. END COMMENT.
MILES