Cablegate: Ambassador Mann Discusses Caspian Energy Issues At

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A

Sensitive But Unclassified -- Not for Internet Distribution

1. (U) Summary: Caspian Basin Energy Development Ambassador
Steven Mann met with energy officials on the margins of the
June 16-17 Tale of Three Seas Energy Conference in Istanbul.
(Septel reports on Mann,s meeting with Turkish Energy
Minister Guler.) Mann was joined by Turkish MFA Deputy U/S
Alev Kilic to jointly encourage Kazakhstan and Greek company
officials to play a more active role in developing the
East-West Energy Corridor. Mann met separately with Statoil
officials to discuss the Shah-Deniz pipeline and spoke with
Calik Energy about the prospects for Turkmenistan
contributing to the East-West Energy Corridor. End Summary.

Kazakh Oil and BTC

2. (SBU) Ambassador Steven Mann joined with Turkish MFA
Deputy U/S Alev Kilic to encourage Kairgeldiy Kabyldin,
General Director of Kazakhstan,s state oil and gas company
Kazmunaigaz, to complete the Aktau-BTC agreement to feed
Kazakh crude into the BTC pipeline. Mann and Kilic stressed
that the Intergovernmental Agreement between Azerbaijan and
Kazakstan had languished too long and it was time to finish
it. Kabyldin said the draft agreement, under consideration
by the GOK since April 2004, was delayed by four issues:
work visas for foreign project personnel; entry and exit
procedures for project personnel; duty-free import and export
of equipment and profit repatriation; and competition among
shippers, including non-Kazakh shippers. He added that the
most recent draft would permit competition among shippers.
Mann and Kilic responded that the state companies in
Azerbaijan and Kazakhstan should reach agreement now, not
delay the signing until after parliamentary ratification.
Kabyldin agreed to convey their views to the GOK.

Greece,s Place in the East-West Energy Corridor

3. (U) Mann and Kilic met with Michale Caramanis, Deputy
Chairman of the Greek Gas Company DEPA, and urged that now is
the time for DEPA to promote natural gas exports from the
Caspian region via Turkey and Greece into Balkan markets.
Mann explained the successful history of East-West corridor
energy projects and pointed out that the private sector led
the way. With the completion of the connector pipeline
between Turkey and Greece in 2006, we look to DEPA to take
the lead in the next expansion of Caspian gas
exports/transit, he said. Caramanis said he would consult
with DEPA and reply within the next six to eight weeks.

The Nabucco Pipeline

4. (U) Mehmet Bilgic, General Manager of BOTAS, Turkey,s
national gas company, updated Mann on the Nabucco natural gas
pipeline project to connect Turkey to Austria and the
European market. He said the Hungarian partner, MOL, wanted
to change Nabucco,s structure ) from a consortium to a
confederation of national pipeline companies. Bilgic worried
that such a change would make the project less feasible
because decisions would require individual negotiations with
each of the national gas companies, instead of with a single
Nabucco project head. Mann reminded Bilgic of the political
and legal dangers of using Nabucco to export Iranian gas.

Shah-Deniz Pipeline and Transit Fees

5. (SBU) Ambassador Mann met with Statoil officials, Georg
K. Gundersen, President, Statoil-Azerbaijan; Peter Lindberg,
Senior Vice President, Natural Gas; Peter Mellbye, Executive
Vice President, Natural Gas; and Kjetil Tungland, Vice
President, Statoil-Turkey. The Statoil execs complained that
after 18 months, Turkey still has not chosen a methodology
for determining the tariffs/pricing for the transit of Shah
Deniz natural gas through Turkey and asked for USG support to
urge Turkey to make a decision. Statoil needs to know the
tariff system before it can prepare cost estimates to present
to investors and customers, they emphasized. Statoil prefers
a methodology that would set a fixed rate tariff for natural
gas transiting the country by any route ) regardless of
distance traveled.

6. (U) On Nabucco, the transit countries have not yet agreed
on tariff rules for each country,s section of the proposed
natural gas pipeline. The Greek Interconnector opens up the
Greek -- and potentially -- the Italian market, but the Greek
market is small and the Italian market is saturated, the
Statoil officials said. Therefore, the 18-20 BCM/y capacity
of Shah Deniz phase 1, will be sufficient. Mann pointed out
that the Nabucco project will need 20-30 bcm/year of natural
gas, much more than Shah Deniz alone can supply. The most
likely candidates are Iran, Iraq and Egypt, but Mann reminded
them that the USG opposes any Iranian gas being a part of
this project.

Turkmenistan Gas

7. (U) Mann met with Ahmet Calik of Calik Energy, which is a
partner in one of the Bosphorus Bypass proposals and which
has extensive energy projects in Turkmenistan. Calik
reported that the Trans-Afghanistan natural gas pipeline
proposal to transport Turkmenistani natural gas via
Afghanistan to Pakistan has been delayed because the
Turkmenistan government had not prepared an audit of its
natural gas reserves, as requested by the Asian Development
Bank. Calik conceded that the chance of success for the
Trans-Afghanistan project is low ) it can not be done
without strong USG support. He encouraged Ambassador Mann to
lend his support to the project. Mann told Calik that the
U.S. supports the idea of a trans-Afghanistan pipeline; we
are waiting for the private sector to prepare a proposal that
we can support.

8. (SBU) Mann told Calik that he was skeptical about
proposals to link Turkmeni gas to the Shah-Deniz pipeline.
Mann reminded Calik that President Niyazov killed the Trans
Caspian Pipeline deal by refusing to sign at the last minute.
Niyazov is unwilling to follow through on any international
or inter-governmental project for a natural gas pipeline,
since he is afraid of the Russians. The U.S. does not want
to be used as a bargaining chip in Niyazov,s negotiations
with Gazprom. Nevertheless, the USG would be willing to
continue the dialogue with Calik and with the Turkmens. Mann
encouraged Calik and the Turkmenistan government to consult
with Statoil and British Petroleum on the possibility of
reviving a trans-Caspian natural gas pipeline route for
Turkmen gas.

9. (SBU) Mann said the Turkish government has never lost
interest in a trans-Caspian natural gas pipeline and the
Turkish government has a romantic view of Niyazov. The
Government of Azerbaijan in principle has an open mind on the
trans-Caspian project ) the first realistic step would be to
get an agreement on delimitation of the Caspian seabed.
Kazakhstan, Azerbaijan, and Russia have already agreed on a
reasonable methodology, but Turkmenistan still wants to use
the &Land8 instead of the &Maritime8 methodology. There
is a need for a dialogue between Azerbaijan and Turkmenistan
on this issue. Mann told Calik that he is well suited to
have private discussions with Niyazov about these ideas and
encouraged Calik to be in touch with the Nabucco project. It
would be positive if Calik could promote a
Turkmenistan-Azerbaijan rapprochement, he said.

Russian Gas to Israel

10. (SBU) Calik informed Mann that Russia had signed an MOU
to supply Israel with natural gas using the Bluestream
pipeline. Calik said Israel had allocated USD 1 million for
a feasibility study.

11. (U) Ambassador Mann cleared this cable.

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