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Cablegate: Turkey's "Houston"?: Adana Wants Btc Pipeline to Attract

VZCZCXRO9858
RR RUEHDA
DE RUEHDA #0255/01 3420705
ZNR UUUUU ZZH
R 080705Z DEC 06
FM AMCONSUL ADANA
TO RUEHC/SECSTATE WASHDC 4378
INFO RUEHAK/AMEMBASSY ANKARA 0924
RUEHIT/AMCONSUL ISTANBUL 0797
RUEHDM/AMEMBASSY DAMASCUS 0185
RHMFIUU/39OS INCIRLIK AB TU
RUEHGB/AMEMBASSY BAGHDAD 0117
RUEHKB/AMEMBASSY BAKU 0006
RUEHSI/AMEMBASSY TBILISI 0006
RUEHDA/AMCONSUL ADANA 0980

UNCLAS SECTION 01 OF 02 ADANA 000255

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ENRG TU
SUBJECT: TURKEY'S "HOUSTON"?: ADANA WANTS BTC PIPELINE TO ATTRACT
MORE ENERGY-RELATED INVESTMENT

REF: ANKARA (5455

SUMMARY
---------------

1. (U) With the BTC terminal as an anchor, the Turkish
government wants its eastern Mediterranean coast-line to develop
into an energy-based hub that will include ship-building,
petro-chemicals and oil refining. While hype about Ceyhan
becoming Turkey's "Houston" or "Rotterdam" is overblown, if some
of the major investments now on the drawing board come to
fruition, the region could see some welcome employment growth to
counter the continuing woes of the local textile industry.
Adana's conservative business community is slowly embracing its
region's new strategic position in world energy markets, but it
is clear that the policy vision - and capital - will come from
elsewhere for the foreseeable future. End summary.

BTC as Flag-Ship for New Investments
--------------------------------------------- --

2. (U) Even before its July inauguration, the
Baku-Tbilisi-Ceyhan pipeline began operations and has now loaded
over 25 million barrels of oil at the Turkish terminal near
Ceyhan. GOT officials are eager to develop the region around
the terminal, which is also the end-point of the Iraq-Turkey
pipeline that originates in Kirkuk. The Kirkuk line has been
plagued by sabatoge attacks in Iraq, but at full capacity it
could pump as much as 550 million barrels per annum.

3. (SBU) East of the oil terminals, the GOT has established a
150-hectare Special Economic Zone, which offers duty-free export
processing privileges as well as favorable tax treatment to
potential investors. According to the zone's director, Muharrem
Pusat, a Turkish shipbuilding company, Hay, is building a
shipyard in the zone on an area of 800,000 sqm. Initially the
yard will focus on service and repair of tankers calling at the
oil terminals. Later, the shipyard will also construct tankers,
ultimately reaching a capacity of 20 per year ranging from
10.000 to 300.000 DWT. Pusat said the company could eventually
employ up to 5,000 workers.

4. (U) The Hay project will take advantage of its proximity to
Isdemir (Iskenderun Iron and Steel Industry), located a few
miles across the bay of Iskenderun. Isdemir, which was
privatized in 2002, has started manufacturing flat iron, an
important input for shipbuilding. Adana Chamber of Industry
President Umit Gozumus told us he would also like to attract
some South Korean ship-building expertise to the region to
develop the synergy with Isdemir further. Currently the SEZ is
mostly empty, but an Irish company, Kingspan, is finishing work
on a 10m Euro plant to produce insallation panels. The zone
also hopes to attract other manufacturing companies as well as
petroleum-related industries such as petro-chemical processing
or fertilizer plants.

One, Two, Three Refineries?
----------------------------------

5. (U) There is also strong interest in building at least one
oil refinery in the region. To date, the Turkish state-owned
oil company Petrol Ofisi's plans appear most advanced; Pusat
told us they have picked out a site west of the oil terminals
and intend to build a plant with 10 million tons of annual
capacity. Calik Energy in conjunction with an Indian partner
have also announced plans for a larger refinery, with a 15
million ton capacity. Meanwhile, PM Erdogan is reportedly
encouraging the Russia's Lukoil to consider building its planned
Turkish refinery in Ceyhan rather than in the Black Sea province
of Zonguldak, as originally planned. Finally, KazakhMunayGaz, a
state-owned company, and Azerbaijan's SOCAR (a BTC partner) have
also announced plans to build refineries in the region.

6. (U) These competing projects are being driven by robust
growth forecasts for refined products in Turkey's under-supplied
market, which is expected to increase by 6-10 percent annually
in coming years. In addition, giving verbal support for a
refinery project in Ceyhan is a way for energy companies to lend
support for the GOT's proposed Samsun-Ceyhan Bosporus by-pass
oil pipeline without committing resources to the planned
pipeline itself, whose commercial prospects are uncertain given
the stiff competition from other by-pass projects .

7. (U) One reliable down-stream customer for a Ceyhan refinery
is the tankers loading oil from the BTC pipeline. The nearest
"gas station" for these ships is currently in Egypt and,

ADANA 00000255 002 OF 002


according to BTC officials, these vessels could consume about
14,000 tons of fuel per year, more if the Kirkuk pipeline
increases its throughput - and if Samsun-Ceyhan is realized.
Tankers from Ceyhan can serve Europe or other global markets.

Adana: We're "Strategic" Now
-------------------------------------

8. (U) Adana's political and business communities are starting
to embrace their region's strategic position in the world energy
puzzle. At a recent seminar, experts from Ankara and Baku
emphasized the BTC's international significance and talked up
future ideas, such as the possibility of routing Russian and
possibly Iraqi natural gas to Ceyhan, where it would be
liquified for shipping to Israel and other consumers. But
Adana's lack of local expertise and capital in the energy sector
mean that the ideas and money for these plans will have their
origins elsewhere for the foreseeable future. Houston wasn't
built in a day.
GREEN

© Scoop Media

 
 
 
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