VZCZCXRO0391
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHAK #0017/01 0051059
ZNR UUUUU ZZH
R 051059Z JAN 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 0484
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPARTMENT OF ENERGY WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0858

UNCLAS SECTION 01 OF 02 ANKARA 000017 
 
SIPDIS 
 
USDOE FOR CHARLES WASHINGTON 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ENRG EPET BEXP TU IR RS
SUBJECT: TURKEY'S WINTER GAS WOES AND MEASURES 
 
REF: 06 ANKARA 6403 
 
¶1.  (SBU) SUMMARY: Occurring each winter at Turkey's peak need, the 
Iranian announcement January 3 that it had to stop natural gas 
exports to Turkey in order to meet its own requirements was not 
unexpected.  Turkey had already embarked on compensating measures 
after Iran's initial December reduction, including augmenting gas 
storage, increasing shipments from Russia, and spot LNG purchases, 
but these sources will be very expensive.  In addition, BOTAS 
announced that some industrial users may face gas cuts.  Covering 
its winter natural gas requirement will be a challenge for Turkey 
given unreliability of Iran as a source and given delays in 
Azerbaijan Shah Deniz gas.  End Summary. 
 
------------------------------- 
Iran Cuts Gas to Turkey - Again 
------------------------------- 
 
¶2.  (SBU) Citing "internal problems" and domestic shortage of gas, 
Iran announced it cut gas exports to Turkey to zero as of January 3. 
  Iranian Oil Minister Hamaneh reportedly apologized to Turkish 
Energy Minister Guler before official notification, and promised to 
resolve the problem in the shortest time possible.  This news came 
as no surprise, since Iran is a notoriously unreliable supplier. 
Already, on December 14 Iran announced reduction of its daily supply 
of natural gas to Turkey to 7 million cubic meters.  Turkey normally 
expects 20-22 million cm per day from Iran in the winter.  Turkey 
could receive as high as 27-29million cm per day under its 10 
billion cm(BCM) annual contract.  In reality, Turkey receies about 
half the contractual capacity on an nnual basis.  Whereas in 
previous years Iran educed its flows to as low as 5 million cm per 
day during the coldest periods, the cut to zero was unprecedented. 
 
------------------------------ 
Measures to Augment Gas Supply 
------------------------------ 
 
¶3.  (SBU)  In expectation of a difficult winter, the Energy Ministry 
and BOTAS had already undertaken significant measures to prevent a 
gas crisis.  In response to Russian offers to fill the gap from the 
December Iranian gas cut, BOTAS reportedly increased gas purchases 
from the Blue Stream and the Russia-West lines.  The daily flow 
through Russia-West went up to 47 million cubic meters from 42 
million and the flow through Blue Stream increased to 37 million 
cubic meters from 28 million cm.  BOTAS also increased LNG 
purchases, and is now using the Egegaz LNG storage facility in 
Aliaga.  Press reports indicated that the Energy Ministry was 
disappointed about delays in commissioning the new Silivri Marmara 
gas storage facility. 
 
¶4.  (U) In a press statement on January 4, Energy Minister Guler 
claimed that the GOT was taking adequate measures to prevent gas 
shortages.  HE explained the efforts to increase gas imports from 
Russia and LNG imports from Nigeria and Algeria.  Guler stressed the 
importance of the recent LNG storage service contract BOTAS signed 
with private sector facility Egegaz.  Guler refused to comment on 
the compensation Turkey would demand from Iran, noting the 
arbitration case between the two countries continued.  As 
supplementary measures, BOTAS announced that some industrial users 
that generate their own electricity ("auto-producers") would not 
receive natural gas, but Minister Guler chose to deemphasize this 
measure, assuring there would be "no gas cuts for homes and 
industry". 
 
--------------------------------- 
Comment - Keeping the Gas Flowing 
--------------------------------- 
 
¶5.  (SBU) Even without the Iran cut-off and delay in Shah Deniz 
deliveries, Turkey was set for a difficult gas crunch this winter. 
BP (see below) estimates Turkey's potential daily peak winter gas 
demand at 137 million cubic meters and identifies likely sources of 
only 115 million, but its figures need further discounting for Iran 
(unreliable), Azerbaijan (delayed), and Marmara storage (delayed). 
It will be a challenge for Turkey to fill the gap with Russian and 
LNG given questions of cost, availability, and technical limitations 
and/or to significantly reduce provision to industrial users and 
power plants.  Turkey remains significantly dependent on imported 
natural gas for 32% of its electricity production and for municipal 
heating.  Even with some new potential production in the western 
Black Sea (with American Toreador Co.), Turkey's domestic gas 
production is nearly nil. 
 
¶6.  (SBU) The Turks saw this coming.  In fact, they are not as bad 
off as last year, when the Ukraine crisis put Russian supplies in 
 
ANKARA 00000017  002 OF 002 
 
 
doubt.  Russia has capitalized on the problems with Iran (and 
Azerbaijan) supply, by stepping up as the reliable (if at a high 
price) supplier.  Concern about angering its key supplier (65+% of 
supply) has colored Turkey's approach to gas transit to Europe and 
negotiations for help to Georgia (now mooted in the short term 
because of delays in Shah Deniz gas).  Gas supply and gas prices are 
highly politicized, front page issues, especially in this election 
year.  The government has avoided passing cost increases on to 
consumers that would moderate demand growth. 
 
-------------------------------- 
Turkey's Winter 2007 Gas Balance 
-------------------------------- 
 
¶7. (SBU) 
 
Daily Demand 
------------ 
 
Power Generation (peak)     57 mcm 
Industry                    20 
Home Heating                60 
 
Total Demand               137 mcm 
 
Daily Supply 
------------ 
 
                         Maximum        Probable 
                         Capacity       Supply 
                         --------       --------- 
 
Marmara LNG                   22 mcm       17 mcm 
Domestic                       2            1 
Russia-West                   42           39 
Blue Stream                   30           29 
Iran                          28           15 
Shah Deniz                     8            9 
Silivri Storage               10            9 
Aliaga storage                12            5 
 
Total Supply                 155 mcm      115 mcm 
 
Note: Estimates provided by BP, not for use outside USG. 
 
McEldowney