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Cablegate: Second Turkey-Iraq-Us Gas Study Meeting in Istanbul

VZCZCXRO8164
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHAK #1756/01 1911303
ZNR UUUUU ZZH
R 101303Z JUL 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 2901
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCNRAQ/IRAQ COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0984
RUEHDM/AMEMBASSY DAMASCUS 1654
RUEHIT/AMCONSUL ISTANBUL 2992
RUEHDA/AMCONSUL ADANA 2121

UNCLAS SECTION 01 OF 03 ANKARA 001756

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET EINV PREL TU IZ
SUBJECT: Second Turkey-Iraq-US Gas Study Meeting in Istanbul

Ref: A) Ankara 756; B) Ankara 614

ANKARA 00001756 001.2 OF 003


1. (SBU) Summary. During the second trilateral gas working meeting
held in Istanbul on Saturday June 30, Turkey's Under Secretary for
Energy Sami Demirbilek reassured Iraqi PM Maliki's oil advisor Abd
al-Ilah al-Amir and the Iraqi Ambassador, Dr. Jawad al Hindawi, of
Turkey's intention to find ways to cooperate with the Iraqi central
government in energy and to do so in "a respectful way and as a
neighbor." Although unwilling to make formal commitments, Advisor
al-Amir expressed willingness to "listen to all ideas" for
cooperation and encouraged Turkey's Ministry of Energy to write
letters formally suggesting cooperation projects in electricity, in
the acceleration of the gas master plan, and in oil and gas
exploration plans in the al-Nasiriyya region. Deputy Assistant
Secretary Bryza noted the first goal for Iraqi gas is domestic use,

SIPDIS
but Bryza also described the great opportunity for Iraq to export
gas to Europe and foster European and global energy security through
supply diversity. After presentations by BOTAS and TPAO, and
discussions of the status of security and the hydrocarbon law in
Iraq, the working group concluded with an agreement to meet again in
September. The first gas working group meeting was held March 9 in
Istanbul. End Summary.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Al-Amir: Listening to all ideas but, first, hydrocarbon law and the
gas master plan
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -

2. (SBU) Iraqi Oil Advisor Abd al-Ilah al-Amir opened and ended his
remarks stating that he is "all ears on the ways and means" for
Iraq-Turkey energy cooperation, but he also described the "hard
situation" in Iraq due to security. He explained the gas sector has
been neglected for 30-40 years, but Iraqi thinking on gas has
changed. The five non-associated fields in the north are not the
only sources of gas, and gas and condensate resources are also in
the Western Desert. Domestic needs are important. Power stations
will be converted from liquids to gas. Gas will be needed for oil
field maintenance and industrial uses. Furthermore, Iraq has agreed
to join the Arab Gas Pipeline project with a spur to the line
running from Egypt through Jordan and Syria to Turkey. Al-Amir
explained "many unknown issues" exist and the purpose of Iraq's
master gas plan is to clarify these. Al-Amir also detailed Iraq's
"new circumstances" for hydrocarbon development once the new
hydrocarbon law has been passed.

- - - - - - - - - - - - - - - - - - - - - - - - - - - -
Bryza and Demirbilek: EU is excited for the prospects of Iraqi gas
- - - - - - - - - - - - - - - - - - - - - - - - - - - -

3. (SBU) Bryza expressed hope that excess Iraqi gas can be exported
to Europe in the future. Bryza also explained how Iraq fits into the
EU energy security strategy. The possibility of obtaining gas from
Iraq would give the EU more confidence in resisting Russian
pressure, even if Europeans would need to be "patient" before
actually receiving the gas. A "smarter" EU energy strategy would
avoid exclusive long-term contracts with Russia, and instead seek
leverage from access to Caspian and Iraqi supplies to negotiate more
favorable terms with Gazprom. Undersecretary Demirbilek echoed these
remarks explaining, "If Iraqi gas were available, it would provide
an important alternative to Russia." Demirbilek suggested working
towards an MOU or IGA between Turkey and the Iraqi Central
Government to allow a framework for oil and gas exploration.
Al-Almir explained that Iraq is not ready now for such agreements
but did declare that Iraq will export gas in "all directions". Bryza
re-emphasized that "we are here for Iraq" in a gesture of good will
and shared interests, and would apply no pressure as our Iraqi
friends make their sovereign decisions. Demirbilek clarified
Turkey's view that Iraq is a good friend and neighbor. Turkey is
willing to support all forms of bilateral energy cooperation, gas,
oil, refineries, and electricity.

4. (SBU) Representatives from Turkey's BOTAS and TPAO put into
context oil and gas cooperation with Iraq, including past projects,
Turkey's strong interest in restoring the Iraq-Turkey
(Kirkuk-Ceyhan) oil pipeline to active use, estimates of future gas
production (with exports growing to 40-50 bcm), the potential for
export through TGI Nabucco, and LNG from Ceyhan, as well as
BOTAS/TPAO willingness to assist in completion of the gas master
plan. TPAO and BOTAS said that while their previous work in the
1990s had focused on the five non-associated gas fields in the
north, they were currently looking at Iraq as a whole, including
ways to exploit currently flared associated gas in the south. TPAO
estimated approximately 1 trillion cubic meters of gas reserves in
northern Iraq, approximately evenly split between associated and
non-associated gas.

ANKARA 00001756 002.2 OF 003

- - - - - -
Next Steps
- - - - - -

5. (SBU) Turkish MFA Energy Affairs DDG Vural Altay asked al-Almir
how best to cooperate while emphasizing only the central government
of Iraq is the counterpart to the Republic of Turkey. He explained
that GOT is currently advising Turkish companies can only proceed
with exploration and cooperation if the central government approves.
Demirbilek further explained that as a neighbor Turkey is not
thinking of "taking product out" for commercial motives, rather
Turkey is seeking a way to open the door to energy cooperation that
will strengthen Iraq politically and economically. Altay referred to
a letter that was sent from Turkey's Ministry of Energy to the Iraqi
electricity minister with concrete proposals for how Turkey could
help in the electricity sector (Note: We understand this letter was
delivered during the course of the Neighbors' working group on
energy on June 28-29. A copy of the letter is in para 10. End Note.)


6. (SBU) Al-Amir responded by ranking completion of the gas master
plan as the highest priority and asked TPAO to write a letter to the
Turkish Ambassador, which mentions this meeting, formally inquiring
about how TPAO might support efforts develop the gas master plan in
conjunction with ongoing efforts by the GOI with Shell's help. He
also suggested that Turkey can help in oil and gas development and
re-injection efforts, including at the provincial level. At
Al-Amir's suggestion, TPAO also agreed to send a letter to the Iraqi
central government and to the provincial government of al-Nasiriyya
offer to assist in the development of oil and gas resources in that
province. On the matter of contracts, al-Amir reminded everyone that
the Iraqi Government will recognize no contracts that do not comply
with the new hydrocarbon law. TPAO repeatedly sought confirmation
that existing production sharing agreements with Iraqi Kurdish
authorities would need to be reconciled with the hydrocarbon law
once that legislation is passed. Turkish Under Secretary Demirbilek
warned that should Turkish companies choose to proceed with existing
PSA's, they risked finding themselves of either having to
restructure their projects in accord with the new hydrocarbon law or
cease developing their projects. Al-Amir affirmed this was indeed
the case. The Turkish Government stressed that it will not approve
any actions by Turkish state-owned companies in Iraq without the
express authorization and agreement of the Iraqi Government. The
Turkish Ministry of Foreign Affairs noted the same applies to access
to the Iraq-Turkish pipeline. As a side note, the Turkish MFA
reported that it rebuffs requests from the Norwegian oil company DNO
"every two weeks' for permission to ship its oil from a Kurdish
field through the Iraq Turkish pipeline.

7. (SBU) From a Turkish suggestion, the Iraqis agreed to organize a
meeting for Turkish companies in Iraq laying out what the GOI sees
as investment needs in the energy sector and explaining the
conditions and requirements for the Turkish private sector in Iraq.
At Bryza's suggestion, all agreed to meet again, perhaps in
September.

8. (SBU) Comment: This second trilateral meeting was positive in
that it discussed a broader range of specific projects, and
highlighted areas for potential cooperation. It was also useful to
brief a higher level Iraqi delegation on the significant potential
for Iraqi gas exports through Turkey. It was also clear that the
Turks have to figure out how BOTAS and TPAO will work with various
Iraqi parties, including the KRG, once the hydrocarbon law is
passed. Overall, we agree with the observation made by several GOT
delegates that we need to work together to make the GOI more
comfortable in participating in this dialogue, including sending a
larger delegation with higher representation at the next meeting.
End Comment.

9. (U) Participating in the Meeting:

Iraq
- Ambassador Dr. Jawad Al Hindawi
- Oil Advisor, Prime Minister's Office, Abdulilah al-Amir

Turkey
- Under Secretary for Energy Sami Demirbilek
- MFA Energy Affairs Deputy Director Vural Altay
- Several other representatives from Turkey's Energy Ministry,
Ministry of Foreign Affiars, BOTAS, and TPAO

U.S.
- Deputy Assistant Secretary Matt Bryza
- Director, NEA/I-ASSIST, Laird - Treiber

ANKARA 00001756 003.2 OF 003


- Robert Boynton, ECON, Embassy Baghdad
- Thomas Goldberger, ECON, Embassy Ankara
- Mike Mauel, Embassy Ankara

10. (SBU) Letter sent by Turkey's Minister for Energy Dr. Hehmet
Hilmi G|ler to Iraq's Minister of Electricity Dr. Kareem Waheed,
dated 20 March 2007.

Begin text:

H.E. Dr. Kareen Waheed
Minister of Electricity
Republic of Iraq

Excellency,

As a follow up to our bilateral meeting of March 20, 2007, which I
have found very useful and promising in the field of energy
cooperation between Turkey and Iraq, I would like to underline once
again that upon your request Turkey is ready and willing to help to
overcome its difficulties in the energy sector.

In this vein, we are ready to cooperate with you to meet Iraqi
electricity demand for which you have asked assistance during our
meeting. As I have mentioned in our meeting, supply of cheap crude
oil and natural gas by Iraqi side to Turkey would play an essential
role to meet your electricity demand in the short term. Different
mechanisms can be jointly developed to extend cooperation in this
field. Our immediate proposals for this cooperation can be
summarized as follows:

-- making Kerk|k-Ceyhan crude oil pipeline fully operational as soon
as possible,

-- receiving crude oil from Iraq through existing infrastructure for
the sole purpose of producing electricity for Turkey and Iraq at the
initial stage,

-- constructing a new electricity power plant in Turkey following
your statement that Iraqi side is ready to allocate resources for
the financing of the power plant project,

-- transmitting electricity from Turkey to Iraq through new
transmission lines which were planned to be constructed,

-- with reference to your call for Turkish companies operating in
the field of energy to invest in Iraq, utilizing the experience of
TPAO in oil and natural gas exploration and other related
activities,

Details of the proposals can be worked out jointly at your earliest
convenience and as we have agreed during our meeting, I also would
like to mention that we are ready for your further proposals for
developing new projects and concrete mechanisms to realize these
projects. An "Action Plan" for the next 5 to 10 years can be
prepared to guide our cooperation in the energy sector in a
structured manner.

Please accept, Your Excellency, the assurances of my highest
consideration.

Sincerely Yours,

(signature)

Dr. Mehmet Hilmi G|ler
Minister

End text.

11. (U) Deputy Assistant Secretary Bryza cleared this cable.

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