NO MAJOR DEVELOPMENTS ON SOUTH PARS DEAL OR

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 000127 SIPDIS E.O. 12958: DECL: 01/22/2020 TAGS: ENRG EPET ECON PREL TU SUBJECT: NO MAJOR DEVELOPMENTS ON SOUTH PARS DEAL OR TURKMEN GAS VIA IRAN REF: A. 2009 ANKARA 1566 ¶B. ANKARA 27 Classified By: DCM Doug Silliman for reasons 1.4 (b,d). ¶1. (C) SUMMARY: Despite a brief "Oil and Gas Journal" news report from Paris January 8th of a recent Turkey-Iran gas agreement, GOT and Turkish Petroleum Company (TPAO) officials tell us there have been no significant developments or changes regarding their dealings on either South Pars gas field development or importing Turkmen gas through Iran. END SUMMARY. NO NEW DEAL ON SOUTH PARS GAS DEVELOPMENT -------------- ¶2. (C) Post has reconfirmed that Turkey and Iran have not signed a final agreement on Turkish Petroleum Company (TPAO) development of South Pars blocks. On January 19, TPAO GM Mehmet Uysal told EconCouns and EconOff the company continues to negotiate on the technical aspects of a possible deal according to the MOU extension signed on PM Erdogan and Energy Minister Yildiz's visit to Tehran October 26-27 (reftel A). Uysal said TPAO will report to Yildiz by mid February regarding the outcome of the negotiations and the "red lines" of TPAO's requirements for a contract. He said the Ministry of Energy will then try to negotiate the contract within TPAO's "red lines." Uysal told us no significant parameters of the deal being considered have changed: they are looking at two central blocks and an investment in the range of $3.5 - 4 billion. (Note: As in all prior conversations, Uysal has not been optimistic of reaching agreement on the technical aspects of the deal. He gave no indication on January 19 that his level of optimism had changed in either direction. End note.) Berris Ekinci, head of the MFA Energy Department, confirmed for us again January 22 that no agreement on South Pars was signed when Yildiz attended the January 6 opening ceremony for the new Turkmen-Iran natural gas pipeline. INTEREST BUT NO DEAL - OR DETAILS - ON TURKMEN GAS VIA IRAN -------------- -------------- ¶3. (C) Although discussions surrounding the January 6 pipeline opening included expressions of positive intentions to work toward exporting Turkmen gas to Turkey through Iran (reftel B),no agreement was signed. Ekinci told us again January 22 that the design and technical details of a possible deal remain undefined. She said the GOT would still prefer to import Turkmen gas by a trans-Caspian route, but as relations with the Azeris have grown difficult, Turkey has begun to look at other options. Ekinci stressed that realizing the option of importing Turkmen gas through Iran would be a long process. Mithat Rende, MFA DG for economic affairs, told DCM and EconCouns on January 15 that they have not even reached the stage of deciding how they would move Turkmen gas through Iran -- whether it would be a swap agreement or straight transit, nor whether it would be via a new pipeline or the existing Iranian system. Officials at the State Pipeline Company (BOTAS) and the Ministry of Energy and other industry experts continue to remind us that Turkey does not currently have the capacity to receive more gas from Iran, and in fact is facing take-or-pay penalties because infrastructure inadequacies prevent BOTAS from accepting and transporting even the currently contracted volumes (reftel B). Regardless of how the deal were designed, it would require significant investment in both Turkish and Iranian infrastructure. ¶4. (C) Rende also complained of the Iranians as negotiators, saying he spent seven hours with them and could not even reach agreement on a comma. He described them as "maximalists, self-confident and proud" in negotiations. Despite this, he said we have to "think big" on Nabucco. He explained that the Nabucco deal is "dead" without Turkmen gas via Iran, since Iraq and Qatar are not feasible near-term options, and the Azeris can supply only a third of the necessary volumes. He concluded, "If you don't want Turkmen gas into Nabucco via Iran, give us an alternate route," suggesting we press the Azeris to agree to a trans-Caspian route. ¶5. (C) On January 26, EconOff and EconSpecialist asked Ibrahim Arinc, advisor to Yildiz, about speculation that a private Turkish company, Som Petrol, was planning to exercise a 1 billion cubic meter (bcm) contract it holds from Turkmenistan to import gas via the new Turkmen-Iran pipeline and through Iran to Turkey. Arinc said he did not know about such a contract, but he did confirm that Som has a contract with the National Iranian Oil Company (NIOC) to import gas ANKARA 00000127 002 OF 002 into Turkey and then export it on to Europe. He noted that Som would face technical challenges regarding infrastructure deficiencies in both Turkey and Iran, though as a private company they might face fewer political challenges. Jeffrey "Visit Ankara's Classified Web Site at http://www.intelink.s gov.gov/wiki/Portal:Turkey"