VZCZCXRO6190
RR RUEHAG RUEHDBU RUEHDF RUEHIK RUEHLN RUEHLZ RUEHVK RUEHYG
DE RUEHAK #5000/01 2411502
ZNR UUUUU ZZH
R 291502Z AUG 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 8274
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPARTMENT OF ENERGY WASHDC
RUCNMEM/EU MEMBER STATES
RUCNCIS/CIS COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0727
RUEHDM/AMEMBASSY DAMASCUS 1570
RUEHNE/AMEMBASSY NEW DELHI 0427

UNCLAS SECTION 01 OF 02 ANKARA 005000 
 
SIPDIS 
 
USDOE FOR CHARLES WASHINGTON 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
EXIM FOR PAMELA ROSS AND MARGARET KOSTIC 
OPIC FOR R CORR AND C CHIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EINV EPET BEXP TU RU
SUBJECT:  TURKEY: DUELING REFINERIES 
 
REF: A: ANKARA 4728 
B: ANKARA 4379 
 
Sensitive But Unclassified.  Please handle accordingly. 
 
¶1.  (SBU) SUMMARY: At least three separate refinery projects in 
Turkey have recently been announced, emblematic of Turkey's energy 
hub vision and growing regional importance, as well as the progress 
if has made in its  investment environment and economic growth.  It 
is not clear if GOT will use strategic and political assessments in 
awarding licenses or step back and let the private sector choose, 
but it is very likely that at least one refinery may be built, with 
Ceyhan the leading contender for location as desired regional energy 
hub.  End Summary. 
 
-------------- 
The Contenders 
-------------- 
 
¶2.  (SBU) Fitting neatly with Turkey's stated intent to develop 
itself as a regional energy hub, at least three separate groups have 
applied to the energy regulator (EMRA) for licenses for establishing 
refineries.  Probably first in the running is an application from a 
partnership of Calik Energy and Indian Oil for a $5 billion - 15 
million ton capacity refinery and petrochemical complex a Ceyhan, 
targeting domestic consumption and export. 
 
¶3.  (SBU) Also targeting Ceyhan is an application from Turkish 
private firm Petrol Ofisi, with its Austrian stake-holder OMV, for a 
smaller $2 billion - 10 million ton capacity refinery.  Meanwhile, 
Russian Lukoil has applied for a license for a $3 billion - 10 
million ton capacity refinery in the western Black Sea town of 
Zonguldak.  Government officials have reportedly asked Lukoil to 
consider locating its investment at the more eastern Black Sea town 
of Samsun as the counterpart energy node to Ceyhan, but the press 
has reported Lukoil's continuing preference for Zonguldak, where it 
has done its supporting analysis.  Most recent reports indicate it 
may be bending more towards the government's preference.  There are 
reports that another Turkish group is talking to the Iraqi 
government about establishing a Ceyhan refinery to process oil in 
exchange for fuel products for Iraq, but this has apparently not 
advanced to a formal application. 
 
¶4.  (SBU) Meanwhile, home-grown, recently privatized refiner TUPRAS 
has announced unspecified plans to increase its refining capacity 
from its existing 27.5 million tons.  TUPRAS has four main refining 
complexes: Izmit on the Sea of Marmara, Izmir, Kirikkale near 
Ankara, and Batman in the southeast. 
 
------------------------ 
Who Will Decide and How? 
------------------------ 
 
¶5.  (SBU) Although Turkey is currently importing 6 million tons of 
fuel products and annual consumption is expected to increase 
domestically and regionally, it is not clear that there is 
sufficient demand in the near term for all the mooted refinery 
projects.  Shell's (minority shareholder in TUPRAS) Turkey General 
Manager told Energy Officer that the major oil companies were 
hard-pressed to understand the economic logic of all the projects 
and where the financing would come from.  He noted that the sponsors 
were local players with plans to link to potential pipelines or 
expand in the market.  He thought it might be possible that one of 
the projects went ahead in the near term. 
 
¶6.  (SBU) EMRA President Yusuf Gunay told us that EMRA would process 
applications as to whether they meet normal standards, including EU 
environmental standards, but that the economic viability -- or lack 
of it -- of any one project is the responsibility of the private 
sector applicant.  All three could receive licenses.  It is not 
clear if the GOT will weigh in on a strategic and/or political basis 
- like its approach to pipeline projects - like Samsun-Ceyhan oil 
Bosphorus bypass. 
 
¶7.  (SBU) Given Turkey's vision of Ceyhan as regional energy hub and 
new Rotterdam, and its granting of an exclusive permit to Calik 
Energy -- in partnership with Italian ENI -- for realizing the 
proposed Samsun-Ceyhan oil pipeline, this project might have a 
political and strategic inside track.  Ahmet Calik, who is 
well-connected to Prime Minister Erdogan's AK Party and made his 
 
ANKARA 00005000  002 OF 002 
 
 
wealth in Turkmenistan, has yet to garner oil through-put 
commitments for the pipeline, but has been talking to Russian 
companies, including TNK-BP, and Chevron.  His group has also talked 
to BOTAS about cooperation on construction and/or the use of 
facilities at the Ceyhan port.  The BOTAS facilities service the 
mostly empty pipeline from northern Iraq, and are adjacent to the 
new BTC facilities.  The Calik-Indian Oil partnership lost out on an 
earlier bid for the state refinery TUPRAS privatization in favor of 
a Koc-Shell partnership. 
 
¶8.  (SBU) Calik's application may fit the best with Turkey's vision 
of Ceyhan as a regional energy hub that processes a variety of 
hydrocarbons.  Energy Minister Guler says Turkey is also very 
interested in Ceyhan for natural gas processing.  The press has 
reported discussions between the GOT and Japanese Marubeni on 
building an LNG terminal in Ceyhan.  This has long been a wish list 
item for the GOT in its bilateral discussions with the Russians. 
 
WILSON