DESPITE IRANIAN GAS CUTS, TURKEY KEEPS THE LIGHTS ON

UNCLAS ANKARA 000035

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET IR TU
SUBJECT: DESPITE IRANIAN GAS CUTS, TURKEY KEEPS THE LIGHTS ON


SENSITIVE BUT UNCLASSIFIED


1. (SBU) Summary. In the midst of cold winter weather and snow,
Turkey is suffering from reduced gas imports from Iran and Russia.
The GOT is taking several measures to assure that power is kept on.
In a worse case scenario of bad weather forcing Russia to cut gas
supplies to Turkey via the West Line, the GOT would be forced to dip
into its gas storage which could maintain current electricity usage
for about a month after which black outs would likely occur.
High-level officials including Prime Minister Erdogan are engaging
with Iran to bring its gas back online for Turkey. End summary.


Natural Gas Cuts from Iran and Russia
--------------


2. (U) On January 1, 2008, Iran reduced it gas exports to Turkey by
75% and on January 7 cut off gas exports entirely. Press reports
claim that Turkmenistan reducing its gas exports to Iran gave Iran
no choice but to reduce exports to Turkey, while the January 7 cut
was blamed on pipeline dysfunctions due to cold weather. Russia
also reduced gas flow through the West Line to Turkey by about 10%,
also due to bad weather.

Keeping the Lights On Despite Gas Cuts
--------------


3. (SBU) According to Energy Ministry Energy Affairs DDG Nilgun
Acikalin, the GOT is determined to keep the lights and heat on for
households and industry. During a similar gas shortage in the
winter of 2007 also caused by a cut from Iran, the GOT was heavily
criticized for cutting power to some industrial users. Acikalin
said the GOT has taken the following measures to assure gas supply:
(1) increased purchase of natural gas from Russia via the Blue Steam
pipeline; (2) increased purchase of liquefied natural gas (LNG) from
Algeria and Nigeria; and (3) substituted secondary fuels such as
gasoline and fuel oil for natural gas in combined cycle power plants
where possible. Turkey is also seeking addition LNG sources from
the spot market. Acikalin said this reduction in gas supply from
both Iran and Russia highlights the importance of Turkey securing
diversity of energy resources.

Worse Case Scenario
--------------


4. (SBU) Acting Energy Under Secretary Selahattin Cimen told the
press that the daily gas consumption in Turkey was 120-130 million
cubic meters (MCM) per day, and this amount would likely increase to
135 MCM/day in bad weather conditions. Acikalin said the worst-case
scenario would be a complete gas cut off from Russia via the West
Line combined with the current cut from Iran. In such a case,
Turkey would have enough gas at its storage facility in Silivri
(700-800 MCM) to maintain current electricity production for one-two
months before black outs would become necessary. Press reports
claim that Turkey's gas storage would only suffice for 15-17 days.
Acikalin speculated that electricity price increases that took
effect January 1, 2008 would probably decrease consumption next
month.

Resolving the Problem with Iran
--------------


5. (SBU) Last week, Cimen traveled to Tehran to discuss the gas
export contract with Iranian officials. The Ministry of Energy has
not released any results from Cimen's trip. The press reported that
Prime Minister Erdogan is also expected to talk to Iran President
Ahmedinejad to resolve this problem. (Comment: If the problem with
Iranian gas is technical, it's not clear how the PM can he helpful,
however if Iran is seeking a higher gas price from Turkey to
accommodate Turkmen seeking a higher price from Iran, the PM may be
able to negotiate a deal. As Turkey raised industrial and
residential prices for electricity January 1, it will be difficult
to pass increased gas costs onto the consumer.)

MCELDOWNEY