VZCZCXRO8350
RR RUEHAG RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHAK #2583/01 1291304
ZNR UUUUU ZZH
R 091304Z MAY 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 5433
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHAH/AMEMBASSY ASHGABAT 1871
RUEHTA/AMEMBASSY ALMATY 2164
RUEHGB/AMEMBASSY BAGHDAD 0610

UNCLAS SECTION 01 OF 02 ANKARA 002583 
 
SIPDIS 
 
USDOE FOR CHARLES WASHINGTON 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EINV BEXP TU AZ
SUBJECT:  STATOIL TARGETS TURKEY FOR A SOUTHERN GAS CORRIDOR 
 
REF: A) ANKARA 2277 
 
B) ANKARA 2044 
C) ANKARA 2042 
 
Sensitive But Unclassified.  Please handle accordingly. 
 
¶1.  (SBU) SUMMARY: In a May 3 meeting with the Ambassador, 
Statoil Country Manager Per Myrvang said that Statoil was 
seriously looking at the Turkish market for commercializing 
Shah Deniz Phase II gas volumes when Azerbaijan's Shah Deniz 
Phase II begins producing in 2011-12.  While there are a 
number of obstacles to arranging the commercialization of 
this potential gas in Turkey and Europe, Statoil, as a key 
South Caucasus Pipeline-Shah Deniz partner, is optimistic. 
Statoil's interest comes at a time when there is a sense of 
urgency to assure delivery of Azerbaijani gas to southern 
Europe.  End Summary. 
 
-------------------------------------------- 
Turkey as Southern East-West Energy Corridor 
-------------------------------------------- 
 
¶2.  (SBU) Myrvang said the Shah Deniz partners (BP is 
technical operator) had agreed to move ahead on a test drill 
aimed at identifying the amounts of gas available at that 
field, which would in turn determine how far beyond 
Azerbaijan and Turkey the gas might be sent.  Myrvang said 
Turkey currently faced an over-supply of take or pay natural 
gas, but based on growing demand and expiring contracts, it 
could be a good market fit for 2011-2012 when the Shah Deniz 
group would be aiming to market 12-20 BCM pa of incremental 
gas.   Depending on supply, the Statoil rep thought Turkey 
could be a conduit for gas to Greece/Italy, Central Europe 
via Nabucco, and/or even a LNG processing facility at Ceyhan 
- targeting Europe or the U.S. (and perhaps also 
commercializing gas from Iraq on the Kirkuk-Ceyhan 
corridor).  He noted that the favorable economics of Caspian 
gas pipelines decline relative to other sources the longer 
the transit distance.  Myrvang said Statoil would build off 
existing commercial arrangements and contacts in Europe to 
discuss Caspian gas when it is feasible to do so. 
 
¶3.  (SBU) The Statoil rep cited a number of challenges to 
doing business in Turkey.  He said that Turkey needed 
natural gas storage to handle peaking in demand, which is 
now imperfectly managed using LNG storage and old gas 
reservoirs.  Myrvang said the GOT was finally undertaking a 
large, appropriate storage facility under the Salt Lake near 
Ankara, with World Bank assistance.  Myrvang said there were 
ambiguities for marketing the natural gas into Europe 
because the new EU Natural Gas Directive prohibits joint 
sale of gas in the EU (i.e., blocking sale by consortium). 
Moreover, he said Turkish current law would have to be 
changed to allow an incremental Turkish contract with 
Azerbaijan.  Myrvang concluded that delivering gas to Turkey 
could still be commercially very attractive for the Shah 
Deniz consortium, but there were still issues to iron out 
between the partners. 
 
---------------------- 
BOTAS lacks leadership 
---------------------- 
 
¶4.  (SBU) Building on a theme we hear increasingly, Myrvang 
said the status and capacity of Turkish state pipeline 
company BOTAS was uncertain.  He noted that the company 
lacks leadership because the GOT has allowed successive 
(relatively weak) acting Director Generals to hold the top 
position, and seemed unableor unwilling to replace the last 
DG who retird 1.5 years ago.  Mryvang blamed BOTAS' 
problems completing BTC on weak sub-contractors (not always 
chosen based on competence and capacity).  The Statoil rep 
pointed out that the pending transfer of BOTAS gas import 
contracts required under current law made it unclear who 
would be the buyer on behalf of Turkey for future gas 
volumes. 
 
-------------------------- 
Urgency on Azerbaijani Gas 
-------------------------- 
 
¶5.  (SBU) The Ambassador described how the Secretary in her 
recent visit and DAS Byrza in an earlier visit stressed the 
 
ANKARA 00002583  002 OF 002 
 
 
urgency of moving forward with Azerbaijani gas to preempt 
Gazprom filling new inter-connectors to southern or central 
Europe.  He said an Italy-Greece-Turkey-Azerbaijan 
conference had been proposed to build confidence; Italy had 
expressed interest in hosting such a conference, but no 
clear timing had been established (refs).  The Statoil rep 
said a conference could be useful, particularly for Turkey 
and Azerbaijan.  He said Statoil has done a lot of business 
with Italy and the rest of Europe, so new deals would be 
done on a commercial basis and would not require IGA's. 
Myrvang also said that Gazprom made deals on a commercial 
basis and viewed Turkey as an important market where it 
would seek to extend its existing contracts. 
 
WILSON