Cablegate: Review of Tpao Investment Under Iran Sanctions Act

VZCZCXYZ0007
PP RUEHWEB

DE RUEHAK #1780 3491310
ZNR UUUUU ZZH (CCY-ADXEDC7AF-MSI1564-468)
P 151310Z DEC 09
FM AMEMBASSY ANKARA
TO SECSTATE WASHDC PRIORITY 1481

UNCLAS ANKARA 001780

SENSITIVE
SIPDIS

DEPARTMENT FOR EEB/ESC TOM HAMMANG, EEB/TFS CHRIS
BACKEMEYER, AND NEA/IR RAJEEV WADHWANI

XXX CORRECTED COPY - PARAGRAPH MARKINGS XXXX

E.O. 12958: N/A
TAGS: ECON ENRG EPET ETTC PREL IR TU
SUBJECT: REVIEW OF TPAO INVESTMENT UNDER IRAN SANCTIONS ACT

REF: STATE 121808

1. (U) Post delivered reftel demarche to Turkish Petroleum
Company (TPAO) General Manager Mehmet Uysal on December 13.

2. (SBU) In November 2008, the GOT Ministry of Energy and
Natural Resources (MENR) signed a one-year memorandum of
understanding on energy with Iran. The MOU provides for TPAO
to develop South Pars gas blocks with capacity of 35 billion
cubic meters (bcm) per year, half intended for the Turkish
market and half for export to Europe. According to Uysal,
TPAO is not a party to the MOU, nor has it signed any
agreements with the Iranians directly. Rather, as a state
company, it has been directed to prepare a technical report
to MENR on the economic and technical feasibility of
developing South Pars gas fields, as called for in the MOU.
Despite 11 months of negotiations, TPAO was unable to reach
any agreement with the Iranians on the terms under which it
could develop blocks in South Pars. In October 2009, MENR
agreed to extend the MOU by three months, to mid-February
2010, and Uysal said TPAO is continuing the talks at the
GOT's request. Thus far, they have agreed to swap blocks 22,
23 and 24 on the periphery of the South Pars field for two
more centrally located blocks, which Uysal said would have
much higher gas potential. But negotiations continue on
which two central blocks those will be and the terms of their
development. If TPAO reaches agreement on terms of
development, it will be up to MENR to decide if the project
will go forward, Uysal said that MENR - not TPAO - would have
to finance the project. The two blocks would likely cost USD
7-8 billion to develop (he said his previous USD 12 billion
estimate was too high). This is far beyond TPAO's financial
capabilities, and "in any case, we are not a party to the
agreement, so TPAO would look to the Ministry to finance it."

3. (SBU) Answers to specific questions in reftel follow below:

Name of Project: South Pars

Type of Activity: Technical and economic feasibility study of
exploration and production

Current Status of Project: Terms of development under
negotiation

Structure of any signed contract: The GOT Ministry of Energy
and Natural Resources signed a one-year energy MOU with Iran
in November 2008, which provided for TPAO to develop South
Pars gas blocks. The MOU has been extended to February 2010.
TPAO is negotiating terms of development under that bilateral
MOU.

Size of the contract in terms of investment requirement and
planned production: The MOU calls for TPAO to develop South
Pars blocks with 35 bcm of capacity. To date, no investment
has been made. If the project were to go forward, TPAO
estimates the cost at USD 7-8 billion.

Contract award date: no contract has been awarded.

Silliman

"Visit Ankara's Classified Web Site at http://www.intelink.s
gov.gov/wiki/Portal:Turkey"

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