TURKEY'S SAMSUN-CEYHAN OIL PIPELINE - BIG STEP

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 006769 SIPDIS USDOE FOR CHUCK WASHINGTON USDOC FOR 4212/ITA/MAC/OEURA/CPD/CRUSNAK EUR ALSO FOR DAS BRYZA E.O. 12958: DECL: 11/17/2015 TAGS: EPET ENRG EINV TU RU BTC SUBJECT: TURKEY'S SAMSUN-CEYHAN OIL PIPELINE - BIG STEP FORWARD REF: A. ANKARA 6310 ¶B. ANKARA 5298 AND PREVIOUS Classified By: ECONOMIC COUNSELOR THOMAS GOLDBERGER FOR REASONS 1.4 (B) AND (D) ¶1. (SBU) SUMMARY: Turkey's long-standing preference for Samsun-Ceyhan as a Bosphorus bypass oil pipeline has moved a big step closer to fruition with the announcement that Italian oil firm ENI will collaborate with Turkish firm Calik Enerji to develop the project. While still far from a done deal, oil major ENI's announced commitment to assist in performance of engineering and design, in combination with its need to gain egress of significant future Kazakhstan oil volumes is a significant milestone. Fanfare and announcements stemming from the November 17 Blue Stream gas pipeline inauguration, in the presence of Turkish, Italian, and Russian leaders, will reinforce the North-South energy vision. End Summary. ENI Announces Backing for Samsun-Ceyhan -------------- ¶2. (U) According to a November 9 press release, Italian oil major ENI and Turkish firm Calik Enerji reached agreement laying the basis for the development of an oil pipeline connecting the Turkish port of Samsun, on the Black Sea, with Ceyhan, on Turkey's Mediterranean coast. According to the press release, the purpose of the project is to provide a faster, environmentally safer, and more economic alternative to the transportation of oil by ship through the Turkish Straits of the Bosphorus and Dardanelles. The press release says the Turkish Government is aware of the initiative undertaken by the ENI-Calik consortium, and has indicated support to the Samsun-Ceyhan route. ENI and Calik will perform engineering and design studies on both the selected route and the transportation system, constituting a 560 km pipeline with 1 million bpd capacity and a new loading terminal in Samsun and oil storage facilities to be built at Ceyahn. Also according to the press statement, the project is of strategic importance for ENI, operator of the Kashagan field and co-operator of the Karachaganak field in Kazakhstan. Turkey supports Samsun-Ceyhan -------------- ¶3. (C) In a November 9 conversation with Steve Mann, GOT MinEnergy DDG Mithat Rende reiterated long-standing GOT preference and support for Samsun-Ceyhan for a Bosphorus bypass, arguing that it was more plausible than the competing Burgos-Alexandropolos (Bulgaria-Greece) route for environmental, existing port capacity, and existing pipeline right-of-way reasons. Noting that "other horses" were ahead, Mann pressed for what the GOT would do to make the project happen. Rende asserted that the project had the full support of the Prime Minister and the Ministry of Energy, and could use part of the BTC right-of-way. (Mann noted that BP said that the GOT has not spoken to them about this.) Rende stated that Samsun-Ceyhan had the commitment of ENI and Total (both with significant future Kazakhstan oil volumes). He said that Chevron was seriously interested, but still uncommitted. Rende said the GOT sought to foster a broad consortium, including U.S. presence, as well as Russian interests. (Mann noted that Russian companies' presence could prove problematic, citing Lukoil's inability to validate its interest in BTC ) because of pressure from the Russian government.) In conclusion, Rende said that the inauguration of the Blue Stream gas pipeline under the Black Sea from Russia on November 17, in the presence of leaders from Italy, Russia, and Turkey, would provide a high-profile opportunity to push this and related "North-South" projects forward, including expansion of Ceyhan as a regional energy hub. (Refs). Rekindle Turkmen Gas Pipeline? -------------- ¶4. (C) Rende also reiterated Turkey's support for a trans-Caspian natural gas pipeline from Turkmenistan. Mann noted that Azerbaijan was receptive to working on this project, as well as ready to negotiate a compromise on Caspian Sea delimitation (to jointly develop the mutually-claimed Kapaz Serdar field in the central Caspian Sea),but lamented that there "was no one for them to talk to" in Turkmenistan. Moreover, Mann noted that the claim that the Turkmen President was willing to quickly resolve the issue was simply never acted on. Repeating that the U.S. was willing to do whatever is needed to secure the export of Turkmen gas, he noted that he did not see a productive possibility at the current time. Rende and Mann agreed that it should be kept on the agenda. BTC Inauguration -------------- ¶5. (SBU) GOT and company officials are all now talking from the same page. According to GOT officials, oil is expected at the Turkish border with Georgia over the next 7-10 days (after problems and delays in Georgia). First oil at Ceyhan is targeted for February 2006, so the still-to-be-scheduled inauguration ceremony is expected in March to gain better weather. ¶6. (SBU) Comment: While ENI has not offered the elusive and critical oil throughput guarantee, it is the first oil major (controlling significant oil volumes) to publicly commit to a specific Bosphorus bypass and commit to co-funding engineering and design studies. The meeting of the Italian, Russian, and Turkish leaders November 17 to formally fete Blue Stream (although it has started operating gradually since 2003) will offer an opportunity to express further commitment to the North-South energy corridor (refs). The North-South axis is intended to compliment, not compete with, the East-West energy corridor. Bringing Russian firms and oil volumes will be necessary to bring a Bosphorus bypass to reality ) and they continue to play the Turks and the Bulgarians-Greeks off each other. End Comment MCELDOWNEY