Exhibit 10.7

Tractatus LLC
33 Harrison Street, New York NY 1 3 USA
Tel: 1 212233.3549 Fax: 1 4135 1.0390 e-mail: paepst@aol.com

July 2, 2001

Transmeridian Exploration Incorporated
11811 North Freeway Suite 500
Houston, TX 77060 USA

Attn: Mr. Peter Holstein, Chairman
Mr. Lorrie T. Olivier, President & CEO

Gentlemen:

This letter confirms the understanding and agreement (the "Agreement") between
Transmeridian Exploration Incorporated, a Delaware corporation ("TMEI") and its
Affiliates (collectively, the "Company"), and Tractatus LLC, a Delaware limited
liability company ("Tractatus") as follows:

1. The Company hereby engages Tractatus as its agent for the purpose of advising
on the structuring and placement with a bank or other financial institution of a
borrowing based, production note or other debt facility (term or revolver) to be
used for development of the Company's oil and gas assets and other projects,
where such debt facility may include equity features or direct or indirect
interests in properties of the Company (collectively referred a as the
"Facility"), of between approximately $10-30 million (hereinafter referred to as
the "Transaction"). For purposes hereof, a Transaction shall include any single
transaction or any series of transactions whereby the Facility is funded.
Tractatus' agency on behalf of the Company shall continue until the closing of
the Transaction, unless earlier terminated pursuant to paragraph 6 below. In
connection with activities hereunder, Tractatus may designate one or more third
parties ("Designated Firms") through whom such activities may be conducted and
compensation allocated.

2. Tractatus hereby accept the engagement described in paragraph 1 and, in that
connection, agrees to:

(a) Keep and maintain all material non-public information which Tractatus
receives or develops concerning the Company confidential and disclose that
information only as contemplated by this Agreement or as required by law;
provided that if disclosure is required, Tractatus shall: (i) promptly notify
the Company; and (ii) disclose only so much of such information as is necessary
to avoid penalty or sanction. Notwithstanding the foregoing, Tractatus may
disclose non-public information to its agents, employees, advisors, potential
financing sources and Designated Firms on a need to know basis; and

(b) Review the Company's operations and advise the Company regarding its capital
structure, the valuation of its business, and the financing alternatives
reasonably available to the Company.

3. Except as required by law any advice rendered by Tractatus pursuant to this
engagement shall be treated as confidential by the Company, shall be solely for
the benefit of the Company and shall not be disclosed publicly in any manner
without the prior written consent of Tractatus. If practicable, without prior
consultation with Tractatus, the Company shall not make any legally required
disclosure of such advice nor make any public announcement or filing in which
Tractatus' name appears.

4. The Company shall:

(a) Promptly advise Tractatus in writing of any parties with which the Company
has had substantive discussions regarding a possible Transaction prior to or
subsequent to the date of this Agreement and during Tractatus' engagement
hereunder; and which transaction if completed will not be subject to this
agreement

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(b) Make available to Tractatus all information concerning the current and
proposed business, assets, operations and financial condition of the Company and
its projects which may reasonably be required by Tractatus in connection with
the performance of its services hereunder. Tractatus may rely upon the accuracy
and completeness of such information without independent verification.

5. During the period that Tractatus is engaged by the Company, the Company shall
not directly or indirectly engage in any substantive discussions with Tractatus
Parties (as defined below) concerning a Transaction without giving prior notice
to Tractatus.

6. Subject to the provisions of paragraphs 7 through 11, which shall survive any
termination of this Agreement, the Company or Tractatus may terminate Tractatus'
engagement hereunder at any time with or without cause by giving Tractatus or
the Company, as the case may be, at least 30 business days prior written notice
of termination.

7. The Company shall pay Tractatus a non-refundable retainer through the
issuance of 5,000 shares of common stock of TMEI payable upon the execution of
this Agreement.

8. The Company agrees to conditionally compensate Tractatus as follows:

(a) If a Transaction is completed with a client of Tractatus during the term of
Tractatus' engagement or within 12 months following the termination of
Tractatus' engagement pursuant to paragraph 6 above, then the Company shall,
upon initial closing of the Transaction, pay Tractatus as compensation for its
services, advisory compensation equal to the greater of (i) $250,000 and (ii) 1%
of the gross proceeds of Facility subscribed, received or to be paid in
connection with a Transaction. The fee payable pursuant to this Section 8(a)
shall be paid pro-rata with draw-downs under the Facility, based upon the ratio
that the aggregate draw-downs bear to the initial borrowing base; provided the
initial $250,000 shall be payable when the Company has received been paid
$5,000,000 of gross proceeds under the Facility.

(b) For the purpose f determining compensation due Tractatus under paragraph
8(a) above, Facility will include amounts initially disbursed by the bank(s) or
other financial institution(s) participating in such Facility and commitments ma
e by such bank(s) or other financial institution(s) to purchase additional
Facility.

(c) The compensation due to Tractatus under paragraph 8(a) above shall be
pro-rated by the ratio that participations in the Facility ("Participations")
acquired by Tractatus Parties in the Transaction, bears to the total amount of
Participations acquired in the Transaction; provided, Tractatus Parties shall be
entitled, at Tractatus' election, to subscribe and purchase not less $5 million
of Participations issued in the Transaction on terms and amount no less
favorable than the most beneficial terms upon which the Facility are offered to
non- Tractatus Parties .For purposes of this Agreement, "Tractatus Parties"
shall be persons or entities introduced to the Company by Tractatus or a
Designated Firm as set forth on Schedule "A" attached hereto (as may be amended
from time to time), or with whom Tractatus or a Designated Firm has substantial
involvement in connection with the Transaction based on a written request from
the Company, and persons or entities introduced o the Company by other Tractatus
Parties.

9. The Company agrees, whether or not a Transaction proceeds, to pay all
expenses directly related to the execution of this agreement. Such expenses
shall include, without limitation, travel, telephone, postage and courier,
printing and any other out-of-pocket costs incurred by Tractatus or the
Designated Firms. Reimbursement by the Company for approved out-of-pocket
expenses shall be made to Tractatus at the earlier of (i) 30 days from the date
the Company receives documentation, or (ii) initial closing of the Transaction,

10. The Company hereby agrees to indemnify and hold harmless Tractatus, its
members, managers, directors, officers, employees, agents and controlling
persons (as defined under the Facility Act of 1933, as amended (the "1933
Act")), and those of the Designated Firms from and against any and all losses,
claims, damages, liabilities and expenses, joint and several (including all
reasonable fees of counsel, whether or not resulting in liability), caused by or
resulting out of Tractatus' acting for the Company pursuant to this Agreement
(collectively, "Claims") provided, however, that the Company will not be liable
hereunder to the extent that any Claim ultimately adjudicated in a
non-appealable

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judgment to have resulted from Tractatus' gross negligence or willful misconduct
in performing the services described above.

11. If a Transaction is completed pursuant to this Agreement, Tractatus may at
its expense and with prior notice to and the Company's approval (which approval
shall not be unreasonably withheld or delayed), place an announcement in such
newspapers and periodicals as it may choose stating that Tractatus has acted as
financial advisor for the company in such transaction.

12. This Agreement shall be binding upon and inure to the benefit of the parties
and their successors and assigns. This Agreement represents the entire
understanding between the parties, and all prior discussions and negotiations
are merged in it, This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to the
state's conflicts of law principles.

If the foregoing correctly sets forth the understanding and agreement between
Tractatus and the Company, please so indicate in the space provided for that
purpose below.

Sincerely,
Tractatus LLC
By: /S/ PHILIP A. EPSTEIN
PHILIP A. EPSTEIN Managing Director

ACCEPTED AND AGREED:
Transmeridian Exploration Incorporated
By: /S/ Peter L. Holstein
Peter L. Holstein
Chairman of the Board
Dated July 3, 2001