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