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RUEHLN RUEHLZ RUEHMA RUEHPB RUEHPOD RUEHROV
DE RUEHBS #0590/01 1091559
ZNR UUUUU ZZH
R 181559Z APR 08 ZDK (MULTI SVCS)
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNRAQ/IRAQ COLLECTIVE
RUEHAK/AMEMBASSY ANKARA
RUEHAH/AMEMBASSY ASHGABAT
RUEHGB/AMEMBASSY BAGHDAD
RUEHDM/AMEMBASSY DAMASCUS
RUEHIT/AMCONSUL ISTANBUL
UNCLAS SECTION 01 OF 02 BRUSSELS 000590
SIPDIS
SENSITIVE
SIPDIS
STATE FOR EUR, EEB, AND NEA/I
E.O. 12958: N/A
TAGS: ECON ENRG EPET ETRD EU IZ SY TU
SUBJECT: IRAQ PLEDGES 5 BCM/Y OF GAS TO EUROPE
BRUSSELS 00000590 001.2 OF 002
1. (SBU) Summary. In meetings in Brussels this week Iraq's
Oil Minister pledged to supply Europe with 5 billion cubic
meters per year (bcm/y) of gas. The gas would come from
development of Iraq's western Akkas field and would be
supplied to Europe by building pipeline interconnections
between Iraq, Syria, and Turkey. The announcement comes as
the EU is looking for ways to meet a projected shortfall in
future gas supplies. In addition to the pledge, Iraq and the
EU are very close to signing a broad Energy Cooperation MOU
that is viewed as the first step towards a more comprehensive
cooperation agreement. End Summary
2. (SBU) Roland Kobia, Member of EU Energy Commissioner
Andris Piebalgs Cabinet, told EST officers that Iraq's oil
minister Hussain al-Shahristani pledged to supply Europe with
5 bcm/y during an April 16 breakfast meeting with Piebalgs.
This pledge was re-discussed later in the day by EU President
Jose Manuel Barroso and Iraqi Prime Minister Nouri al-Maliki.
Kobia characterized it as "A political gesture of good
will." Al-Shahristani's pledge was picked up in a number of
press reports and likened to the pledge made last week by
Turkmenistan to supply the EU with 10 bcm of gas annually.
3. (SBU) Sigurd Schmidt, a Commission official from DG-Tren,
told EST Officer that the Iraq and Turkmenistan pledges are
part of a wider effort to diversify the EU's gas supply and
find supporting volumes for the proposed Nabucco pipeline.
Schmidt said the EU is concerned about a future production
gap as Europe's demand for gas grows. The Commission is
expecting a decline in European gas production and is worried
about underinvestment in Russia leading to declining gas
production there. As such, bringing in new supplies through
projects such as Nabucco is becoming more and more important.
For this reason the EU is pursuing potential gas supplies
from Central Asia and the Middle East.
The Pledge
----------
4. (SBU) Schmidt indicated the gas to meet al-Shahristani's
pledge would come from the Akkas field in Iraq's western
Anbar province, near the border with Syria. Schmidt sees the
only viable export route for Akkas gas via Syria to Turkey.
This route would require very little in terms of new
pipelines -- a 40 km connector to Syria from Akkas and a 17
km Syria to Turkey connector. According to Schmidt, the
Syrian system has sufficient capacity and would not need to
be expanded to handle the flow. Schmidt estimates it would
take about four years to bring Akkas exports up to the
pledged amount of 5 bcm/y. Schmidt indicated that EU
understanding is that Akkas development can proceed without
need for passage of the Iraqi hydrocarbon law.
5. (SBU) Kobia commented he believes the Iraqi pledge is
realistic. Al-Shahristani is pleased with the tender for
Akkas development, which saw 30-40 companies pre-qualified,
and al-Shahristani told EU officials he is very happy with
the "computer pick" of the best offer. An intergovernmental
agreement would be needed between Iraq, Syria, and Turkey to
provide an export route into Europe, but Kobia does not see
this as a sticking point. Kobia indicated the pipeline
connection between Syria and Turkey should be completed next
year. According to Kobia, the Iraqis have also considered
other less attractive options for exporting gas from Akkas:
shipping gas south via the Arab Gas Pipeline to Alexandria,
Egypt where it could be converted to LNG for export to
Europe; or building a pipeline from Akkas to northern Iraq
where it could be directly exported to Turkey (bypassing
Syria). Like Schmidt, however, Kobia views the
Iraq-Syria-Turkey route as the most viable option.
Next Step: An EU-Iraq Energy MOU
--------------------------------
6. (SBU) Kobia indicated that the EU and Iraq are very close
to signing an Energy Cooperation MOU. The EU has almost
completed its internal review and Kobia feels the MOU could
be signed in a matter of weeks. Kobia said that Al-Mailiki
and al-Shahristani had asked to sign the agreement this week,
but the EU had to explain that they were not quite ready.
The MOU will not be legally binding, but is intended to
strengthen the energy dialog. Schmidt indicated the MOU will
cover three main topics:
BRUSSELS 00000590 002.3 OF 002
-- Enhanced cooperation on developing an energy policy for
Iraq.
-- Enhanced cooperation on energy security and supply.
Topics discussed under this heading, include: using
associated gas that is now being flared; hydrocarbon supply
options; LNG possibilities in the south; Arab Gas Pipeline
options; and more technical and educational exchanges.
-- Renewable Energy and Energy Efficiency. The Iraqis are
very interested in solar and wind power -- especially because
these options would provide distributed power and help with
blackouts. Kobia indicated that Iraq views its oil and gas as
sources of export revenue so they are looking for other
solutions to meet internal electricity demand. Schmidt said
that the main topic for energy efficiency was looking at ways
to improve efficiency at Iraq's oil refineries.
7. (SBU) Kobia characterized the MOU as the first step
towards a broader cooperation agreement. Kobia and Schmidt
both indicated that there have been very good EU-Iraq
discussions on the energy chapter for the cooperation
agreement. Schmidt also indicated that the EU, in
cooperation with the Energy Charter Secretariat, plans to
arrange a seminar in Damascus on June 19 for representatives
from Lebanon, Syria, Jordan, Egypt, Turkey, and Iraq to work
towards building a consensus on hydrocarbon transit. The
seminar will be a working level event. Damascus was chosen
as the venue because of its central importance for the Arab
Gas Pipeline.
8. (SBU) Comment: This is the second pledge in a week that
the EU has received on gas from a potential export supply
country. It demonstrates that the EU's energy diplomacy is
at least producing pledges. The same sticking point seems to
remain, however: how will the EU get this gas? Kobia said
that the key for Europe is getting Turkey to accept a transit
regime for gas that is "fair and transparent". He urged the
U.S. to collaborate with the EU to make this happen. He also
said that Turkey needs to separate its discussions on energy
with the EU from its accession negotiations or negotiations
on gas will go nowhere. However, the EU is still relatively
weak as an institution on promoting its energy interests and
it is as yet uncertain what its new pledges will amount to.
In the broader context, greater cooperation on energy is an
encouraging sign of increased EU engagement with Iraq. End
Comment.
.