This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ANKARA 003419 
 
SIPDIS 
 
SENSITIVE 
 
ISTANBUL -- PLEASE DELIVER TO AMBASSADOR MANN 
 
E.O. 12958: N/A 
TAGS: ECON EPET ETRD SENV TU
SUBJECT: BOSPHORUS BYPASS PIPELINES -- THE SITUATION IN 
TURKEY 
 
REF: A. ISTANBUL 262 
     ¶B. ANKARA 2071 
 
Sensitive But Unclassified -- Not for Internet Distribution 
 
¶1.  (SBU) Summary:  The Turkish Government supports 
construction of a bypass pipeline to reduce the rising volume 
of oil tanker traffic through the Turkish Straits.  Two 
consortia are promoting bypass projects in Turkey -- one via 
Thrace and the other from Samsun to Ceyhan -- and have 
applied for licenses to proceed.  However, many observers 
doubt that a bypass will be built because it is still cheaper 
to ship via the Straits and because of the free rider 
problem.  The Thrace proposal is the cheapest option but 
faces some environmental concerns and possible resistance 
from the MFA; the more expensive Samsun project is closer to 
the east Black Sea oil export ports and will take advantage 
of the established oil port at Ceyhan.  End Summary. 
 
The Bosphorus Bottleneck 
 
¶2.  (U) Tanker traffic in the Turkish Straits continues to 
rise.  The amount of oil shipped through the Straits has more 
than doubled since 1997, from 60 million tons in 1997 to 134 
million tons in 2003.  This has meant not only more tankers 
but also larger tankers making their way through the narrow 
and congested Straits.  (More than 2,000 vessels per day 
transit the Straits.)  Turkish officials are increasingly 
concerned that the Straits are approaching the maximum safe 
limit for oil tanker traffic and fear that increasing traffic 
will lead to a serious tanker accident. 
 
¶3.  (SBU) Turkish officials continue to stress that they have 
no intention to modify the Montreaux Convention, under which 
Turkey is obligated to maintain free passage for all vessels. 
 However, they have implemented several safety requirements 
to reduce the risk of the largest oil tankers.  For example, 
because the largest tankers must frequently cross the 
channel, Turkish authorities allow them to transit in one 
direction at a time, effectively limiting the number to 6 per 
day.  With more and more traffic funneling through the 
Straits, delays are becoming more frequent and severe, 
raising the cost to the oil companies.  For example, last 
winter bad weather caused long delays in tanker traffic, 
costing the oil companies hundreds of thousands of dollars 
per tanker (ref a).  Russian oil companies complained that 
Turkey was using safety concerns to unnecessarily reduce 
tanker traffic, and Transneft called for construction of a 
bypass pipeline. 
 
¶4.  (SBU) Although most observers agree that bypass pipelines 
are desirable, most of our contacts are skeptical that any 
will be built soon.  First, most observers maintain that, 
even with rising costs due to insurance and delays transiting 
the Bosphorus, it is still significantly cheaper to ship 
through the Straits than to commit to using a pipeline. 
Second, there is the problem of free riders.  If some 
companies begin to transport oil via a bypass pipeline, 
delays will be reduced, reducing the cost to the shippers who 
opted out of the bypasses.  Many contacts told us that, 
without the agreement of all the oil companies to use a 
bypass, individual oil companies will not commit.  Former 
Energy U/S Yigitguden told us that oil companies will be glad 
to support a bypass pipeline, but they will only use it as a 
relief valve -- when temporary delays in the Straits make 
using the bypass a viable option.  However, the Chairman of 
Thrace Development Corporation (the Thrace bypass developer) 
assured us that the Thrace pipeline is already price 
competitive and a number of oil companies have expressed 
their willingness to use the pipeline. 
 
Bypass Pipelines 
 
¶5.  (SBU) Plans for bypass pipelines have been in the works 
for a number of years.  There are currently four proposals to 
offload oil in the Black Sea and transfer it to the 
Mediterranean:  1) from Burgas in Bulgaria to Vlore in 
Albania; 2) from Burgas to Alexandropoulis in Greece; 3) via 
Thrace; and 4) from Samsun to Ceyhan. 
 
-- The Thrace pipeline would run 195 km across Thrace 
(northwest of Istanbul), and would be able to transport 1.5 
mbd of crude from the Black Sea to Saros Bay in the Aegean, 
at a total cost of about USD 615 million.  The Thrace plan is 
the shortest and cheapest option.  However, there are no port 
facilities for large oil tankers; the project will include 
Single Port Mooring buoys for off- and on-loading the crude. 
Environmental groups have voiced opposition to the project, 
claiming that tanker traffic would harm the delicate 
ecosystem in Saros Bay.  Thrace Chairman Lowe told us that he 
has financial banking for the project and adequate throughput 
commitments from several oil companies. 
 
-- There have been frequent reports that Transneft is 
involved in the Thrace bypass.  Lowe confirmed that Thrace 
has no relationship with Transneft.   Transneft supported a 
Thrace copy-cat project with a Turkish firm, Anadolu Energy. 
However, this project has not gotten off the ground, and a 
recent press report from Moscow indicated that Transneft has 
abandoned this option, though Lowe told the Ambassador 
recently that he understood Transneft was in Ankara lobbying. 
 
 
-- The Samsun-Ceyhan project will run from the Black Sea port 
of Samsun to the oil export port of Ceyhan.  (The 
Kirkuk-Yumurtalik pipeline from Iraq terminates at Ceyhan as 
will the BTC pipeline when it begins operation next year.) 
The pipeline would be able to transport 1.1 mbd, at a cost of 
USD 1.1 billion.  The lead company is Calik Energy, a Turkish 
firm with a number of energy projects in Turkmenistan.  In 
the initial stage, the project could use an existing pipeline 
from a large refinery complex near Ankara to Ceyhan.  The 
Samsun line, although more expensive, has two advantages:  it 
will use deepwater ports, and Samsun is much closer to the 
major oil exporting ports in the eastern Black Sea.  Both 
Thrace and Calik have license applications pending before the 
GOT. 
 
Where Does Turkey Stand 
 
¶6.  (SBU) Turkish officials in the MFA and Energy Ministry 
have voiced support for a bypass, and the MFA has quietly 
floated a proposal to solve the free rider program.  MFA 
Energy Chief Hakki Akil has asked the oil companies to agree 
on a statement of voluntary principles (ref b), expressing 
their commitment to use bypass pipelines that come available. 
 However, a Western oil company official told us that 
although the Western oil companies publicly support the idea, 
in private they are concerned that the Russian companies will 
not abide by the voluntary principles.  He added that the 
principles would publicly commit the Western companies to a 
high standard, that could be used as a precedent for their 
operations worldwide -- significantly increasing their costs. 
 
 
¶7.  (SBU) Energy Ministry U/S Demirbilek told us the Ministry 
recommended that the Council of Ministers approve licenses 
for Thrace and Calik.  He explained that the licenses were 
conditional and would give the companies six months to 
evaluate and address the environmental impact, demonstrate 
throughput guarantees, arrange financing.  In this way, the 
Turkish state assumes no risk for either project and will 
allow them to go forward is they can demonstrate that they 
are commercially viable.  However, the Thrace application has 
been stuck in the Council of Ministers for nearly two months. 
 Calik just recently submitted their application. 
 
¶8.  (SBU) We have not been able to get an explanation for the 
delay, but Thrace official Yilmaz Oz learned from a 
government contact that MFA was the only Ministry not to 
approve.  It may be that some in the MFA prefer the 
Samsun-Ceyhan project or want to ensure an important role for 
Turkish companies.  BOTAS CEO told us that no bypass project 
had much of a chance without BOTAS participation, and that he 
personally favored the Samsun-Ceyhan route.  (Under 
legislation passed in 2001, BOTAS was to be broken up and 
privatized, but GOT has taken steps in recent months to 
preserve BOTAS as a major player in energy.) 
EDELMAN