EON-RUHRGAS DETAILS POSSIBLE PURCHASE OF GAS FROM

C O N F I D E N T I A L BERLIN 000567

SIPDIS

SIPDIS

NEA/IR, EUR/AGS

E.O. 12958: DECL: 03/20/2017
TAGS: ETRD PGOV ENRG PREL IR GM
SUBJECT: EON-RUHRGAS DETAILS POSSIBLE PURCHASE OF GAS FROM
IRAN

Classified By: Economic Minister-Counselor Robert F. Cekuta for reasons
1.4(b) and (d).


1. (C) Summary: Eon Ruhrgas gave emboff a new detailed read
out March 13 of the company's plans for the possible purchase
of Iranian liquified natural gas (LNG). Eon's Vice President
for Government, International and Economic Affairs Dr. Heinz
Riemer, said Eon's decision to pursue a contract to buy LNG
from Iran is part of a strategy to improve the firm's
negotiating position with Russia and the result of a lack of
other LNG options. Reimer said the tentative agreement would
allow Eon to purchase 2.2 billion cubic meters of LNG in the
2010-2012 time-frame, when LNG terminals in Iran and Germany
are expected to be completed. End Summary.


2. (C) Dr. Heinz Riemer, Vice President for Governmental,
International and Economic Affairs for Eon-Ruhrgas, told
Emboff the decision to purchase LNG from Iran is part of a
larger diversification strategy, which looks to wean the
company -- and Germany -- from dependence on Russian gas. By
agreeing to buy Iranian LNG, Eon, he said, strengthens its
negotiating position with Russia, which "won't take you
seriously, unless you have a chip to play." Riemer stated
the gas market is becoming extremely competitive, which he
said limits the choices for where Eon can invest. He
cautioned that U.S. companies have "locked up" the gas market
in Qatar, leading Eon to consider other alternatives, i.e.,
Iran. If the Qatari gas market were to open, even minimally,
Eon could reconsider purchasing gas from Iran, he told
emboff. Riemer also mentioned, however, that Eon has signed
a memorandum of understanding with Algeria to purchase gas.


3. (C) Detailing the preliminary agreement to buy
approximately 2.2 billion cubic meters of LNG from Iran,
Riemer said the contract would cover the purchase of gas
starting in 2010 and run through 2012. The actual starting
date is contingent on Iran's construction of its LNG
terminal, which press reports indicate the French company
Total is partially funding, as well as on Eon's building of
its long-planned LNG terminal in Wilhelmshaven. According to
Riemer, that facility will be completed by 2009 or 2010.
Riemer emphasized Eon's contract with Iran is strictly for
purchase of LNG, and does not include participation in or
funding of the construction of Iran's LNG facility.

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Comment
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4. (C) Eon-Ruhrgas' decision to buy LNG from Iran may
indicate plans to bring LNG terminals on-line in both Germany
and Iran have accelerated. Previous estimates by Eon had
anticipated LNG terminals in Germany and Iran roughly ten
years out. However, increasing Eon skepticism of Russia's
ability to remain secure supplies -- at agreed upon terms --
and current and projected gas market conditions have
apparently made LNG terminal construction not only
economically more viable, but, according to Eon's out-year
gas market projections, necessary. While hearing our message
that now is not the time for business as usual with Iran,
Eon's managers seem to have made a calculated decision that
secure supply means diversification of sources which requires
the company to obtain gas from wherever it can be acquired at
competitive prices. End Comment.
KOENIG