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Cablegate: Edison Optimistic On Prospects of Turkey-Greece-Italy

Published: Mon 25 Sep 2006 03:36 PM
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PP RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHRO #2698/01 2681536
ZNR UUUUU ZZH
P 251536Z SEP 06
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC PRIORITY 6045
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3163
RUEHKB/AMEMBASSY BAKU PRIORITY 0085
RUEHSI/AMEMBASSY TBILISI PRIORITY 0208
RUEHMIL/AMCONSUL MILAN PRIORITY 7711
RUEHNP/AMCONSUL NAPLES PRIORITY 1873
RUEHFL/AMCONSUL FLORENCE PRIORITY 1760
UNCLAS SECTION 01 OF 02 ROME 002698
SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: EPET ENRG ETRD AJ AL RS TU GR IR IT
SUBJECT: Edison Optimistic on Prospects of Turkey-Greece-Italy
Pipeline Completion, Requests Low-Profile USG Support
REF: ROME 1667
ROME 00002698 001.2 OF 002
SUMMARY
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1. In a meeting with A/Ecmin and ConGen Milan representatives,
Roberto Poti, Vice President for Business Development of Edison,
Italy's second largest energy company, expressed confidence that the
natural gas pipeline connecting Greece and Italy will be completed
by 2010. Obstacles remaining include financing the Greek portion of
the 300 million euro underwater pipeline connecting Greece and
Italy, and clearly defining Turkey's role in the export of Azeri
gas. In Edison's view, Turkey would like to become a natural gas
reseller, while Edison would prefer Turkey limit its role to that of
a transit state. Poti was emphatic that Turkey's selling Azeri gas
would upset the "economics" of the project for Edison and would be a
deal breaker. End summary.
2. A/Ecmin and P/E Chief ConGen Milan met September 5 with Roberto
Poti, the Edison official responsible for the company's
participation in the Turkey-Greece-Italy (TGI) natural gas pipeline
project. A/Ecmin and Poti had previously met (reftel). A/Ecmin
reiterated the USG interest in Italy's energy security, and
underscored that the USG views the TGI as a key project.
3. Poti expressed confidence the TGI project will be completed by
2010-11. He also thought the pipeline connecting Azeri production
fields to Turkey (via Georgia) should be operational by 2007, by
which time the pipeline connecting Turkey to Greece should also be
completed. The final link between Greece and Italy, the
Italy-Greece Interconnector, will be built by Edison and the Greek
Public Gas Corporation (DEPA). DEPA will be responsible for the
Greek onshore portion of the pipeline, while an Edison/DEPA joint
venture will carry out construction of the submerged pipeline
connecting Italy and Greece (the "Poseidon" project).
Financing
---------
4. Poti said Edison has the necessary 150 million euros to fund its
portion of the Poseidon pipeline. DEPA, however, will need EU
funding. Poti believes EU funding will be forthcoming due to strong
Greek government support and because it has been identified as a
"Project of European Interest." Under its agreement with DEPA,
Edison will pay transit fees to DEPA for 20 years and thus guarantee
cash flow for DEPA to repay its EU financing. Marco Margheri,
Edison's Brussels representative, indicated it might be helpful if
the USG expressed support for the project as part of the greater
U.S.-EU energy security dialogue.
Italy-Greece (IGI) Pipeline "Purely a Commercial Venture"
--------- ----------------- -------------------- --------
5. Poti said that while sensitive to energy security matters,
Edison is committed to the IGI for commercial purposes only and not
by a desire to stop Gazprom's westward expansion. He explained that
because it is not a big energy company, like ENI, Edison must find
alternative cheaper sources of natural gas to remain competitive.
Azerbaijan
----------
6. Poti said PM Prodi had written the Government of Azerbaijan to
support the Edison-Socar collaboration to extract natural gas from
Azeri gas fields and that Edison had "no problems" with Azerbaijan.
He was also unaware of any Russian pressures on Azerbaijan to block
the project.
7. However, Poti said Edison cannot negotiate dates, volumes, and
prices until the BP-Statoli-led consortium completes the Shah Deniz
technical study. Edison believes the USG could help by urging BP (as
the most "friendly" partner in the consortium) to complete the
technical study as soon as possible. One key question for Edison is
whether the Shah Deniz gas field can produce sufficient natural gas
to allow Azerbaijan to export through the TGI. (Note: Edison
expects to import approximately eight BCMs per year through the IGI;
Greece, three BCMs per year. See reftel. End note.)
8. Poti does not think a USG direct intervention with the GOA is
needed at this stage, although he would welcome the USG letting the
GOA know of USG interest in the project.
Turkey
------
ROME 00002698 002.2 OF 002
9. Poti expressed concern over Turkey's desire to become an Azeri
natural gas distributor, rather than only a transit country. If
Turkey becomes a gas reseller, Poti sees two negative results:
Edison would have to pay Turkey additional fees, thus raising the
cost of natural gas to Edison; and Turkey could pump other natural
gas (Gazprom) into the TGI. Poti said that the USG could help by
urging Turkey to commit to the project as currently designed, with
Turkey providing only transit services. Edison would also like the
USG to urge Turkey to sign onto the Italy-Greece intergovernmental
agreement to make it a trilateral agreement. To avoid collapse of
the TGI project, Poti said Edison could agree to Turkey's Botas
becoming a partner, but he did not specify how.
Russia
------
10. Poti thinks Russia is no longer trying to block TGI
construction and that Russian might see the pipeline as another
means to export Gazprom gas to Europe. Poti related that during
Russian President Putin's recent visit to Greece, Putin asked the
Greeks if Russian gas could be pushed through the IGI and the Greeks
told him that Gazprom should deal with Edison directly.
Iran
----
11. Poti hinted at, but did not elaborate on, possible problems
between Iran and Turkey, but he said Iran was not "hostile" to the
project.
Albania
-------
12. Poti said there is EU political pressure to route the TGI
through Albania. Edison is vigorously opposed to this idea because
there is no reason to route the gas through an additional country.
"There must be no confusion between the concept of Albania's
receiving natural gas, with which we agree, and Albania's
transporting natural gas, which we do not," Poti said. Edison is
willing to provide Albania with natural gas and has offered to build
a TGI spur pipeline to Albania, but sees no need for the entire
pipeline to pass through Albania. He said the pipeline goes through
enough "problem states" and that Edison does not want to be
Albania's hostage in the future. Alluding to USG interest in
enhancing EU energy security, Poti noted the USG could help by
advocating with the EU that the IGI continue the route as planned.
TGI and Nabucco
---------------
13. Poti believes the TGI and Nabucco projects (the latter linking
Turkey and Austria via Bulgaria, Romania, and Hungary) are not
incompatible. To the contrary, he said, the two pipelines will
complement each other, if the situation in Iraq and Iran stabilize.
However, given the TGI's smaller scale and relative simplicity, Poti
believes that the TGI is more likely to be completed first.
SPOGLI
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