VZCZCXYZ0007
PP RUEHWEB

DE RUEHAK #1780 3491310
ZNR UUUUU ZZH (CCY-ADXEDC7AF-MSI1564-468)
P 151310Z DEC 09
FM AMEMBASSY ANKARA
TO SECSTATE WASHDC PRIORITY 1481

UNCLAS ANKARA 001780 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EEB/ESC TOM HAMMANG, EEB/TFS CHRIS 
BACKEMEYER, AND NEA/IR RAJEEV WADHWANI 
 
XXX CORRECTED COPY - PARAGRAPH MARKINGS XXXX 
 
E.O. 12958: N/A 
TAGS: ECON ENRG EPET ETTC PREL IR TU
SUBJECT: REVIEW OF TPAO INVESTMENT UNDER IRAN SANCTIONS ACT 
 
REF: STATE 121808 
 
¶1. (U) Post delivered reftel demarche to Turkish Petroleum 
Company (TPAO) General Manager Mehmet Uysal on December 13. 
 
¶2. (SBU) In November 2008, the GOT Ministry of Energy and 
Natural Resources (MENR) signed a one-year memorandum of 
understanding on energy with Iran.  The MOU provides for TPAO 
to develop South Pars gas blocks with capacity of 35 billion 
cubic meters (bcm) per year, half intended for the Turkish 
market and half for export to Europe.  According to Uysal, 
TPAO is not a party to the MOU, nor has it signed any 
agreements with the Iranians directly.  Rather, as a state 
company, it has been directed to prepare a technical report 
to MENR on the economic and technical feasibility of 
developing South Pars gas fields, as called for in the MOU. 
Despite 11 months of negotiations, TPAO was unable to reach 
any agreement with the Iranians on the terms under which it 
could develop blocks in South Pars.  In October 2009, MENR 
agreed to extend the MOU by three months, to mid-February 
2010, and Uysal said TPAO is continuing the talks at the 
GOT's request.  Thus far, they have agreed to swap blocks 22, 
23 and 24 on the periphery of the South Pars field for two 
more centrally located blocks, which Uysal said would have 
much higher gas potential.  But negotiations continue on 
which two central blocks those will be and the terms of their 
development.  If TPAO reaches agreement on terms of 
development, it will be up to MENR to decide if the project 
will go forward, Uysal said that MENR - not TPAO - would have 
to finance the project.  The two blocks would likely cost USD 
7-8 billion to develop (he said his previous USD 12 billion 
estimate was too high).  This is far beyond TPAO's financial 
capabilities, and "in any case, we are not a party to the 
agreement, so TPAO would look to the Ministry to finance it." 
 
 
¶3. (SBU) Answers to specific questions in reftel follow below: 
 
Name of Project: South Pars 
 
Type of Activity: Technical and economic feasibility study of 
exploration and production 
 
Current Status of Project: Terms of development under 
negotiation 
 
Structure of any signed contract: The GOT Ministry of Energy 
and Natural Resources signed a one-year energy MOU with Iran 
in November 2008, which provided for TPAO to develop South 
Pars gas blocks.  The MOU has been extended to February 2010. 
TPAO is negotiating terms of development under that bilateral 
MOU. 
 
Size of the contract in terms of investment requirement and 
planned production: The MOU calls for TPAO to develop South 
Pars blocks with 35 bcm of capacity.  To date, no investment 
has been made. If the project were to go forward, TPAO 
estimates the cost at USD 7-8 billion. 
 
Contract award date: no contract has been awarded. 
 
 
 
Silliman 
 
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