Turkey open to energy ties with Israel, but early days

* Tentative rapprochement raises hopes of energy ties

* Yildiz says too early to talk of deal

* Concern over extent of Turkish-Israeli rapprochement

(Adds details on relations with Israel, Iraq)

By Humeyra Pamuk

ANKARA, April 10 (Reuters) - A tentative rapprochement

between Turkey and Israel could eventually pave the way for

joint energy projects but it is still too early to talk of

specifics, Turkey's energy minister said on Wednesday.

A U.S.-brokered thaw between Turkey and Israel could alter

the energy equation in the eastern Mediterranean, in theory

allowing newly discovered Israeli gas to be piped to

import-dependent Turkey and on to other markets.

Israel, once energy poor, is expected to become a gas

exporter by the end of the decade. Its huge offshore Leviathan

field contains an estimated 17 trillion cubic feet (tcf) of gas,

making it the world's largest offshore discovery of the past

decade when it was found in 2010.

Seventeen 17 trillion cubic feet (481 billion cubic metres)

is equivalent to almost a year's worth of European gas demand

and enough to cover Israel's gas needs for generations.

U.S. President Barack Obama last month brokered a first step

in reconciliation between the two former allies, whose relations

were frozen after the 2010 killing by Israeli marines of nine

Turks aboard a Gaza-bound aid ship.

Israeli Prime Minister Benjamin Netanyahu apologised to his

Turkish counterpart Tayyip Erdogan over the killings and pledged

compensation to the bereaved, meeting a long-standing Turkish

demand. Turkey, for its part, appeared to back off a separate

demand that Israel stop blockading Gaza.

"The reason for Israel's apology was not energy projects.

But the consequence could be energy projects," Yildiz told

reporters at an energy conference in Ankara.

"We have said we are not closed to these in the future. But

at this stage ... it is early to talk about energy projects."

Because Israel's domestic energy market is so small, exports

are key to the development of the find. It would be cheaper to

export gas via a pipeline to Turkey than converting it to

liquefied natural gas to reach export markets by ship.

Turkey could become a large consumer of Israeli gas and

serve as a transit route to other export markets, but there are

concerns, behind the conciliatory rhetoric, about how quickly

Turkish-Israeli relations will be restored.

DIPLOMATIC COUP

U.S. Secretary of State John Kerry urged the two nations to

restore full relations during a trip to Istanbul on Sunday,

saying such a move was vital to regional stability.

Despite Obama having pulled off a diplomatic coup - a

three-way telephone call with the Israeli and Turkish prime

ministers, who had not spoken since 2011 - some officials in

Washington are worried Turkey might be backtracking on the deal.

An Israeli delegation had been due in Turkey this week to

begin discussing details of the compensation agreement, but

Turkey postponed the meeting due to a foreign trip by a senior

government official who is involved in talks with Israel.

Neither country has said when their ambassadors would go

back, a prerequisite for the restoration of relations necessary

for bilateral energy talks.

Yildiz also said that Turkey wanted to see the Iraqi

constitution respected in any deals between energy firms and the

northern Iraqi Kurdistan region.

He told Reuters in an interview last week that he saw no

obstacles to public or private firms striking oil exploration

deals with Kurdistan and that Turkey would play an active role

in any arrangement under which crude export revenues are shared

between the central government and Kurdistan.

Yildiz added that Turkey's state oil company TPAO had

applied for exploration rights off the coast of Lebanon, which

shares a border with Israel. Israel and Lebanon have never

agreed upon a maritime border.

"For the field offshore Lebanon, several firms have applied

including TPAO. We're hoping to hear on the pre-qualification

results soon and we hope TPAO will be one of them," Yildiz said.

"TPAO will participate in the Lebanon (project)."

Dozens of companies have submitted pre-qualification bids to

explore for oil and gas in Lebanon's offshore waters.

Interest in drilling in the eastern Mediterranean has grown

since natural gas fields were discovered off Israel.

Names of the pre-qualified companies will be announced on

April 18 and the government aims to agree its first exploration

and production agreement by February next year.

(Writing by Nick Tattersall; editing by Ayla Jean Yackley and

Keiron Henderson)