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Cablegate: Turkey: Advancing Bypasses and Iraq Gas/Oil

VZCZCXRO2668
RR RUEHAG RUEHAST RUEHBC RUEHDA RUEHDBU RUEHDE RUEHDF RUEHFL RUEHIHL
RUEHIK RUEHKUK RUEHKW RUEHLA RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR
RUEHVK RUEHYG
DE RUEHAK #0756/01 0930817
ZNR UUUUU ZZH
R 030817Z APR 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 1554
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPARTMENT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 ANKARA 000756

SIPDIS

USDOE FOR WASHINGTON AND EKIMOFF
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET EINV TU IZ
SUBJECT: TURKEY: ADVANCING BYPASSES AND IRAQ GAS/OIL

REF: A) ANKARA 614, B) ANKARA 518

1. (SBU) SUMMARY: Turkish public and private sector officials are
eager to move forward on consideration of Iraqi gas for export to
and via Turkey. The GOT is ready to discuss scheduling the second
meeting of the Iraq Gas Working Group, but expects to receive a
draft from the USG on conclusions and next steps from the first
meeting in Istanbul March 9. The Turkey Oil and Gas Exposition 2007
generated lots of enthusiasm for Turkey's aspirations as an energy
hub and southern gas corridor to Europe. End Summary.

--------------------------------------------- -------
Iraq Gas Meeting - Waiting for a Draft from the U.S.
--------------------------------------------- -------

2. (SBU) In a March 30 meeting, Foreign Ministry Deputy Director
General Vural Altay said he was satisfied with the March 9 meeting
in Istanbul of Iraqi, Turkish, and U.S. officials to discuss
Turkey's potential role helping develop Iraq's natural gas reserves
for domestic consumption and potential export. He looked forward to
scheduling a next meeting, hoping for larger Iraqi participation,
and asked for the U.S. to provide the promised paper of conclusions
and next steps. Altay expressed optimism that the hydrocarbon law
would be passed in the Iraqi parliament in May and thought this
might open the way for further discussions.

--------------------------------------------
Quiet Progress on Oil PSA's in Northern Iraq
--------------------------------------------

3. (SBU) Speaking at the Turkey Oil and Gas Exposition (TUROGE)
March 28 in Ankara, Genel Enerji General Manager Orhan Duran also
expressed optimism about passage of the hydrocarbon law. In a
subsequent private meeting, the holder of the most advanced PSA in
Northern Iraq was much more cautious, noting that in addition to the
law itself, the Iraqi legislature would have to approve annexes and
separate laws for revenue-sharing, restructuring the Iraqi National
Oil Company, and establishing the Federal Oil and Gas Council.
Duran noted that there were still lots of opportunities for
disagreement and delay. If the law is passed, he expects that there
will be a bidding round that would draw interest from major oil
companies. Duran said that Shell, Statoil, OMV, and others were
quietly holding talks with the KRG and were poised to move forward.
While proceeding on development of two wells each with production
potential of 25,000 bpd, Duran admitted that Genel's Taq Taq
Operating Company (TTOPCO), in partnership with Canadian Addax,
faces risk on both the hydrocarbon law and establishment of egress
for export of oil.

4. (SBU) Duran said that under the new law there would be a review
of the KRG's existing contracts. Given that key Iraqi officials had
participated in the original PSA signed in 2002, former Oil Minister
Thadban had approved the contract in 2004, and the PSA was revised
in November 2006, Duran was confident that TTOPCO was well
positioned. Moreover, he said that the PSA authorized export via
Turkey and there were advanced discussions for potential pipelines
north. Duran noted that Norwegian DNO was the second most advanced
PSA operator, adding that their field was very close to the Turkish
border. He identified Petoil-Prime (Turkish and American,
respectively) as third in project advancement, but suggested that
they may be targeting "flipping" (selling) its project.

5. (SBU) On Iraqi gas, Duran noted significant interest from Turkey
in the first gas agreement in 1995, involving ENI, Gaz de France,
BOTAS, TPAO, and Tekfen, before Shell subsequently joined. Duran
lamented that subsequent progress on Blue Stream from Russia and the
new pipeline from Iran caused Turkey to be over-subscribed for gas
and interest in developing Iraqi gas languished in advance of the
Iraq war. He was excited about relaunching these projects, and he
referred to the Iraq gas meeting in Istanbul in his remarks at the
TUROGE.

-------------------------------
Southern Gas Corridor to Europe
-------------------------------

6. (SBU) At the MFA, DDG Vural Altay expressed hope that there
would be follow-up from the meeting on the "southern gas corridor"
at the IEA in Paris. He said that there was discussion on setting
up the next meeting in Ashkabat to focus attention on the renewed
potential for Turkmenistan as a source. Altay expected that Azeri
Shah Deniz gas would soon come to Turkey and he anticipated first
shipment of Azeri gas to Greece in July via the

ANKARA 00000756 002 OF 002


Turkey-Greece-Interconnector. He emphasized that Turkey would
continue to be a reliable corridor to Europe. Altay was supportive
of the USG TDA funded gas transit orientation visit for an
inter-agency group of Turkish officials, including the regulator
EMRA.

---------------------------------------
Bosphorus Bypasses - Who Will Be First?
---------------------------------------

7. (SBU) Echoing published statements by Energy Minister Guler at
TUROGE, Altay said that the GOT's preferred Samsun-Ceyhan Bosphorus
bypass had garnered 70% throughput commitments, but was unable to
offer details. In his TUROGE speech, the Macedonian Investment
Minister expressed comparable confidence for the AMBO bypass, but
also would not reveal the identity of claimed throughput guarantors.
Altay said that the official ground-breaking for Samsun-Ceyhan was
postponed from March to April in order to schedule participation of
the Turkish and Italian Prime Ministers. Recently bringing on
former TPAO DG Osman Dinc as new project manager, Calik Enerji is
the main sponsor and ENI is the official partner for the
Samsun-Ceyhan "TAPCO" project company. Shell and Indian Oil Company
are still "seriously looking". Echoing comments we have heard from
other companies and observers, the Chevron rep told us that the
presence of a project "sponsor or middle-man" is an impediment to
Chevron's participation.

Wilson

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