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Cablegate: Turkey: Dueling Refineries

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RR RUEHAG RUEHDBU RUEHDF RUEHIK RUEHLN RUEHLZ RUEHVK RUEHYG
DE RUEHAK #5000/01 2411502
ZNR UUUUU ZZH
R 291502Z AUG 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 8274
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPARTMENT OF ENERGY WASHDC
RUCNMEM/EU MEMBER STATES
RUCNCIS/CIS COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0727
RUEHDM/AMEMBASSY DAMASCUS 1570
RUEHNE/AMEMBASSY NEW DELHI 0427

UNCLAS SECTION 01 OF 02 ANKARA 005000

SIPDIS

USDOE FOR CHARLES WASHINGTON
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
EXIM FOR PAMELA ROSS AND MARGARET KOSTIC
OPIC FOR R CORR AND C CHIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EINV EPET BEXP TU RU
SUBJECT: TURKEY: DUELING REFINERIES

REF: A: ANKARA 4728
B: ANKARA 4379

Sensitive But Unclassified. Please handle accordingly.

1. (SBU) SUMMARY: At least three separate refinery projects in
Turkey have recently been announced, emblematic of Turkey's energy
hub vision and growing regional importance, as well as the progress
if has made in its investment environment and economic growth. It
is not clear if GOT will use strategic and political assessments in
awarding licenses or step back and let the private sector choose,
but it is very likely that at least one refinery may be built, with
Ceyhan the leading contender for location as desired regional energy
hub. End Summary.

--------------
The Contenders
--------------

2. (SBU) Fitting neatly with Turkey's stated intent to develop
itself as a regional energy hub, at least three separate groups have
applied to the energy regulator (EMRA) for licenses for establishing
refineries. Probably first in the running is an application from a
partnership of Calik Energy and Indian Oil for a $5 billion - 15
million ton capacity refinery and petrochemical complex a Ceyhan,
targeting domestic consumption and export.

3. (SBU) Also targeting Ceyhan is an application from Turkish
private firm Petrol Ofisi, with its Austrian stake-holder OMV, for a
smaller $2 billion - 10 million ton capacity refinery. Meanwhile,
Russian Lukoil has applied for a license for a $3 billion - 10
million ton capacity refinery in the western Black Sea town of
Zonguldak. Government officials have reportedly asked Lukoil to
consider locating its investment at the more eastern Black Sea town
of Samsun as the counterpart energy node to Ceyhan, but the press
has reported Lukoil's continuing preference for Zonguldak, where it
has done its supporting analysis. Most recent reports indicate it
may be bending more towards the government's preference. There are
reports that another Turkish group is talking to the Iraqi
government about establishing a Ceyhan refinery to process oil in
exchange for fuel products for Iraq, but this has apparently not
advanced to a formal application.

4. (SBU) Meanwhile, home-grown, recently privatized refiner TUPRAS
has announced unspecified plans to increase its refining capacity
from its existing 27.5 million tons. TUPRAS has four main refining
complexes: Izmit on the Sea of Marmara, Izmir, Kirikkale near
Ankara, and Batman in the southeast.

------------------------
Who Will Decide and How?
------------------------

5. (SBU) Although Turkey is currently importing 6 million tons of
fuel products and annual consumption is expected to increase
domestically and regionally, it is not clear that there is
sufficient demand in the near term for all the mooted refinery
projects. Shell's (minority shareholder in TUPRAS) Turkey General
Manager told Energy Officer that the major oil companies were
hard-pressed to understand the economic logic of all the projects
and where the financing would come from. He noted that the sponsors
were local players with plans to link to potential pipelines or
expand in the market. He thought it might be possible that one of
the projects went ahead in the near term.

6. (SBU) EMRA President Yusuf Gunay told us that EMRA would process
applications as to whether they meet normal standards, including EU
environmental standards, but that the economic viability -- or lack
of it -- of any one project is the responsibility of the private
sector applicant. All three could receive licenses. It is not
clear if the GOT will weigh in on a strategic and/or political basis
- like its approach to pipeline projects - like Samsun-Ceyhan oil
Bosphorus bypass.

7. (SBU) Given Turkey's vision of Ceyhan as regional energy hub and
new Rotterdam, and its granting of an exclusive permit to Calik
Energy -- in partnership with Italian ENI -- for realizing the
proposed Samsun-Ceyhan oil pipeline, this project might have a
political and strategic inside track. Ahmet Calik, who is
well-connected to Prime Minister Erdogan's AK Party and made his

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wealth in Turkmenistan, has yet to garner oil through-put
commitments for the pipeline, but has been talking to Russian
companies, including TNK-BP, and Chevron. His group has also talked
to BOTAS about cooperation on construction and/or the use of
facilities at the Ceyhan port. The BOTAS facilities service the
mostly empty pipeline from northern Iraq, and are adjacent to the
new BTC facilities. The Calik-Indian Oil partnership lost out on an
earlier bid for the state refinery TUPRAS privatization in favor of
a Koc-Shell partnership.

8. (SBU) Calik's application may fit the best with Turkey's vision
of Ceyhan as a regional energy hub that processes a variety of
hydrocarbons. Energy Minister Guler says Turkey is also very
interested in Ceyhan for natural gas processing. The press has
reported discussions between the GOT and Japanese Marubeni on
building an LNG terminal in Ceyhan. This has long been a wish list
item for the GOT in its bilateral discussions with the Russians.

WILSON

© Scoop Media

 
 
 
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