US embassy cable - 05ANKARA6769

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 006769 
 
SIPDIS 
 
USDOE FOR CHUCK WASHINGTON 
USDOC FOR 4212/ITA/MAC/OEURA/CPD/CRUSNAK 
EUR ALSO FOR DAS BRYZA 
 
E.O. 12958: DECL: 11/17/2015 
TAGS: EPET, ENRG, EINV, TU, RU, BTC 
SUBJECT: TURKEY'S SAMSUN-CEYHAN OIL PIPELINE - BIG STEP 
FORWARD 
 
REF: A. ANKARA 6310 
     B. ANKARA 5298 AND PREVIOUS 
 
Classified By: ECONOMIC COUNSELOR THOMAS GOLDBERGER FOR REASONS 1.4 (B) 
 AND (D) 
 
1.  (SBU) SUMMARY: Turkey's long-standing preference for 
Samsun-Ceyhan as a Bosphorus bypass oil pipeline has moved a 
big step closer to fruition with the announcement that 
Italian oil firm ENI will collaborate with Turkish firm Calik 
Enerji to develop the project.   While still far from a done 
deal, oil major ENI's announced commitment to assist in 
performance of engineering and design, in combination with 
its need to gain egress of significant future Kazakhstan oil 
volumes is a significant milestone.  Fanfare and 
announcements stemming from the November 17 Blue Stream gas 
pipeline inauguration, in the presence of Turkish, Italian, 
and Russian leaders, will reinforce the North-South energy 
vision.  End Summary. 
 
ENI Announces Backing for Samsun-Ceyhan 
--------------------------------------- 
 
2.  (U) According to a November 9 press release, Italian oil 
major ENI and Turkish firm Calik Enerji reached agreement 
laying the basis for the development of an oil pipeline 
connecting the Turkish port of Samsun, on the Black Sea, with 
Ceyhan, on Turkey's Mediterranean coast.   According to the 
press release, the purpose of the project is to provide a 
faster, environmentally safer, and more economic alternative 
to the transportation of oil by ship through the Turkish 
Straits of the Bosphorus and Dardanelles.  The press release 
says the Turkish Government is aware of the initiative 
undertaken by the ENI-Calik consortium, and has indicated 
support to the Samsun-Ceyhan route.  ENI and Calik will 
perform engineering and design studies on both the selected 
route and the transportation system, constituting a 560 km 
pipeline with 1 million bpd capacity and a new loading 
terminal in Samsun and oil storage facilities to be built at 
Ceyahn.  Also according to the press statement, the project 
is of strategic importance for ENI, operator of the Kashagan 
field and co-operator of the Karachaganak field in Kazakhstan. 
 
Turkey supports Samsun-Ceyhan 
----------------------------- 
 
3.  (C) In a November 9 conversation with Steve Mann, GOT 
MinEnergy DDG Mithat Rende reiterated long-standing GOT 
preference and support for Samsun-Ceyhan for a Bosphorus 
bypass, arguing that it was more plausible than the competing 
Burgos-Alexandropolos (Bulgaria-Greece) route for 
environmental, existing port capacity, and existing pipeline 
right-of-way reasons.   Noting that "other horses" were 
ahead, Mann pressed for what the GOT would do to make the 
project happen.  Rende asserted that the project had the full 
support of the Prime Minister and the Ministry of Energy, and 
could use part of the BTC right-of-way.  (Mann noted that BP 
said that the GOT has not spoken to them about this.)  Rende 
stated that Samsun-Ceyhan had the commitment of ENI and Total 
(both with significant future Kazakhstan oil volumes).  He 
said that Chevron was seriously interested, but still 
uncommitted.  Rende said the GOT sought to foster a broad 
consortium, including U.S. presence, as well as Russian 
interests.  (Mann noted that Russian companies' presence 
could prove problematic, citing Lukoil's inability to 
validate its interest in BTC ) because of pressure from the 
Russian government.)  In conclusion, Rende said that the 
inauguration of the Blue Stream gas pipeline under the Black 
Sea from Russia on November 17, in the presence of leaders 
from Italy, Russia, and Turkey, would provide a high-profile 
opportunity to push this and related "North-South" projects 
forward, including expansion of Ceyhan as a regional energy 
hub. (Refs). 
 
Rekindle Turkmen Gas Pipeline? 
------------------------------ 
 
4.  (C) Rende also reiterated Turkey's support for a 
trans-Caspian natural gas pipeline from Turkmenistan.   Mann 
noted that Azerbaijan was receptive to working on this 
project, as well as ready to negotiate a compromise on 
Caspian Sea delimitation (to jointly develop the 
mutually-claimed  Kapaz Serdar field in the central Caspian 
Sea), but lamented that there "was no one for them to talk 
to" in Turkmenistan.   Moreover, Mann noted that the claim 
that the Turkmen President was willing to quickly resolve the 
issue was simply never acted on.   Repeating that the U.S. 
was willing to do whatever is needed to secure the export of 
Turkmen gas, he noted that he did not see a productive 
possibility at the current time.   Rende and Mann agreed that 
it should be kept on the agenda. 
 
BTC Inauguration 
---------------- 
 
5.  (SBU) GOT and company officials are all now talking from 
the same page.   According to GOT officials, oil is expected 
at the Turkish border with Georgia over the next 7-10 days 
(after problems and delays in Georgia).  First oil at Ceyhan 
is targeted for February 2006, so the still-to-be-scheduled 
inauguration ceremony is expected in March to gain better 
weather. 
 
6.  (SBU) Comment: While ENI has not offered the elusive and 
critical oil throughput guarantee, it is the first oil major 
(controlling significant oil volumes) to publicly commit to a 
specific Bosphorus bypass and commit to co-funding 
engineering and design studies.   The meeting of the Italian, 
Russian, and Turkish leaders November 17 to formally fete 
Blue Stream (although it has started operating gradually 
since 2003) will offer an opportunity to express further 
commitment to the North-South energy corridor (refs).  The 
North-South axis is intended to compliment, not compete with, 
the East-West energy corridor.  Bringing Russian firms and 
oil volumes will be necessary to bring a Bosphorus bypass to 
reality ) and they continue to play the Turks and the 
Bulgarians-Greeks off each other.  End Comment 
MCELDOWNEY