CASPIAN BASIN ENERGY AMBASSADOR MANN DISCUSSES

UNCLAS SECTION 01 OF 02 ANKARA 002914

SIPDIS


SENSITIVE


E.O. 12958: N/A
TAGS: ECIN ENRG EPET ETTC IR TU
SUBJECT: CASPIAN BASIN ENERGY AMBASSADOR MANN DISCUSSES
EAST-WEST ENERGY CORRIDOR NEXT STEPS WITH TURKISH ENERGY
OFFICIALS


REF: ANKARA 2721


Sensitive but unclassified -- not for internet posting.



1. (SBU) SUMMARY: On the margins of the IEA's Seminar
"Natural Gas in South East Europe," May 5-6, in Istanbul,
Ambassador Mann met with Energy U/S Sami Demirbilek and MFA
DDG for Energy Hakki Akil to discuss U.S.-Turkish
coordination in support of the East-West Energy Corridor.
Turkish officials agreed to continue our strong cooperation
on the East-West Energy Corridor, including urging Kazakh
officials to link to the BTC pipeline, and working together
to promote the Nabucco gas pipeline to Europe. Mann urged
the Turkish officials to approve the license request of
Thrace Development Corporation to proceed with plans for a
Bosphorus bypass pipeline, and assured them there was not
conflict with BTC. Although Akil was skeptical that the
Thrace proposal could be built, Demirbilek told Mann that he
had recommended that the Council of Ministers approve the
license. End Summary.


BTC Problems



2. (SBU) Demirbilek said BOTAS subcontractor Tepe is having
the most difficulty. Tepe officials claim they are losing
money because of exchange rate changes and they think BP
should compensate them. Mann responded that these issues
should be in the contract, and should be settled on that
basis. This issue cannot be allowed to cause further delays
because that will cost the entire BTC consortium. Demirbilek
assured Mann that Tepe will face significant fines if it
causes a delay in the completion of BTC.


Caspian Producers



3. (SBU) Ambassador Mann emphasized that big policy issues
remain to be solved on Caspian oil and gas. He urged Turkey
to keep Caspian issues at the top of its priorities, adding
that Turkey and the U.S. need to work together to solve the
remaining problems. Demirbilek agreed, saying the U.S. and
Turkey, as NATO allies, can sit side by side to complete the
tasks, including bringing Kazakhstan's Aktau oil to BTC. (At
an earlier meeting, Mann agreed with MFA Deputy U/S Alev
Kilic that the two would meet together with Kazakh officials
in Almaty to urge Kazakhstan to link its oil production to
the BTC pipeline.) Mann noted that Kazakhstan's insistence
on maintaining monopoly control of shipping oil across the
Caspian was a problem. Demirbilek added that Kazakh gas
fields should also be considered -- we could build a gas
pipeline next to an Aktau-BTC connector, he suggested.
Demirbilek said the Georgian Government is interested in a
oil pipeline from the Russian port of Novorosyissk through
Georgia to link to Turkey's Mediterranean port of Ceyhan. He
added that the Russian have agreed to set up a working group
on the project, but he doubted they were truly interested.


Natural Gas to Europe



4. (SBU) Mann stressed that the U.S. sees Turkey as an
energy hub for natural gas to Europe. Demirbilek said that
Nabucco gas pipeline through southeast Europe was being
established by the national gas companies. Mann agreed that
this was the best way to proceed and pledged to work together
to support the effort. Mann raised the issue of Iranian gas
being shipped via pipelines through Turkey to Europe. He
re-affirmed U.S. opposition and warned that such
Iranian-Turkish cooperation could end U.S.-Turkish
cooperation on gas exports to Europe. Demirbilek suggested
that gas that Turkmenistan is sending to Iran could be used
to fill the demand in Europe and reduce European demand for
Iranian gas. Mann was skeptical that any agreement could be
struck with Turkmenistan's President Niyazov.


Bosphorus Bypass Pipelines



5. (SBU) Mann urged Demirbilek and Akil to approve the
application by Thrace Development Corporation for a license
to build a bypass pipeline in Turkish Thrace. Demirbilek
said that Energy Ministry forwarded its proposal to approve
the license to the Council of Ministers, which must review
the proposal and determine if it would conflict with BTC.
(Turkey agreed with BTC not to support pipelines that would
conflict with BTC.) Mann assured the Turks that BTC does not
consider the bypass proposal to be in conflict with BTC.
However, Akil voiced several other concerns. He said the
Thrace project was unrealistic, because environmental groups
would not permit a project to feed oil into the
environmentally sensitive Saros Bay in the north Aegean, and
Greek authorities would view the Thrace Bypass as competing
with the Burgas-Alexandropolis option. He also was skeptical
that Thrace could win enough commitments from oil shippers to
go ahead. In his opinion, a proposed bypass midway along
Turkey's Black Sea coast connecting to the Mediterranean port
of Ceyhan was more likely.



6. (SBU) Mann responded that Thrace is ready to move forward
-- unlike the promoters of the Ceyhan option -- and that the
license would merely allow Thrace to move to the next stage
of project development. He urged the Turks not to delay
approval. Demirbilek said he recommended that the Council of
Ministers approve the license, with the condition that after
six months Thrace must demonstrate that it has adequate
financing and throughput guarantees, so there was no risk to
Turkey.



7. (U) This cable was cleared by Ambassador Mann.
EDELMAN