High-level meetings between U.S. and Turkish officials this week could help build the case for a southern pipeline corridor through the country, bringing Caspian Sea natural gas and oil to Western markets, CNN reports.
A NATO member on the fast track to become a member of the European Union, Turkey is strategically positioned between petroleum resources in Central Asia, Russia, Iran and Iraq and growing European consumption.
Acting Deputy Secretary of Energy Jeffrey Kupfer this week led a delegation to Istanbul, meeting with the prime minister and his top energy, treasury and foreign affairs cabinet officials. Kupfer also met with oil and gas industry, banking and other business officials.
"They were all very productive and useful talks...encouraging," Kupfer said in a telephone interview with Dow Jones Newswires. He said the officials discussed the southern pipeline corridor and how the U.S. could help Turkey develop its own domestic energy projects, including nuclear power, renewable energy and the upgrading of its coal-fired generation.
Turkey - in the midst of developing a major new energy initiative - is primarily dependent on natural gas supplies from Russia, with many of its current contracts expiring in the next four to five years.
The U.S. wants to Turkey to move away from gas supplies from Russia and Iran, especially as tensions with the Persian nation mount over its nuclear enrichment program. The U.S. is also increasingly concerned about Russia's use of natural resources for political leverage, particularly because of Europe's dependency on the former Soviet state for its energy supplies. The U.S. would prefer that Turkey become a conduit for natural gas supplies from Turkmenistan, Kazakhstan, Azerbaijan and Iraq.
The war in Georgia exacerbated fears of growing Russian domination in the region, and may have strengthened European Union policy makers' resolve to pursue the construction of lines such as the Nabucco gas pipeline - an OMV AG ( OMV.VI) project - and the Trans Caspian Gas Pipeline, both of which bypass Russia.
Western oil companies such as Eni SPA (E), BP PLC (BP) and Total SA (TOT), which are developing the Shah Deniz field in the southern Caspian Sea; Royal Dutch Shell PLC (RDSA), which is eyeing natural gas in northern Iraq; and Exxon Mobil Corp. (XOM) and ConocoPhillips (COP), which have interests throughout the Middle East and Caspian region, are watching Turkey's oil and gas transit policies.
Russia wants to build its own lines into Europe, including two lines that would compete with Nabucco, Gazprom OAO's (GAZP.RS) Blue Stream and South Stream proposals.
Kupfer said the U.S. sees the diversity of supply for Turkey that a southern energy corridor and nuclear power could give the country as important not only because it could provide Turkey with a broader range of supplies, but also it would mean more gas flows into Europe.
"We think it's important to get that flow going westward from the Caspian, and that will hopefully encourage other resources to be developed," he said.
Kupfer also said there was progress made on Turkey's plans for its first nuclear power plant and financing for other domestic power projects, some of which have been stalled by the global credit crisis.
Companies such as GE Hitachi Nuclear Energy, a joint venture between General Electric Co. (GE) and Hitachi Ltd. (HIT); Sabanci Holding (SAHOL.IS); and Iberdrola SA (IBE.MC) are interested in a tender for a 4,000-megawatt nuclear plant planned for the Turkish port of Akkuyu. The tender has had problems, however, because many of the companies have concerns about liability issues.
"(The Turkish government) recognizes there are some things they can do to improve the tender...(and) they seem to be receptive to trying to work through those issues," Kupfer said.
The U.S. earlier this year signed a civil nuclear energy agreement for greater cooperation and technology sharing with Turkey.
With officials from the U.S. Export-Import Bank, the Overseas Private Investment Corp. and the U.S. Trade Development Agency accompanying the DOE's mission, Kupfer said the U.S. also had arranged for financing mechanisms for the domestic energy projects.
"There is an opportunity for the U.S. government to help step in and keep some of these energy projects moving forward...including multilateral financing," he said.
David Pumphrey, deputy director of the Washington-based Center for Strategic and International Studies, said the domestic energy deals, including the nuclear help and financing assistance, would likely encourage Turkey to focus on energy conduit policies that the U.S. favors.
"We want to help (Turkey) to become more comfortable with their domestic energy situation, and also play a role in bringing countries together on either end" of the energy corridor, Kupfer said.