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P 111142Z FEB 10
FM AMEMBASSY ASHGABAT
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C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000195 
 
SIPDIS 
 
STATE FOR SCA/CEN; EEB;NEA/IR 
ENERGY FOR EKIMOFF/BURPOE/COHEN 
COMMERCE FOR DSTARKS/EHOUSE 
 
E.O. 12958: DECL: 02/11/2020 
TAGS: EPET ECON PGOV EINV BTIO IR TX
SUBJECT: TURKMENISTAN: U.S. COMPANY WEATHERFORD EYES MORE 
OPPORTUNITIES 
 
Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d). 
 
¶1. (C) SUMMARY: U.S.-based oil and gas service company 
Weatherford continues to press forward in Turkmenistan, 
seeking additional service contracts with international oil 
and gas companies (IOC), as well as direct contracts with the 
Government of Turkmenistan (GOTX).  The company is 
considering an "alliance" with Turkmenistan's state-owned oil 
and gas companies, since the GOTX is reportedly reluctant to 
enter into joint ventures.  The company's country manager 
felt the GOTX prefers to do business with service companies 
like Weatherford over large international oil companies 
(IOC).  He added that his company had the resources, 
technology, and experience that most IOCs had.  Weatherford 
recently entered into a contract with UAE-based Gulf Oil and 
Gas FZE to drill wells in the South Yoloten gas field.  The 
deal comes at a time when Weatherford ended its service 
contract with UAE-based Dragon Oil in the offshore Cheleken 
contractual territory.  Dragon Oil swaps oil with Iran, and 
U.S.-based Weatherford needed to comply with U.S. sanctions 
against Iran.  END SUMMARY. 
 
¶2. (C) On February 10, econoff met with the country manager 
for the U.S. oil and gas service provider Weatherford.  The 
company has been present in Turkmenistan for eight years and 
has its main office in Ashgabat.  It operates a branch in 
Turkmenbashy where it has a service contract with Malaysian 
Petronas and another branch in Balkanabat, where it has a 
service contract with Italian energy company Eni (NOTE: U.K. 
Burren Energy had the original oil production sharing 
agreement (PSA) with the GOTX in 1996, but Eni bought Burren 
Energy in 2008.  END NOTE.)  Weatherford has 120 employees in 
the country, only 12 of whom are expats.  The company's 
country manager stated he was brought into Turkmenistan from 
the UAE to "build the business," after turning Weatherford's 
$4 million annual UAE profits into $200 million per year. 
 
AN "ALLIANCE" VS. A JOINT VENTURE 
 
¶3. (C) Weatherford's country manager explained that the 
company is in constant negotiations with state-owned 
TurkmenGas, TurkmenOil, and TurkmenGeology in order to spur 
direct deals with the GOTX.  He stated the company has one 
employee dedicated to visiting the state-owned companies and 
government offices on a daily basis to liaise with Turkmen 
energy sector decision makers.  He noted that the GOTX would 
prefer to enter a commercial "alliance" with Weatherford, in 
lieu of a joint venture for a particular project.  He added 
that much remains unclear concerning the potential 
"alliance," including who will provide capital, whether the 
alliance will be considered a legal entity by Turkmen law, 
and what specific benefits Weatherford can count on by 
joining the alliance.  At the same time, he had the 
impression that entering an "alliance" with the GOTX would 
put Weatherford at the front of the line for future 
production deals. 
 
¶4. (C) According to the company's country manager, the GOTX 
prefers to work with service companies like Weatherford and 
Schlumberger over large, international oil and gas companies 
(IOC).  He posited that Weatherford's eight year presence in 
the country had won oer government officials, who are 
generally weary of foreign energy companies.  He was 
confident that Weatherford could successfully drill subsalt 
and high sulfur content fields that IOCs have previously 
claimed only they could do.  As a result, he believed that 
all service companies in Turkmenistan are quietly courting 
the GOTX with direct production deals, since they are willing 
to work on a service contract basis.  He did not rule out the 
possibility of pursuing longer-term agreements including 
 
ASHGABAT 00000195  002 OF 002 
 
 
PSAs, however.  When asked if Weatherford's business 
interests with IOCs in other countries could be damaged by 
Weatherford's plans to seek direct deals with the GOTX, he 
responded that Turkmenistan was still relatively 
"unexplored," and that no one energy company had any 
established "claims" to date. 
 
WEATHERFORD CLAIMS ITS IRAN SANCTION COMPLIANT 
 
¶5. (C) The country manager explained that Weatherford's 
service contract with UAE-based Dragon Oil was terminated 
when the company's U.S. sanction's office confirmed that 
Dragon Oil was swapping oil produced in Cheleken with Iran. 
He stressed that Weatherford's legal counsel worked closely 
with the U.S. Departments of Justice, State, and Commerce in 
order to ensure the company is in compliance with U.S. law. 
In addition, the company reportedly spent a large amount of 
its own resources pulling its employees and equipment out of 
the Cheleken contractual territory.  The country manager 
described the former contract with Dragon Oil as profitable, 
adding that Weatherford is now pressing for future contracts 
with the GOTX to compensate for lost revenue. 
 
¶6. (C) COMMENT: There are only a handful of oil and gas 
service companies in Turkmenistan, and U.S.-based Weatherford 
is prominent among them.  According to the company's country 
manager, the GOTX currently prefers service providers over 
large IOCs, putting Weatherford in an excellent position to 
strike direct deals for the development of onshore gas 
fields.  Unlike most IOCs vying for Turkmen business, service 
contracts are the bread and butter of companies like 
Weatherford.  At the same time, Weatherford hopes that its 
eight years of successful service contract work will enable 
the company to parlay its good reputation into direct, 
long-term deals with the Turkmen.  END COMMENT 
CURRAN