UNCLAS SECTION 01 OF 02 ANKARA 005745

SIPDIS

SENSITIVE
SIPDIS

EUR FOR DAS BRYZA AND S/P FOR STEVE HELLMAN
USDOE FOR CHARLES WASHINGTON
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK

E.O. 12958: N/A
TAGS: ENRG EPET EINV PREL TU GG AZ RU
SUBJECT: TURKEY'S BOTAS WORRIED ABOUT SOUTHERN GAS CORRIDOR

REF: A) ANKARA 5699

B) ANKARA 5624
C) ANKARA 5332

ANKARA 00005745 001.2 OF 002


Sensitive But Unclassified. Please handle accordingly.


1. (SBU) Summary: In an October 2 meeting, BOTAS officials
expressed strong support for the southern gas corridor, but voiced
concerns about developable reserves in Azerbaijan, pressure from
Russia on Azerbaijan and Georgia, and how Iran's significant
reserves fit into pipeline possibilities. BOTAS said that it was
ready to receive South Caucasus Pipeline (SCP) gas from Azerbaijan
via Georgia and that the Turkey-Greece-Interconnector (TGI)
construction was on track for early spring 2007 completion. BOTAS
officials said they would be pleased to participate in an
IEA-convened southern corridor working group meeting if BOTAS
participation was approved by the Ministry. End Summary.

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Connection to Greece on Track
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2. (SBU) BOTAS Acting DG Saltuk Duzyol told us that the
Turkey-Greece-Interconnector (TGI) was on track for completion in
spring 2007. He said that 1.5 km remained to be completed in the
Dardanelles crossing. Duzyol admitted that there were some problems
with the Meric River crossing to Greece and construction in the
Thrace where BOTAS may have to replace the sub-contractor. He
stated that BOTAS would proceed with a sense of urgency to get as
much work done as possible in advance of winter rains. The BOTAS
official still identified early spring 2007 as the date for
completion; however, he noted that there were comparable delays on
the Greek side where DEPA was required to use a Russian contractor
based on previous agreement with Gazprom, and where the Greek
Supreme Court had only recently approved the interconnector.


3. (SBU) Duzyol commented that after completion of the Dardanelles
crossing the construction barge would go to Akcakoca on the Black
Sea where a partnership of American firm Torreador-Madison and
Tur

kish TPAO were developing a pipeline link to the Turkish grid for
2 MCM of natural gas production from a shallow water off-shore
platform.

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Southern Caucasus Pipeline Golden Weld
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4. (SBU) While suggesting that Azerbaijan and the SCP consortium
had created obstacles - partly a legacy of comparable claims and
counter-claims with BP on BTC completion, Duzyol said that the
"golden weld" completing Turkey's Erzurum spur link to the SCP was
sealed at the Georgian border last week. He claimed that Turkey is
now ready to accept gas, but because of technical delays in
Azerbaijan the SCP consortium was not ready to deliver gas to the
border. Duzyol claimed that the Turkish portion of the pipeline and
the metering station were complete, but admitted that the compressor
was late with only one unit functioning.


5. (SBU) Citing recent strained relations between Moscow and
Tbilisi, the BOTAS officials expressed strong concern that Russia
would put extreme pressure on Azerbaijan not to provide gas to
Georgia and Turkey. They understood that Russia had threatened not
to deliver the 5 BCM Russian gas to Azerbaijan in 2007, putting in
question Azerbaijan's ability to perform under its Shah Deniz Phase
I contract with Turkey.


6. (SBU) Duzyol said the most important topic discussed at the BSEC
Energy Ministerial in Sochi, Russia was prospects for Bosphorus
bypass oil pipelines. He delivered the standard Turkish government
position on why Samsun-Ceyhan would be the best Bosphorus bypass oil
pipeline project and why Russia will eventually come around to
support it. Duzyol also cited the potential linkages from Ceyhan
(by pipeline or tanker) to the existing pipeline in Israel from
Ashkalon to the Red Sea to provide crude oil to Asian markets. The
BOTAS official lamented Russia's clear intent to maintain its oil
pipeline monopoly, and he admitted that Burgos-Alexandropolos was
currently "a little ahead".

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Clearing the Fog
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7. (SBU) Sharing our strong support for a "southern gas corridor" to
Europe, the BOTAS officials identified the critical importance of
Shah Deniz. They expressed concerns about the extent of
Azerbaijan's exportable reserves and the country's will to follow
through on development of Shah Deniz phase 2. They lamented an
extensive "fog" of problems with respect to Azerbaijan's intents and
Russia's threats. Accepting our position on Iran that it needed to
get its house in order on both its pursuit of uranium enrichment and
its unreliability as a gas supplier, Duzyol and his colleagues
called for development of alternatives; i.e. Iraq (septel),
Trans-Caspian from Turkmenistan and/or Kazakhstan, and Egypt to
supplement Shah Deniz.


8. (SBU) BOTAS officials were supportive of the action plan we laid
out: 1) Turkey-Azerbaijan meeting to dispel lack of clarity on Shah
Deniz Phase I and lay groundwork for transit arrangements for Phase
II; 2) A larger southern gas corridor meeting convened by the IEA
(they would participate with Ministry approval); 3) a TDA study
visit to Henry Hub, Louisiana as an example of a good hub; and 4) a
TDA feasibility study for a TCP from Kazakhstan (with potential link
to Turkmenistan and possible inclusion of oil).


9. (SBU) COMMENT: The BOTAS officials were dismissive of notions
that they intended to act like a Gazprom, but they called for Turkey
playing a "pooling" role for the transit of a variety of sources.
They called for "hurrying up" to avoid increased dependency on
Russia and repeated their urging to "dispel the fog" on the moving
parts that need to come together to make up a southern gas
corridor.

MCELDOWNEY