US embassy cable - 05ANKARA5298

UNCLAS SECTION 01 OF 02 ANKARA 005298 
 
SIPDIS 
 
STATE FOR EUR/SE, EB/CBA, AND EB/ESP 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
DOE FOR CHARLES WASHINGTON 
 
SENSITIVE 
 
EUR ALSO FOR DAS BRYZA 
 
E.O. 12958: N/A 
TAGS: EPET, ENRG, EINV, TU 
SUBJECT:  TURKISH STRAITS BYPASS - SLOW BUT SURE 
MOVEMENT 
 
REF: ANKARA 5080 
 
Sensitive But Unclassified. 
Please Handle Accordingly. 
 
1.  (SBU) SUMMARY: While Turkish government officials 
continue to assert that Samsun-Ceyhan is the best route 
for a "Bosphorus bypass" pipeline, regional energy 
company reps say a commercial consensus is forming 
around Burgos-Alexandropolos, with Samsun-Ceyhan a 
possible second bypass, particularly if oil is found in 
ongoing Black Sea exploration.  Although neither route 
has emerged as a clear-cut "winner", government and 
industry officials have differing views on the role 
governments could play in overcoming commercial 
rivalries and creating a consensus.  Meanwhile, MFA 
officials say they seek "strategic" cooperation on gas 
projects, including Trans-Caspian and a "North-South 
corridor" linking the Middle East, Turkey, Russia and 
Europe.  End Summary. 
 
GOT still set on Samsun-Ceyhan 
------------------------------ 
 
2.  (SBU) In a September 2 meeting with Econ/C and 
Energy Officer, GOT MFA DDG Energy Mithat Rende 
reiterated Turkey's long-standing preference for Samsun- 
Ceyhan as the Bosphorus bypass of choice to alleviate 
tanker pressure on the Turkish Straits.  He cited 
environment, existing port facility and capacity at 
Ceyhan, and potential oil discoveries in the Black Sea 
as major reasons for this preference.  Rende asserted 
that the GOT must play a facilitating role, and asked 
for advice from the USG on how to proceed effectively. 
He repeated the potential list of sponsors and 
participants (who have at least looked seriously at the 
deal): oil majors, including Total, ENI, Chevron, and 
TNK-BP; Calik Enerji; BOTAS; and the Russians.  Note: 
we understand some sort of feasibility study has been 
completed, but not detailed engineering.  End Note. 
 
Companies Have Other Ideas 
-------------------------- 
 
3.  (SBU)  Meanwhile, Chevron reps told Charge 
September 6 that serious progress had been made on 
bringing a Bosphorus bypass to realization.  The 
Chevron officials, however, believed that Burgos- 
Alexandropolos was the project of choice from the 
standpoint of economics and work already done; but 
worried about the potential negative reaction of the 
GOT (which they suggested could manifest itself in more 
restrictive management of Straits traffic).  They said 
Chevron was working closely with TNK-BP, and had been 
in touch with Transneft and other Russian companies to 
coordinate getting all players on board.  Given the 
volumes of Russian and growing Caspian crude (even with 
expansion of CPC and BTC), the Chevron officials said 
they were giving more and more credence to the need for 
two Bosphorus Bypass projects.  Therefore, they 
speculated, perhaps a case could be made for Samsun- 
Ceyhan first, then Burgos-Alexandropolos.  The Chevron 
reps noted that potential oil discovery in the eastern 
Black Sea (still high risk) would definitely argue for 
Samsun-Ceyhan.  Note: Chevron has stepped into Unocal's 
25% share of the BP-led eastern Black Sea deep water 
exploration work.  End Note. 
 
4.  (SBU)  The Chevron reps stressed that a critical 
mass of companies was gelling to make bypass project(s) 
work on a commercial basis, mitigating the free rider - 
first mover risk.  Even though there would remain some 
companies that would not play a helpful role, this 
would obviate the need, they thought, for a government 
role in fostering an industry consensus on the best 
route -- as proposed both by Rende and Energy Ministry 
Undersecretary Demirbilek in his August 26 meeting with 
State/EUR DAS Bryza (ref).  This view was corroborated 
in a separate meeting with BP Turkey country director 
Tahir Uysal, who told the Charge that there was strong 
interest in a bypass project. 
 
Gas Projects 
------------ 
 
5.  (SBU)  Rende also emphasized to EconOffs his belief 
that governments had a strategic role to play in making 
other big, international deals happen, particularly in 
the gas sector.  He cited: 
a) GOT need to consolidate and encourage gas transit; 
   the Turkey-Greece connector being a good start. 
b) The proposal discussed by Energy Minister Guler 
   during August 7 meetings in Jerusalem for a gas 
   export pipeline from Ceyhan to Israel. 
c) Other transit deals such as Nabucco to Austria and 
   Egyptian gas through Jordan and Syria to Turkey. 
d) The need for governments to encourage the Turkmen 
   to move forward and the Azeri's to be flexible to 
   realize trans-Caspian gas. 
In addition, he noted that a deal had not yet been 
reached on adding Kazakh oil volumes to BTC. 
 
6.  (SBU) Comment:  Thrace Development Company's 
(American interest) proposed trans-Thrace bypass 
project is not dead, but appears well back in the 
ranks. 
 
McEldowney