IMPACT OF IRAQ OPERATION ON KIRKUK-YUMURTALIK

C O N F I D E N T I A L ANKARA 001952 SIPDIS STATE FOR E, EB/CBED, EB/ESC, EUR/SE, NEA/NGA, OPS CENTER STATE PASS NSC FOR QUANRUD AND BRYZA USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO USDOE FOR PUMPHREY/ROSSI E.O. 12958: DECL: 03/25/2013 TAGS: ENRG ECON EPET ETTC TU IZ SUBJECT: IMPACT OF IRAQ OPERATION ON KIRKUK-YUMURTALIK PIPELINE Classified by EconCouns Scot Marciel, Reason 1.5 (b,d) ¶1. (C) Summary: BOTAS General Manager Bildaci told us the oil flow in the Kirkuk-Yumurtalik (Ceyhan) Pipeline had decreased by half and likely would stop completely by March ¶26. Bildaci attributed the slow-down to the lack of oil tankers transporting crude from the port at Ceyhan since the start of Operation Iraqi Freedom, putting storage at Ceyhan at near capacity. A local shipping exec claims that shipping brokers and traders know that the U.N. Oil for Food (OFF) program has not been suspended, but are reluctant to offtake from Ceyhan due to security and legal uncertainties. Turkey,s state owned refinery also has decided not to purchase Iraqi crude from Kirkuk for now. End summary. ¶2. (C) BOTAS General Manager Bildaci told econoff March 24 that, since the start of Operation Iraqi Freedom, the oil flow in the Kirkuk-Yumurtalik (Ceyhan) Pipeline had decreased by half and likely would stop completely in 1-2 days. Bildaci attributed the slow-down to the lack of oil tankers transporting crude from the port at Ceyhan. He said recent average output of the pipeline had been approximately 800,000 barrels per day (bpd),but had decreased to about 400,000 bpd over the last several days. Bildaci noted that within the next 48 hours the 6.5 million barrel storage capacity at Ceyhan would be full, and that no tankers had transported crude from Ceyhan since March 21. He added that one important impact on Turkey would be the loss of transit revenue from the OFF program, which he estimated to be about USD 200 million per year. ¶3. (SBU) A local shipping company executive told econoff March 24 that shippers, traders, and brokers were generally aware that the OFF program had not been suspended. Further, he said, as of COB March 23, insurance underwriters had not levied an additional war premium for tankers traveling in and out of Ceyhan port. Still, the exec said, shipping brokers for the major oil companies and traders were reluctant to offtake from Ceyhan due to the security and legal uncertainties arising from the Iraq war. The shipping exec said he had spoken recently to Gulf Agency Management, a large shipping broker in Turkey, as well as a large shipping broker based in the U.K., both of which had decided not to transport crude from Ceyhan at this time, although they were aware that OFF had not been suspended. ¶4. (U) Turkey,s state-owned petroleum refinery corporation, TUPRAS, told the press on March 20 that, although the Kirkuk-Yumurtalik pipeline had not officially closed, TUPRAS would not purchase Iraqi crude from this source during the war. TUPRAS said for now it would pursue Black Sea exports, i.e. from Russia, to replace the approximately 1.5 millions barrels of Iraq,s Kirkuk crude it imports per month. TUPRAS General Manager Danis told the press he did not expect Turkey to experience an oil shortage during the war, unless other oil-producing countries became actively involved in operations. PEARSON