US embassy cable - 04ANKARA6043

C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 006043 
 
SIPDIS 
 
USDOC FOR ITA/SAMUEL NEWMAN 
USDOC FOR MAC/OEURA/CPD/DDEFALCO 
 
E.O. 12958: DECL: 10/14/2009 
TAGS: EPET, EWWT, TU, IZ 
SUBJECT: TURKISH OIL COMPANY WANTS TO DO BUSINESS IN 
NORTHERN IRAQ 
 
Classified By: DCM ROBERT S. DEUTSCH FOR REASONS 1.4 (B) AND (D) 
 
1.  (C) SUMMARY: According to its CEO, the state-owned 
Turkish Petroleum Corporation (TPAO) has developed a 
"strategic plan" for reengaging in oil and gas development in 
Northern Iraq that it will present in Baghdad, Washington, 
and London.  Understanding that Iraq's oil and gas resources 
are controlled in Baghdad, the plan also requires working 
with the Kurdish Regional Government (KRG).  Building on its 
pre-1990 experience in Northern Iraq, available personnel and 
equipment based in southeast Turkey, and good relations with 
central and regional Iraqi officials, the company believes 
its agenda will contribute to economic development in Iraq 
and encourage other oil companies to follow its lead.  End 
Summary. 
 
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Parallel Tracks 
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2.  (C)  TPAO President Osman Saim Dinc described his 
company's vision for reengaging in the oil/gas business in 
Northern Iraq in an October 14 meeting with energy officer. 
Dinc said that operationally commencing oil or gas 
development in the region would require approvals from both 
Baghdad and the KRG, and expressed frustration that while the 
KRG appears eager to move forward, the Oil Ministry in 
Baghdad had postponed tendering permits for production 
sharing agreements (PSA's).  Dinc said he has been in contact 
with Halliburton, Baker-Hughes and KBR (and previously with 
the CPA) and had understood that Baghdad had decided to focus 
on a PSA approach, rather than buy-back agreements for 
hydrocarbon development. 
 
3.  (C)  The TPAO President said that some private companies 
were talking to Barzani and Talabani and that two Turkish 
firms (Pet Holding and Genel Energy) were producing small 
amounts of product in Northern Iraq, but were unable to 
market their oil.  Dinc said that these companies had 
requested TPAO's assistance, but that Baghdad officials had 
told TPAO not to work with them.  Dinc stressed that TPAO was 
aware of the need to work with the IIG and would remain 
patient, while continuing to press Baghdad to open the door. 
 
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Why TPAO? 
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4.  (C) Dinc made the following points on why TPAO was 
well-positioned to facilitate oil and gas development in 
Northern Iraq and contribute to economic activity in the 
region: 
 
--PREVIOUS EXPERIENCE IN NORTHERN IRAQ: Dinc said TPAO was 
very active in Northern Iraq before 1990.  TPAO had been part 
of a five company consortium working on natural gas 
development north of Baghdad (with Total, ENI, BOTAS- Turkish 
pipeline Company, and Tekfin- a Turkish construction 
company).  Shell led a separate project based on associated 
natural gas.  According to Dinc, both projects targeted 10 
bcm gas per year for a 30 plus year life.  More recently, 
Dinc said that TPAO had held informal discussions with Shell 
on working together on potential gas development, marketing, 
and transmission via Turkey.  Dinc said that at the time of 
the Gulf War, TPAO had been on the verge of signing long-term 
oil/gas agreements with Iraq. 
 
--AVAILABLE PERSONNEL AND EQUIPMENT: Dinc said that he had 
almost 4000 people and extensive equipment positioned in 
southeastern Turkey ready to take advantage of this 
opportunity (2400 people in Batman and 1200 people in 
Adiyaman).  He claimed to be holding some of his best 
equipment in reserve for potential use in Iraq. 
 
--TRUST OF BOTH BAGHDAD AND KRG:    Dinc said that TPAO 
retains good relations with Iraqi oil minister Thamir 
Ghadhban from the pre-1990 period.  TPAO has continued to 
build trust with post-Saddam authorities through its 
extensive deliveries of refined products to KBR and SOMO. 
(He said TPAO had delivered 300,000 tons in the first seven 
months of 2004 and contracted for 350,000 tons in second half 
2004).  Dinc noted that most of his personnel in southeast 
Turkey were Kurdish and/or Arabic speakers. 
 
--INTEREST OF OTHER COMPANIES: Dinc said that Statoil and 
Shell have expressed an interest in operating in Iraq, but 
have said "you go first".  TPAO is willing to take the 
initial risk and pave the way, and others will follow, he 
said. 
 
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Next Steps 
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5.  (C) Dinc said he has received positive initial reactions 
from the Turkish Ministers of Energy and Foreign Affairs. 
(Energy Minister Guler included Dinc in his September 21 
meeting with Secretary Abraham.)  He now intends to prepare a 
more detailed and formal strategic plan to present first to 
Prime Minister Erdogan, and then senior officials in 
Washington and London.  Dinc stressed that his proposals 
would provide a practical way to build hope and employment in 
a increasingly difficult situation, and would constructively 
counter pressure from outsiders who sought to provoke terror. 
 He said his plan would comprehensively deal with phased 
logistics, security, and development in a number of areas. 
Dinc said his plan would target "white" and "gray" areas in 
which he could provide appropriate security. 
 
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Other Gas Issues 
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6.  (C) Dinc is a strong proponent of developing Turkey as an 
East-West Energy Corridor and is bullish about BTC not only 
quickly running at capacity, but being boosted to 1.8 million 
b/d.  He said he expects a deal for five large tankers to 
ship crude from Aktau in Kazakhstan to Baku to be announced 
in December to provide the supplemental oil.  He said that he 
has had long conversations with the highest levels in 
Kazakhstan about development and transportation of natural 
gas.  Dinc asserted that he has firmly counseled against 
transit options via Iran, noting that Iran would be a 
"nightmare" for them. 
 
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TPAO Background 
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7.  (SBU) TPAO is active in oil and gas exploration, 
drilling, and production in Turkey and internationally.  It 
partners with western firms for exploration and production in 
Turkey.  TPAO and U.S. firm Madison Oil recently announced 
the discovery of commercial natural gas on an offshore Black 
Sea permit. TPAO/BP will be bringing an American drilling rig 
into the eastern Black Sea early next year. TPAO has also 
partnered with ChrevronTexaco and El Paso.  TPAO participates 
in oil/gas development in Libya, Kazakhstan, and Azerbaijan 
(Azeri-Chirag-Guneshli, Shah Deniz gas, Baku-Tbilisi-Ceyhan 
(BTC) oil pipeline, and South Caucasus Natural Gas pipeline). 
 
8.  (SBU) Dinc himself is new to the oil business, having 
been appointed only about eighteen months ago.  He said he is 
a mechanical engineer with a U.S. perspective, having worked 
for about fifteen years for General Electric in upstate New 
York. 
 
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Comment 
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9.  (C)  Without knowing the details of TPAO's ideas, as 
described by Dinc they would seem to support a number of USG 
interests, including developing Turkey as an East-West Energy 
Corridor (from Iraq) and encouraging economic development and 
prosperity in Iraq.  TPAO is willing and appears to be able 
to take and manage initial risks, which could catalyze both 
entry of other international oil majors and economic growth 
and stability. 
 
10.  (U) Baghdad minimize considered. 
EDELMAN