VZCZCXRO4803
RR RUEHAG RUEHDBU RUEHDF RUEHIK RUEHLN RUEHLZ RUEHROV RUEHVK RUEHYG
DE RUEHAK #1723/01 1870941
ZNR UUUUU ZZH
R 060941Z JUL 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 2854
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHGB/AMEMBASSY BAGHDAD 0978
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES
RUEHIT/AMCONSUL ISTANBUL 2979
RUEHDA/AMCONSUL ADANA 2107

UNCLAS SECTION 01 OF 04 ANKARA 001723 
 
SIPDIS 
 
USDOE FOR ALAN HEGBURG 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
TDA FOR DAN STEIN 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EINV TU
SUBJECT: CERA Energy Conference Highlights Caspian Gas Transient and 
Clean Energy 
 
ANKARA 00001723  001.2 OF 004 
 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1.  (SBU)  Summary.  Over 250 government and industry 
representatives attended the tenth annual "East Meets West" 
Executive Conference in Istanbul, June 26-27, for two full days of 
presentations and discussions of energy security, resource access, 
oil and gas transit, and the impact of climate change on energy 
markets.  The Presidents of the Republics of Ukraine, Georgia, 
Azerbaijan, and Turkey opened the conference with strong calls for 
regional energy cooperation and freedom from "monopolistic 
pressures" for energy transit.  Turkey's Energy Minister Hilmi Guler 
announced that Azeri gas will flow to Turkey within a month, 
Turkey's gas interconnector to Greece will open on August 10, and a 
"big potential" exists for wind and hydroelectric power. 
 
¶2.  (SBU)  The OPEC President described the dual challenges ahead to 
increase oil production by 6.9 million bbl/d and to attract over 
$130 billion investment to achieve this expansion.  Iraqi Energy 
Advisor Thamir Ghadhban clearly and proudly described the new 
hydrocarbon law.  For the first time at CERA, nearly half of the 
sessions focused on clean energy technologies, with CERA Chairman 
Daniel Yergin concluding, "The carbon tipping point has been 
reached." The weekend's news of the "South Stream" gas pipeline 
project, which was jointly announced by Gazprom and Italian oil firm 
Eni, gave cause for much discussion on regional transit strategy. 
Nevertheless, except as a reminder of Gazprom's resource clout 
allowing it to guarantee supply for new pipeline projects, no one 
suggested the announcement altered the value of alternate supply 
routes like the Nabucco pipeline.  End Summary. 
 
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Four Presidents Call for Energy Cooperation 
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¶3.  (U) After a rousing performance by the Tekfen Black Sea 
Philharmonic Orchestra with musicians from 23 Caspian and 
Mediterranean countries, CERA Chairman Yergin welcomed participants 
and noted the historic tenth anniversary of the Istanbul Conference. 
 Ten years ago, the late President Heydar Aliyev of Azerbaijan 
addressed the first CERA "East Meets West" conference with his calls 
to overcome obstacles and complete the Baku-Tbilisi-Ceyhan (BTC) oil 
pipeline.  Yergin then introduced opening speakers including 
Ukrainian President Victor Yushchenko, Georgian President Mikhail 
Saakashvilli, Azeri President Ilham Aliyev, and Turkey's President 
Ahmet Necdet Sezer.  The four presidents called for regional energy 
cooperation, open and transparent oil markets, multiple pipelines, 
uniform and just rules of fairness, and freedom from monopolistic 
energy pressures. 
 
¶4.  (U) While the four presidents shared common themes, each also 
made individual appeals. 
 
-- Ukraine's Yushchenko called for Russia to ratify the EU Energy 
Charter, pledged Ukraine's "guarantee" as a reliable transit 
country, called for the Odessy-Brody pipeline to be filled with 
Caspian Oil to Poland, and explained the opportunity for new nuclear 
power cooperation in Ukraine under the "strictest requirements" for 
safety. 
 
-- Georgia's Saakashvilli explained, "We are all interlinked."  He 
thanked Azerbaijan for "coming to the rescue" last winter and noted 
this "was more than friendly" being also in Azeri strategic 
self-interest.  Saakashvilli also thanked Europe, and especially 
Poland, for their support aimed at reducing energy dependence on 
Russia. 
 
-- President Ilham Aliyev explained, "Azerbaijan is much different 
today than ten years ago."  Aliyev noted that "no country is more 
reliable" than Azerbaijan as an energy supplier; he warned of a 
difficult winter ahead while also pledging Azeri support for the 
energy security of its neighbors; he boasted of increasing oil and 
gas production and of the fastest growing economy of the world; he 
acknowledged the UN Public Service Award for oil revenue 
transparency was given on June 26 to the State Oil Fund of 
Azerbaijan (SOFAZ); and he promised Shah Deniz gas will be delivered 
to Europe. 
 
-- Turkey's President Sezer explained that achieving global energy 
security and preventing "undeniable" global warming are problems 
that can only be solved through international cooperation.  Sezer 
 
ANKARA 00001723  002.2 OF 004 
 
 
stated, "Energy supply diversification is key."  He defined 
diversification as: the BTC pipeline, the soon-to-be-operational 
Baku-Tbilisi-Erzurum (BTE) gas pipeline, the interconnector to 
Greece and then to Italy, the need to start Nabucco, trans-Caspian 
flow of Kazakh oil and Turkman gas, the repair and expansion of 
Iraqi transportation after "the legal framework is in place to 
insure oil wealth helps all Iraqi people," and the attractiveness of 
the Samsun-Ceyhan bypass to avoid environmental accidents in the 
Aegean Sea. 
 
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World and Regional Energy Leaders on Stage 
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¶5.  (U)  CERA keynote and plenary speakers included several world 
and regional energy leaders.  Highlights included: 
 
-- Turkey's Minister of Energy and Natural Resources Hilimi Guler 
presented Turkey's vision of pipelines and announced that Azeri gas 
will flow to Turkey within a month, Turkey's gas interconnector to 
Greece will open on August 10, oil and gas transit from Iraqi when 
the hydrocarbon law has been approved, and Samsun-Ceyhan will be an 
vital bypass.  Guler called his recent visit to Turkmenistan 
"promising" and emphasized the importance of environmental safety. 
Concerning climate change, a "big potential" exists for wind and for 
as many as 970 hydroelectric power projects. 
 
-- OPEC President and UAE Energy Minister Mohamed bin Dhaen Al 
Hamili described the importance of technology advances upstream, for 
new resources, and downstream, for environmental reasons. OPEC 
"welcomes the development of new energy sources and welcomes 
improvements to end-use efficiency."  But Al Hamili also gave 
warning that policies for new energy technology should not cause 
demand uncertainty that may delay the "large investments" needed to 
expand oil production nor burden economic growth of developing 
nations. 
 
-- Thamir Ghadhban, Energy Advisor to Iraqi PM al-Maliki, clearly 
described the pending hydrocarbon law using a detailed flow chart 
showing municipal and central government responsibilities, the use 
of the "Future Fund" for oil revenue management, and Iraqi desire to 
cooperate with international oil companies and bring needed 
investment for additional production. 
 
-- Lin Zhenya, President, State Grid Corporation of China, spoke of 
strategic planning for electricity. The State Grid Corporation is 
China's largest company and the largest utility in the world. Zhenya 
described the huge challenge facing China's power sector that will 
likely grow from 650 GW today to 1,100 GW installed capacity by 
¶2010.  While most power will be from coal-fired plants, Zhenya spoke 
of China's desire for sustainable development, enhanced efficiency, 
and plans to construct an "electricity super highway" (an 
ultra-high-voltage transmission grid) that will bring hydroelectric 
power from the west and also power from distant coal and nuclear 
plants to eastern cities. 
 
-- Stefan Judisch, CEO of RWE Gas Midstream, spoke of changes in the 
gas business due to increasing imports and contract complexity. He 
announced his company's interest in securing Caspian gas for Europe, 
and suggested that compressed natural gas (CNG) tankers may be the 
most promising trans-Caspian gas route because of Iranian 
demarcation objections to a pipeline. 
 
-- Ann Pickard, Shell's Regional Vice-President for Africa, began 
her presentation noting the three "critical discontinuities" 
described in Shell's recently released Global Energy Scenarios to 
2025: links between energy consumption and economic growth, 
deepening energy security and supply concerns, and the emergence of 
the carbon marketplace. Pickard then explained that Nigeria will 
soon overtake Norway as a hydrocarbon exporter and that deep water 
wells and LNG are keys to expansion. West Africa faces the challenge 
of meeting its own development and security needs while also 
honoring its supply commitments. 
 
-- Fatih Birol, Chief Economist, IEA, discussed "uncertainties in 
the oil markets" caused by four challenges: rapid economic growth in 
China and India, the declining role of the international oil company 
(IOC), inaccessible oil field data, and price inelasticity in major 
oil consuming nations. 
 
 
ANKARA 00001723  003.2 OF 004 
 
 
-- Andris Piebalgs, Energy Commissioner, European Commission, 
explained that European energy is "much more complicated that 
pipelines and supplies."  In addition to supply security, EU energy 
policy will address sustainability and "competitive" energy 
technology initiatives to address climate change.  Piegbals said, 
"Europe must speak with one voice" in its external energy 
relationships.  He concluded by noting EU's emphasis on climate 
change issues and stating, "All paths forward are needed," including 
decarbonization, hydrogenation, zero carbon energy, and demand 
management. 
 
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Energy and Climate Change: Carbon Tipping Point Crossed 
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¶6.  (U) The impact of climate change on energy policy and the 
development of technology to reduce greenhouse gas emission was a 
second theme of CERA Istanbul.  Speakers from industry, finance, and 
academia addressed the development of renewable energy like solar 
and wind, prospects for future deployment, renewable energy 
financing, and carbon trading.  Featured speakers included Julian 
Mylchreest, Head, Citigroup's Emerging Markets who emphasized the 
necessity of financial incentives for wind and solar deployment, 
Martin Berkenkamp, GE's Marketing Director for Renewables who spoke 
of today's improved wind technology and the potential for continued 
wind power growth, Duygu Erten, Adjunct Professor at Koc University, 
and President of a Turkish consulting firm that brings efficiency 
technology to buildings, and Erol Demirer of whose firm has 
installed two wind farms in Turkey.  Dr. R. K. Pachauri, Chairman of 
the Intergovernmental Panel on Climate Change (IPCC) described the 
links between carbon dioxide emission and climate change.  Jefferson 
Science Fellow and Columbia University Professor of Applied Physics, 
Michael Mauel, illustrated how international partnerships, like the 
Asian Pacific Partnership for Clean Energy Development, can aid the 
deployment of clean energy technology, showed the potential for 
breakthroughs stemming from basic research in biosciences, 
nanotechnology, and fusion energy, and explained that "the race to 
clean energy is a marathon not a sprint".  The latter point was 
re-emphasized by Daniel Yergin during his closing remarks when he 
declared energy to be at the "carbon tipping point" but the 
transformation to carbon-neutral energy will be long and gradual. 
 
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Eurasian Transportation Forum: Caspian Energy from a CERA Viewpoint 
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¶7.  (SBU)  In contrast to the policy presentations made during the 
CERA Istanbul conference, the Eurasian Transportation Forum on June 
25 was technically focused.  CERA'S Russian, Eurasian, and Caspian 
Energy experts presented their views on Bosphorus bypass issues, 
Caspian oil exports, Russian gas development, and Caspian gas 
transit to Europe.  The Transportation Forum was a closed meeting 
for over fifty CERA clients and included executives from 
Gazprombank, Lukoil, Transneft, TNK-BP, Agip, PetroKazakhstan, 
Hellenic Petroleum, Rompetrol Group, TPAO, and the major IOCs. 
 
¶8.  (U)  CERA expects Russian gas production to continue to 
increase, supplied from the smaller gas and condensate fields in the 
Nadym-Pur-Taz (NPT) region and produced from "independent" gas 
producers and oil companies.  CERA also expects Gazprom to "turn its 
full attention" to the new Yamal gas fields and to the costly 
construction of its five, high-pressure pipes capable of moving 300 
bcm westward.  CERA's presentation gave little reason to doubt 
Russian gas could supply Europe's growing demand that may require an 
additional 200 bcm by 2020. 
 
¶9.  (U)  CERA's presentation of Caspian gas transit noted the region 
has now returned to Soviet-era gas production levels (more than 160 
bcm) and predicts additional production of at least 60 bcm by 2020. 
However, CERA suggests that growing regional gas consumption, 
including re-injection needs for Kazakh oil fields and Georgia's 
desire to sever gas ties to Russia, may limit gas exports. 
 
¶10.  (U) CERA also provided commentary on the "changing prospects" 
for Caspian gas transit to Europe.  CERA publicly and privately 
acknowledged the importance of supply diversity and of Caspian gas 
through Turkey to Greece and Italy.  However, more important to 
CERA's Russia and Eurasian group is how expanding Russian gas 
volumes will flow to Europe.  The weekend's joint announcement by 
Gazprom and Italian oil firm Eni to begin a feasibility study for 
 
ANKARA 00001723  004.2 OF 004 
 
 
the proposed "South Stream" gas pipeline project gave a sense of 
urgency to Turkey's gas transit options.  The South Stream Pipeline 
would extend from Beregovaya, Russia and under the Black Sea to 
Bulgaria.  If built, South Stream would provide the Balkans a direct 
source of Russian gas without passing through Turkey. CERA Chairman 
Yergin and Vice-President Daniel Hobbs viewed South Stream as 
"simply another project" and stressed the importance of multiple 
routes and sources.  Hobbs said, "Turkey will not be excluded from 
the energy race, and the Nabucco pipeline does not seem to be 
threatened" by the South Stream announcement. In private 
discussions, CERA analysts contrasted Russia's "heat" with Caspian 
"warmth" and noted South Stream's supply "guarantee" by Gazprom 
gives the project at least some degree of significance in spite of 
its formidable technical obstacles. 
 
¶11.  (U)  Comment.  The tenth annual CERA "East Meets West" 
conference contained a historic call for regional cooperation from 
the Presidents of Turkey, Azerbaijan, Georgia, and Ukraine.  The 
presidential statements emphasized neighbor-helping-neighbor and 
transparent open markets to relieve Russian monopolistic pressures 
in energy supply.  The conference concluded the "carbon tipping 
point" has arrived with the growing importance of efficiency and 
renewable energy.  However, near-term concerns over oil and gas 
supply security seemed more pressing than longer-term goals to 
deploy carbon-neutral technology.  The South Stream pipeline 
announcement, and Russian President Putin's participation at the 
Black Sea Economic Cooperation (BSEC) meeting just days before in 
Istanbul, gave Russia a "presence" at the meeting that made the 
absence of presentations by high-level U.S. officials from 
Washington more noticeable.  End Comment. 
 
¶12.  (U) Attending the CERA Istanbul conference were Ambassador to 
Turkey Ross Wilson, Ambassador to Azerbaijan Anne Derse, and 
Jefferson Science Fellow Michael Mauel, who drafted this report. 
Wilson