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OIL & GAS LAWS AND REGULATIONS IN TURKEY

Details 23 March 2022 Last Updated: 23 March 2022 Hits: 22394

Oil & Gas Laws and Regulations in Turkey

Oil & Gas Comparative Guide: 2022
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> Contributed by CMS.

1. SUMMARY 

2. OVERVIEW OF THE COUNTRY’S OIL & GAS SECTOR 

2.1. Legal framework – a brief outline of your jurisdiction’s oil & gas sector

Turkish law provides that all rights (i.e., ownership, exploration,
exploitation, and sale) relating to natural resources belong to the state. The
exploration and exploitation rights can be delegated to private parties
(individuals and legal entities) through licensing, which is carried out by the
Energy Market Regulatory Authority (EMRA) and the General Directorate of
Petroleum Affairs (General Directorate). The Turkish Petroleum Law No. 6491
(TPL) governs procedures and principles regarding regulation, promotion, and
supervision of petroleum exploration and production activities in Turkey and the
Natural Gas Market Law No. 4646 (NGML) covers the import, transmission,
distribution, storage, marketing, trade and export of natural gas, the licensing
requirements pertaining to such activities, and the rights and obligations of
all natural and legal persons involved, together with relevant secondary
legislation in respect of both petroleum and natural gas. 

Energy prices have risen sharply in Turkey, driven by global increases and a
decline in the lira’s value against the dollar last year. Turkey is almost fully
dependent on imported gas from Russia, Azerbaijan, and Iran. According to the
latest official data, Iran provided 16% of Turkey’s natural gas needs in the
first ten months of 2021. In January 2022, Iran cut the gas flow to Turkey
claiming technical issues. Sudden stoppage in the flows caused interruptions in
the industry. Following the cuts caused by Iran, it is stated that Azerbaijan
will increase the gas flow to Turkey for support. Turkey has been the biggest
client of Azerbaijani gas in the first 11 months of 2021. 

As Turkey’s oil and natural gas demand is primarily met through imports, the
country has focused on oil and natural gas exploration activities to increase
domestic production. Accordingly, Turkey is looking forward to accelerating the
process of making the natural gas explored in the Black Sea available for use. 

2.2. Domestic oil & gas production and imports/exports 

The TPL governs procedures and principles regarding regulation, promotion, and
supervision of petroleum exploration and production activities in Turkey. Its
secondary legislation, namely the Regulation on the Implementation of the
Turkish Petroleum Law (Turk Petrol Kanunu Uygulama Yonetmeligi – the Regulation)
regulates the procedures and principles for petroleum survey, exploration,
production, reporting, taxation, supervising, and licensing.

As for natural gas, the NGML covers the import, transmission, distribution,
storage, marketing, trade, and export of natural gas, the licensing requirements
pertaining to such activities, and the rights and obligations of all natural and
legal persons involved.

According to Article 4 of the NGML, the annual amount of imported natural gas
held by any wholesale company cannot exceed 20% of the annual national gas
consumption forecast, which is determined by the EMRA on an annual basis. 

Currently, the Turkish Petroleum Pipeline Corporation (BOTAS) imports natural
gas to Turkey through two methods. In addition to the natural gas purchases of
liquefied natural gas (LNG) from Algeria and Nigeria and natural gas imported
from Russia, Azerbaijan, and Iran through pipelines within the framework of
long-term contracts, Turkey imports spot LNG from the USA and Qatar without
entering into long-term contracts. 

Article 22 of the TPL imposes that only 35% of crude oil and natural gas
produced onshore and 45% of the same produced offshore may be exported. The
remainder must be retained in Turkey to fulfill domestic demand. 

Furthermore, as per Article 30 of the Natural Gas Market License Regulation, the
export cannot interrupt local needs or the supply system which is relevant to
the transfer of natural gas via pipelines. Accordingly, exporters of natural gas
must adhere to the technical specifications introduced by the EMRA, taking into
account the capacity of the transmission network and the export exit points.

As Turkey’s oil and natural gas demand is primarily met through imports, the
country has focused on oil and natural gas exploration activities to increase
domestic production. The Turkish Petroleum Corporation (TPAO), a state-owned oil
company, has initiated an offshore exploration and discovered approximately 320
billion cubic meters of natural gas reserves in the Black Sea. Although the
newly discovered reserve is far from meeting the entire demand of Turkey or
effectively ending the need for imports, it is likely to increase Turkey’s
bargaining power in the renegotiation of longer-term contracts.

2.3. Foreign investment and participation 

According to the TPL, private entities are entitled to acquire permits and
licenses for investigation, exploration, and production of petroleum, and
foreign participation is allowed for upstream activities.

On the other hand, as per Article 7 of the Petroleum Market License Regulation,
applications for downstream oil licenses can only be filed by Turkish legal
entities (or individuals) residing in Turkey, registered with the Turkish trade
registry (or industry registry) who are corporate (or income) taxpayers.
However, there is no restriction that prevents a Turkish licensee company from
being wholly or partially owned by foreign individuals and/or legal entities. 

Article 5 of the Petroleum Market License Regulation prohibits the transfer of
downstream licenses with an exception in favor of project lenders (such as banks
and other financial institutions). Accordingly, depending on the terms and
conditions of the financing agreements, lenders are entitled to request the EMRA
to reissue the subject matter license in the name of another legal entity,
provided that all of the initial license holder’s undertakings in relation to
the license are transferred to that third party and the new licensee satisfies
the criteria sought for license applicants within the scope of the regulation.
The same practice is also applicable to the natural gas market and is governed
under Article 5 of the Natural Gas Market License Regulation.

Pursuant to Article 21 of the TPL, any share transfer that may lead to a change
of control in the licensed entity is subject to the prior approval of the
Ministry of Energy and Natural Resources (Enerji ve Tabii Kaynaklar Bakanligi –
MENR). Accordingly, as per Article 13 of the Regulation, the parties of the
share transfer apply to the General Directorate with their reasoning of the
proposed transfer and the General Directorate reviews the application and sends
it to the approval of the MENR. Together with its opinion. If the MENR provides
its consent to the transaction, the closing of the transaction must be completed
within 60 days following the date on which the MENR issued its consent.
Evidentiary documentation showing such a change should be provided to the
General Directorate.

As per the natural gas market, applications for downstream natural gas licenses
can only be filed by Turkish legal entities.

As per Article 42 of the Natural Gas Market License Regulation, acquisition of
10% (5% for listed companies) or more shares of a licensee company, directly or
indirectly, by an individual or a legal entity and acquisitions that result in
one of the shareholders having more than 10% of the shares and/or share
transfers that result in a decrease of the shareholding of a shareholder below
the abovementioned thresholds are subject to the approval of the EMRA. Any
changes to the privileged shares (although there are no share transfers) and
transfer of existing privileged shares (although not meeting the thresholds) are
subject to the approval of the EMRA without prejudice to the exceptions provided
by the legislation.

2.4. Protection of investment 

Turkey is 74% dependent on imported energy to meet its energy demand. Being
located as the neighbor to 60% of the oil and gas reserves in the world, Turkey
aims to become the center of the energy trade within its region. For this
purpose, Turkey took part in several crude oil and natural gas pipeline
projects. The main ones are as follows:

 Crude oil pipelines

 *  The Kirkuk-Yumurtalik Crude Oil Pipeline (Iraq-Turkey Crude Oil Pipeline)
 *  The Baku-Tbilisi-Ceyhan Crude Oil Pipeline (BTC)

 Natural Gas Pipelines

 *  The Iran – Turkey Natural Gas Pipeline
 *  The Blue Stream Natural Gas Pipeline
 *  The Baku-Tbilisi-Erzurum Natural Gas Pipeline (BTE)
 *  The Turkey-Greece Natural Gas Interconnector (ITG)
 *  The Trans-Anatolian Natural Gas Pipeline Project (TANAP)
 *  The TurkStream Natural Gas Pipeline

Turkey is also party to bilateral investment treaties with 98 countries, 76 of
which are currently in force, including the United States, all European Union
Member States, excluding Ireland; all OECD member countries except Iceland,
Canada, Norway, and New Zealand; several Asian countries such as China, Japan,
and the Republic of South Korea; and Middle Eastern countries such as Lebanon
and Iran.

3. EXPLORATION OF OIL & GAS 

3.1. Granting of oil & gas exploration rights 

The TPL governs procedures and principles regarding regulation, promotion, and
supervision of petroleum exploration and production activities in Turkey whereas
the Regulation (as defined under Section 2.2.) regulates the procedures and
principles for petroleum survey, exploration, production, reporting, taxation,
supervising and licensing.

There are different governmental authorities that take part in the process. The
General Directorate is responsible for the issuance and monitoring of permits
and licenses for the upstream activities pertaining to petroleum. As to the
downstream licenses, the EMRA is the governmental authority that evaluates the
applications. As per the TPL, any share transfer that may lead to a change of
control in the licensed entity is subject to the prior approval of the MENR.

3.2. Foreign exploration 

The TPAO  no longer has the exclusive right to explore and produce petroleum due
to Turkey’s liberalized energy regime. Private entities are entitled to acquire
permits and licenses for upstream activities, mainly for the investigation,
exploration, and production of petroleum. Upstream activities are also open to
foreign participation.

3.3. Stages of the exploration process 

There are three types of licenses and permits required to conduct upstream
activities as per the TPL: (i) an investigation permit, (ii) an exploration
license, and (iii) an operation license. 

The investigation permit grants the right to survey the land by gathering data
from the ground or air through topographic, geological, geophysical,
geochemical, and similar methods for petroleum exploration purposes and by
performing drilling works to gather geological information. This permit does not
grant its holder the right to drill a well. The exploration license grants the
holder the right to explore within the area defined in the license. As per
Article 8 of the TPL, upon the discovery of a petroleum reserve for commercial
production, an exploration license holder must apply for an operation license to
be able to develop and produce petroleum in the defined area and to transport
and trade the same to downstream licensees that hold a petroleum market activity
license issued by the EMRA. The General Directorate is the authority in charge
of applications for these licenses

The criteria regarding granting exploration licenses are detailed under Article
6 of the TPL and Article 16 of the Regulation. Accordingly, exploration licenses
may be granted for onshore and offshore petroleum exploration. The maximum term
for an exploration license is five years for onshore activities whereas the term
for offshore activities is eight years, with a right of extension. In any event,
the term of the license, including any extension period, cannot exceed nine
years for onshore exploration and fourteen years for offshore exploration
licenses. The General Directorate may also choose to close the application
process for a specific field and to conduct a public auction. 

Under Article 6 of the TPL, it is governed that the exploration licenses are
based on map sections on a scale equal to 1/50,000 or 1/25,000. The exploration
license applications for grids available for petroleum exploration are published
and announced in the Official Gazette and all applications, including business
and investment plans, should be submitted to the General Directorate. 

As per Article 7 of the TPL, the applicants are under the obligation to provide
a bank letter of guarantee to the General Directorate in an amount equal to 2%
of their total investment whereas this rate is 1% for offshore activities. 

Pursuant to Article 9 of the TPL, explorers or operators are under the
obligation to pay the state share equal to one-eighth of the petroleum produced
from the area subject to the production lease in cash on a monthly basis at the
production stage. 

The General Directorate examines applications based on the applicant’s business,
investment plans, financial status, technical capacity, human resources,
experience in the energy sector, and achievements. Upon its review, the General
Directorate issues its decision within a maximum period of 60 days. 

In addition to the above-mentioned sector-specific licenses, environmental
permits may also be required to conduct exploration and production activities
together with a workplace opening and operating license which will be obtained
from the relevant municipality.

According to Article 22 of the TPL, license holders are under the obligation to
build facilities and equipment without harming nature or the environment and to
secure compensation for any damages that might be caused during their
petroleum-related activities. The amount of the loss and damages guaranteed to
be paid per hectare is 5/10,000 of the required application fee for
investigation permits applicants, 1/1,000 of the required application fee for
exploration license applicants, and 5/1,000 of the required application fee for
operation license applicants. The President of Turkey has the authority to
increase or decrease this rate by 50%. 

According to Article 26 of the Regulation, the guarantee is returned to the
license holder one year after the announcement of the termination of the
relevant petroleum license in the Official Gazette, provided that no loss or
damage has occurred and that no third-party claims have been made regarding this
guarantee. In case of any loss or damage, the amount of the guarantee that
remains following the compensation of such loss and damage will be returned to
the license holder. 

Article 4 of the NGML foresees that the natural gas exploration and production
activities are conducted in line with the TPL and that the exploration and
operation licenses are granted by the General Directorate. Production is not
classified as market operation.

3.4. Obligatory state participation 

Pursuant to Article 9 of the TPL, explorers or operators are under the
obligation to pay the state share equal to one-eighth of the petroleum produced
from the area subject to the production lease in cash monthly at the production
stage.

As per Article 19 of the TPL, the information and data pertaining to the
boreholes drilled in the exploration license site and geophysical details
together with the geological and laboratory information and data become public
at the end of the term of the license whereas those pertaining to the wells
drilled in the operation license site become public at the end of the fifth year
and information obtained as per the investigation permit become public at the
end of the eighth year. Local and international marketing and sales of the
information and data that are deemed to have become public are conducted by the
General Directorate. 

General technical, financial, and geological information, borehole locations,
bowing profiles, casing tube records, and general production and sales numbers
are not deemed confidential.  

3.5. Risks to be considered

According to Article 23 of the TPL, those that:

 *  cause damages that cannot be repaired due to dangerous activities, 
 *  carry out dangerous operations, 
 *  operate without an exploration or operation license, 
 *  conduct exploration activities without having an investigation permit or an
   exploration license,
 *  restrain the use of a right or prevent an officer from doing his duty in
   line with the law,
 *  make false statements on their applications,
 *  fail to send the information and documents required two times in one
   calendar year,
 * shall be imposed to administrative fines.

Actions that may result in cancellation of the license such as failing to meet
the criteria governed by the legislation or required by the relevant license,
not paying the state share three times in one calendar year, and not meeting the
undertaken business plan for two consecutive years are listed and detailed
separately under Article 24 regarding administrative measures. 

4. PRODUCTION OF OIL & GAS 

4.1. Granting of oil & gas production rights 

The production of petroleum including crude oil and gas is regulated under the
TPL and its secondary legislation. As per Article 8 of the TPL, an operational
license for the continuation of exploration, petroleum production, and trade of
the produced petroleum is issued upon a petroleum discovery during the
exploration activity conducted by an exploration license holder.  An exploration
license holder must promptly notify the General Directorate regarding the
discovery and the General Directorate shall register or reject the discovery
within six months at the latest by deciding whether to monitor the production,
to carry out long-term flow and pressure tests in the well, and consequently
whether the discovered petroleum accumulation will be operated commercially or
not. Following the registration of the discovery, the exploration license holder
is obliged to continue production, develop the petroleum field to form the basis
of the operation license and sell the produced petroleum. The operation license
is given for a period of 20 years maximum by considering the reserve, its
economic life, production program, and work and investment program of the field.
Such a period may be extended twice, each for a period of 10 years. The license
holder is obliged to continue production except for force majeure events. The
field, of which operation license has expired, may be put up for auction
following the approval of the Minister of Energy and Natural Resources for the
granting of the operation license if the TPAO does not request the field for
production.

According to data provided by PETFORM (the Petroleum and Natural Gas Platform
Association), Turkey provided 7.1% of its consumption in 2020 with an oil
production of 60,845 barrels/day and a total of 3.2 million tons. While the
country’s total producible oil reserves are 209.9 million tons, the remaining
producible oil reserves are 48.1 million tons as of 2020. 37 companies, 12 of
which are foreign, operate in oil production in Turkey and there are a total of
322 licensed companies.

4.2. Foreign production 

The TPL provides that any foreign private legal entity established as a stock
corporation according to the law of their domicile country may obtain
investigation, exploration, and operation licenses.  However, as per the
conditions stipulated under the Regulation regarding the application procedure,
such legal entities should provide information and documentation with respect to
its registration in Turkey. Since there is no specific form stated under the
Regulation, the foreign legal entity may establish a subsidiary or a branch to
fulfill such registration requirements. According to the legislation on the
protection of the value of the Turkish currency, foreign legal entities having
petroleum rights are deemed to be residents in Turkey in terms of their
activities in Turkey. There are no other additional obligations arising from the
license holder being a foreign legal entity.

4.3. Stages of the production process 

In the context of the production process, the legislation basically regulates
the operation license, and no different stages are stipulated in the process.
For details on the operation license, please refer to Section 4.1.

4.4. Obligatory state participation 

Oil and gas producers in Turkey are obliged to pay one-eighth of the petroleum
they produce as state shares. Petroleum used in transactions related to the
licensing procedures is exempted from such obligation up to 0.5% of the
petroleum produced. Oil and gas producers are subject to the Income Tax Law and
Corporate Tax Law for their tax obligations. However, the total amount payable
as tax of such producers shall not exceed 55% of their taxable income.

License holders are entitled to export 35% of the crude oil and gas they produce
on onshore fields and 45% of they produce in offshore fields, either as raw or
as refined. Considering the pipelines stated in Section 2.4. and the ports
located at various points of Turkey, there are no infrastructure barriers for
exporting the petroleum produced. 

4.5. Risks to be considered

Please see Section 3.5.

5. TERMINATION OF PRODUCTION OF OIL & GAS 

5.1. Abandonment and decommissioning 

The Abandonment and decommissioning of oil and gas facilities are regulated
under the TPL and its secondary legislation. A license holder may partially or
completely abandon the investigation permit and exploration license by applying
to the General Directorate at least one month in advance and the operation
license by applying at least three months in advance. The license holder should
also notify any related public institution or organization regarding the field
if any. Rights arising from exploration or operation licenses expire on the
application date for the abandoned part. Before the abandonment, together with
the abandonment application, the inventory and detailed layout plans of the
underground and above-ground facilities should be submitted to the General
Directorate. The General Directorate should be informed on how and when this
inventory and facilities will be removed from the field. With the expiration of
the licenses, the license holder restores the land. In case the license holder
does not remove such inventory and facilities from the land within six months
following the expiry of the license, the ownership passes to the landowner. The
license holder is also obliged to fully compensate and pay the damage caused to
the landowner, possessor of the land, the land, the facilities over the land,
and the lost profit damages arising from the product or business.

In case the abandoned facility still has the resources to produce, the operation
license of the facility will be offered to the TPAO. If the TPAO does not accept
such an offer, the operation license will be given to a third party by auction.
To determine the price of the inventory and facilities, a commission of at least
five people will be formed, one of which is the transferor’s representative, and
one is the transferee’s representative. The commission determines the value of
the inventory and facilities and if the parties agree, the transfer is completed
over this price. In case the parties cannot agree on this price, the existing
inventory and facilities are transferred to the ministry free of charge. Upon
the request of the new license holder within thirty days, the ministry transfers
the inventory and facilities with the price determined by the commission. If the
new license holder does not want to complete the transfer at the price
determined, the operation license request is deemed to have been waived and will
be auctioned again.  

5.2. Environmental and HSE consideration 

The oil and gas facilities are deemed as “businesses with a high level of
polluting effect on the environment” under  the Regulation on Environmental
Permit and License. Accordingly, such facilities should obtain environmental
permits and licenses. As per the regulation, any business having such a permit
and license should inform relevant authorities in case of termination of their
activities. The authorities to be informed include the Ministry of Environment
and Urbanisation and other administrations depending on the characteristics of
the facility such as its location. 

6. SAFETY OF OIL & GAS EXPLORATION AND PRODUCTION 

6.1. International treaties to which the jurisdiction is a party 

Below is a list of the main international treaties in the field of safe
exploration and production of oil and gas to which Turkey is a party: 

 *  The Energy Charter Treaty;
 *  The International Convention on Civil Liability for Bunker Oil Pollution
   Damage;
 *  The International Convention on the Establishment of an International Fund
   for Compensation for Oil Pollution Damage;
 *  The International Convention on Civil Liability for Oil Pollution Damage;
 *  The International Convention on Oil Pollution Preparedness Response and
   Co-Operation;
 *  The International Convention for the Prevention of Pollution from Ships;
 *  The Protocol Concerning Cooperation in Preventing Pollution from Ships and,
   in Cases of Emergency, Combating Pollution of the Mediterranean Sea;
 *  The Barcelona Convention;
 *  The C152 Occupational Safety and Health (Dock Work) Convention;
 *  The C155 Occupational Safety and Health Convention;
 *  The C167 Safety and Health in Construction Convention; and
 *  The C187 Promotional Framework for Occupational Safety and Health
   Convention.

6.2. Offshore Safety Directive 

OSD is not adopted in Turkey. There is not one legislative act that covers all
the issues regulated in the OSD. Different legislative acts correspond to
different sections of the OSD.

For example, the Law on the Principles of Emergency Response and Compensation
for Damages in Pollution of the Marine Environment with Petroleum and Other
Harmful Substances numbered 5312 which sets out (i) the principles of
intervention and preparedness to be applied in order to eliminate the danger of
pollution arising from activities in ships and coastal facilities in emergency
situations or to reduce, limit, and eliminate pollution, (ii) principles of
determination and compensation of damages resulting from the event, and (iii)
principles of the fulfillment of international obligations.

As for health and safety, the occupational health and safety legislation and
regulations in Turkey applicable to oil and gas operators are (i) the
Occupational Health and Safety Law numbered 6331 and (ii) the Occupational
Health and Safety Regulation dated December 9, 2003.

7. IMPORT, EXPORT, AND SALES OF OIL & GAS 

7.1. Import and Export of oil & gas

Pursuant to the TPL, license holders are entitled to export 35% of the crude oil
and gas they produce on onshore fields and 45% of they produce in offshore
fields, either as raw or as refined. License holders can keep the foreign
currency obtained from the exported petroleum. The amount of foreign currency is
deducted from the transfer of the capital imported to Turkey and the net assets
exceed this amount. 

According to the NGML, gas producers can export the gas they produce by
obtaining the exporter license. In addition, the importer companies can sell the
gas they import to the markets abroad by obtaining the exporter license. 

Pursuant to the Petroleum Market Law, those who will import crude oil and fuel
must have a refiner or distributor or bunker fuel delivery company license.
Those who produce crude oil in Turkey can import crude oil in an amount to be
mixed with low gravity domestically produced crude oil. Crude oil and fuel
imports are made through authorized customs administrations that are equipped to
make certain technical measurements. 

Pursuant to the NGML, legal entities are obliged to obtain an import license to
import natural gas. To obtain the import license, such entities must have the
technical and economical power to carry out import activities, have certain
information and guarantee about the source, reserves, production facilities and
transmission system of the natural gas to be imported, obtain the commitments
and guarantees determined by the Energy Market Regulatory Board (Board) from the
legal entities that will carry out storage activities to have underground
storage facilities in the national territory within five years, have the ability
to contribute to the development and security of the national transmission
system and provide economic support to the investments of the legal entities
that will realize the development of the system for this purpose. Importer
companies must obtain a separate license for each import connection they will
make and notify the EMRA of the contract periods, time extensions, anticipated
annual and seasonal import quantities and the changes in these quantities, and
the obligations included in the import contracts or their extensions concerning
the security of the system. Importer companies can transfer the gas they obtain
through import to wholesale companies or exporter companies in Turkey with a
sales agreement or sell the gas abroad, provided that they obtain an export
license. The transfer to the exporter companies does not remove the commitments
of the importer companies given under the license. The annual amount of imported
gas cannot exceed 20% of the national gas consumption estimate to be determined
by the EMRA for the current year. The importer company is obliged to provide the
information and documents requested by the EMRA regarding all the executed
import contracts.  

7.2. Transportation 

Pursuant to the TPL, an operation license holder may request permission from the
General Directorate for collection lines in the field, and for the connection
lines to be constructed to the nearest refineries or main transmission pipelines
or sales points. The General Directorate concludes the application within 90
days.  

As per the Petroleum Market License Regulation, a transmission license is
required to transport oil through the pipeline and operate a transmission
facility. The transmission license application is made to the EMRA and decided
by the Board. There are also several exemptions set out under the License
Regulation. A transmission license is not required for transportation activities
carried out via pipelines to facilities/warehouses owned by persons who do not
serve third parties and/or who directly purchase oil from refineries. In
addition, refinery license holders may carry out pipeline transportation
activity to other nearby facilities without obtaining a separate license,
provided that such activity is included in their licenses, and distributor
license holders may transport fuel to facilities near their warehouses via
pipelines without obtaining a transmission license.

According to the Natural Gas Market License Regulation, a transmission license
is required to transport gas through the pipeline. The transmission license
application is made to the EMRA and decided by the Board. While there is no
restriction for private legal entities to obtain such a license, the only
transmission license holder in Turkey is BOTAS (Petroleum Pipeline Corporation),
which is a state economic enterprise owned by the Turkey Wealth Fund.

7.3. Land rights 

Pursuant to the TPL, a license holder may obtain the right to use the land
required for petroleum processing in or around the exploration or operation
license if (i) the land is privately owned, by agreement or by expropriation in
case of disagreement or if (ii) the land belongs to the Treasury or at the
disposal of the state, by leasing, obtaining right of easement or right to use
from the Ministry of Treasury and Finance and registering such right to its
license. The ownership of the expropriated land belongs to the Treasury, and the
right to use belongs to the license owner who pays the expropriation price. In
this case, the right of easement is established by the Ministry of Treasury and
Finance in favor of the license holder free of charge and for the duration of
the license. The obtained usage rights continue throughout the license period as
part of the exploration and operation license.

According to the Petroleum Market Law, it is essential that the acquisition of
rights and ownership regarding the lands, plots, and buildings required for the
facilities within the scope of the law is made primarily by agreement. If
required by the activities regulated by the law, acquisitions regarding refinery
and licenses storage facilities, the establishment of the easement right on the
lands and plots where the transmission lines are located, other buildings that
are inseparable parts of these lines, and immovables in their vicinity, and
processing facilities to be determined by the EMRA may be acquired through
expropriation. The ownership of the expropriated land belongs to the Treasury,
and the right to use belongs to the legal entity paying the expropriation price.
The right to use is registered to the land registry on behalf of the license
holder and such rights are a part of the license and continue for the duration
of the license. Legal entities may request the establishment of incorporeal
rights on lands owned by the Treasury and their lease by paying their price.
Upon approval of the Board, the EMRA usufruct, easement, right of construction,
or long-term lease depending on the need. Such rights are also a part of the
relevant license or certificate, and their validity is limited to their term.

If required by the activities regulated under the NGML, expropriation will be
made on the relevant immovables. The ownership of the expropriated land belongs
to the Treasury, and the right to use belongs to the legal entity paying the
expropriation price. The right to use is a part of the relevant license or
certificate and its validity is limited to their term. Legal entities may
request the establishment of incorporeal rights on lands owned by the Treasury
and their lease by paying their price. Upon approval of the Board, the EMRA
usufruct, easement, right of construction, or long-term lease depending on the
need. Such rights are also a part of the relevant license or certificate, and
their validity is limited to their term. 

Pursuant to the Law on Transit Transmission of Petroleum by Pipelines, the
President of the Republic may appoint a state institution or organization to
carry out the expropriation process regarding the transit petroleum pipeline
project within the scope of the transit petroleum transmission within Turkey by
means of a pipeline, by diverting the oil coming from or via another country to
another country. The state institution or organization assigned with the
expropriation must fulfill this duty as soon as possible and with priority. The
said state institution or organization is also the addressee of legal disputes
that may arise in relation to all kinds of actions and transactions within the
framework of this expropriation. The expropriation and/or other acquisitions may
be made by acquiring relevant property or establishing an easement right,
including independent and permanent rights on the immovable. Such rights
established in favor of the relevant state authority may be transferred and
allocated to the petroleum rights holders within the scope of the project.    

7.4. Access and integration 

According to the TPL, those engaged in transmission activities as stated in
Section 7.2. and licensed warehouses are obliged to meet the transmission and
storage requests when they have the capacity in their facilities. Such request
must be in accordance with the license holder’s tariff and the capacity of the
relevant facility, must not cause adverse or risk increasing effects on the
license holder’s facility, its operating rules, and conditions, the oil
transmitted or stored, must be in accordance with the nature of the facility,
transmitted or stored oil and the minimum amount specified by the license
holder’s tariff. Transmission requests must be made by the producer, refiner,
transmitter, or distributor by taking into account the type of oil and storage
request must be made by everyone, provided that it is above the minimum amount
specified in the warehouse’s tariff. 

According to the Natural Gas Market License Regulation, a transmission license
holder is obliged to connect the users who want to connect to the system within
the framework of the criteria determined by the EMRA, at the most convenient
point of the network within 12 months at the latest, provided that the system is
suitable.

In case the license holder rejects the system connection request, the user may
notify the EMRA of this situation. If it is determined by the EMRA that the
license holder has violated the regulation regarding network operation, the
license holder connects the user to the system according to the decision of the
Board. The license holder must reply to the users’ connection requests within
thirty days at the latest. In case of rejection, the reasons for the rejection
are notified to the user. If such users apply to the EMRA within sixty days, the
Board makes a decision within three months at the latest and notifies the
parties. In its decision, the Board pays maximum attention not to interrupt
transmission activities and not disrupt the functioning of the system.   

7.5. Gas transmission and distribution 

Distribution license refers to the permit issued by the Board for legal entities
to engage in urban natural gas distribution activities.

The company that will be entitled to obtain a natural gas distribution license
is determined by the tender announced by the EMRA. The procedures and principles
regarding the distribution license and the tender are mainly set out by the
Regulation on Distribution Customer Services. The distribution license is given
to the company that is entitled to receive a distribution license following the
fulfillment of the procedures included in the relevant legislation and the
tender dossier.

The distribution license tender is made by a Board decision. The city subject to
the tender, the license period, the eligible consumer limit, the subscriber
connection fee to be applied during the license period, the amount of temporary,
and definite letters of guarantee and other issues related to the tender are
specified in the Board decision. The tender to be made by the EMRA is announced
in the Official Gazette. The tender announcement contains the application
period, place of application, Q&A method and timing, information, documents to
be requested, and other issues.

The specification containing preparation and submission of the offer, type of
currency in which the offers will be submitted, opening, evaluation, and
concluding of the offers, limit of eligible consumers in the city where the
distribution license will be granted, license period, subscriber connection fee
to be applied throughout the license period, amount of temporary and definite
letters of guarantee, the period for which the unit service and depreciation fee
will be applied as fixed, the start date of the investment, the procedures and
principles regarding issuance of the distribution license, the procedures and
principles to be applied all stages including the design, construction,
materials to be used for the construction of the distribution network, and the
commissioning of the completed network and the basic principles and procedures
and technical criteria are included. The specification is determined according
to the characteristics of the city where the distribution license will be
granted.

The tariffs to be applied by distribution companies are determined according to
the Natural Gas Market Tariffs Regulation. The retail sale price to be applied
by a distribution company consists of the natural gas unit purchase price, the
system usage fee, and tax and tax-like liabilities. This price constitutes the
upper limit to be applied by the distribution company. The distribution company
cannot demand any price from the customers under any name other than the retail
sale price, excluding the prices determined by law.

The system usage fee is determined to the extent that the efficiency targets
determined for the relevant legal entity are achieved, taking into account the
load and costs that customers bring to the system and/or the consumption levels
specified by the Board in a way to allow a reasonable return to meet the
variable and the fixed costs and to continue the investments within the
framework of procedures and principles determined by the Board.   

8. TRADING 

8.1. Trading license 

According to the NGML, different types of licenses allow different trading
options. The licenses giving trading rights are mainly import license, wholesale
license, distribution license, CNG license, and export license. 

Import license holders have the right to sell imported gas to exporter
companies, distribution companies, CNG sales companies, OtoCNG companies,
wholesales (OtoLNG) companies, and eligible consumers.  

Wholesale license holders have the right to sell gas to exporter companies,
eligible consumers, CNG sales companies, OtoCNG companies, wholesales (OtoLNG)
companies, importer companies, distribution companies, and other wholesale
companies.

Distribution license holders have the right to sell gas to their subscribers and
eligible consumers.

To obtain relevant licenses giving the right to trade, an application should be
made to the EMRA. Following review and assessment of the application by the
EMRA, the Board concludes the application within 60 days beginning from the
application date. 

8.2. Products

As per the definitions provided under the NGML and the Liquefied Petroleum Gases
Market Law, natural gaseous hydrocarbons that are or can be extracted from the
ground and other forms of these gases that have been liquefied, pressurized, or
physically treated by various methods for placing on the market can be traded. 

Tariffs for natural gas commodities (excluding LPG) are regulated in accordance
with the Natural Gas Market Tariffs Regulation. The tariffs of connection,
transmission and shipment control, storage, wholesale, and retail sales are
determined by the Board’s approval of the application made by the relevant legal
entities to the EMRA. These tariffs are binding on all relevant natural persons
and legal entities.

LPG pricing is regulated under the Liquefied Petroleum Gases (LPG) Market
Pricing System Regulation. Pursuant to the regulation, refiners and distributors
notify the EMRA of the prices of market activities they carry out under their
licenses as ceiling prices, taking into account the price formation in
accessible world free markets, and are obliged to comply with such ceiling
price. 

9. COMPETITION

9.1. Authorities

The Turkish Competition Authority (TCA) regulates competition aspects and
anti-competitive practices, based on Protection of Competition numbered 4054
(Competition Law).

There are no specific regulations for the oil & gas market, and the general
provisions set forth by the Competition Law and the TCA apply to all markets.

9.2. Anti-competitive actions 

As per Article 42 of the Natural Gas Market License Regulation, acquisition of
10% (5% for listed companies) or more shares of a licensee company, directly or
indirectly, by an individual or a legal entity and acquisitions that result in
one of the shareholders having more than 10% of the shares and/or share
transfers that result in a decrease of the shareholding of a shareholder below
the abovementioned thresholds are subject to the approval of the EMRA. Any
changes to the privileged shares (although there are no share transfers) and
transfer of existing privileged shares (although not meeting the thresholds) are
subject to the approval of the EMRA without prejudice to the exceptions provided
by the legislation.

Article 15 of the Petroleum Market Pricing System Regulation provides the EMRA
with the power to intervene and determine a floor and/or ceiling price in case
of arrangements or market practices that have the aim and effect of restricting
and disrupting competition and market activities. The EMRA is also empowered to
take the necessary precautionary measures in the petroleum market, be it
regional or national, for a duration of two months max. 

Article 7 of the Competition Law prescribes that any merger or acquisition that
would result in a significant lessening of effective competition within a market
for goods or services in the entirety or a part of the country, particularly in
the form of creating or strengthening a dominant position, is prohibited.

The Communique on Mergers & Acquisitions that Require Permission from The
Competition Board (Communique) provides details of the merger control regime. On
March 4, 2022, the TCA published Communique No. 2022/2 and introduced
significant changes in the control thresholds which will be effective starting
from May 5, 2022.

Accordingly, parties to a merger must file an application to the TCA to receive
permission:

If the total turnovers of the transaction parties in Turkey exceed TRY 100
million (to increase to TRY 750 million from May 5, 2022), and turnovers of at
least two of the transaction parties in Turkey each exceed TRY 30 million (to
increase to TRY 250 million from May 5, 2022), or in acquisition transactions,
the turnover of the asset or activity, in merger transactions, the Turkey
turnover of at least one of the transaction parties exceeds TRY 30 million (to
increase to TRY 250 million from May 5, 2022) and the world turnover of at least
one of the other transaction parties exceeds TRY 500 million (to increase to TRY
3 billion from May 5, 2022).

In relation to merger or acquisition agreements that fall within the scope of
Article 7 of the Turkish Competition Act and exceed the turnover thresholds
stipulated in the Communique, the TCA makes a preliminary examination within a
15-day time frame commencing from the date of notification. The TCA could either
grant permission to the transaction or undertake a final examination. Typically,
it takes around 4-6 weeks to obtain a decision approving or disapproving the
transaction.

In the event that the TCA does not respond to the application regarding the
merger or acquisition within the prescribed period, or does not take any action,
merger or acquisition agreements enter into force 30 days after the notification
date and become valid legally.

10. STABILITY CLAUSE AND DISPUTE RESOLUTION 

10.1. Stability clause 

Chapter 12, provisional sub-clause 1 of the TPL states that the rights and
obligations regarding exploration and operation licenses obtained before the
effective date of the law – May 30, 2013 – shall continue until the end of the
license period.

However, apart from this sub-clause, there is no specific stability clause for
oil & gas companies.

10.2. Compulsory dispute resolution procedure

Article 20 of the TPL prescribes that the applications regarding all rights
received or to be acquired pursuant to the provisions of the law or objections
regarding the disputes that may arise between the right holders shall be
determined by the MENR. The cases to be filed against the decisions that affect
the rights arising from the application, research permit, exploration license,
and operating license delivered by the Ministry are heard before the Council of
State (Danistay), acting as the court of first instance.

As per article 10 of the Petroleum Market Law, the EMRA has the power to settle
disputes over oil and gas pricing. Dissatisfied parties may challenge the EMRA’s
rulings relating to license holders’ rights and obligations before the Council
of State. As per Article 46 of the Administrative Procedures Law, judgments made
by administrative courts may be appealed before the Council of State within 30
days of the notification date.

According to Article 16 of the Transmission Network Operation Principles,
published in the Official Gazette numbered 25561, dated August 22, 2004,
disputes arising between the transporter and shipper from the implementation of
the network operating principles regarding:

 *  Capacity reservations, cancellations,
 *  Allocations,
 *  System balancing participation fees,
 *  Interruption balancing fees,
 *  Service interruption fees, and

 Emergency event, difficult day, and limited capacity day applications shall be
settled by the EMRA. 

Regarding the expropriation procedures, a landowner has the right to appeal an
expropriation decision before the administrative courts. Should the landowner
and the license holder fail to reach an agreement regarding the price of the
land, the dispute shall be resolved before the civil court of first instance.

10.3. International treaty protection 

Turkey is a signatory to and has duly ratified into domestic legislation both
the New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards and the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States (ICSID). 

Court judgments in Turkey are not publicly available so it is not possible to
check whether there have been instances in the oil & gas sector when foreign
corporations have successfully obtained judgments or awards against Government
authorities or state organs pursuant to litigation before domestic courts. 

As for arbitral awards, ICSID records indicate that in the oil & gas sector, an
investment arbitration was commenced against Turkey by Nabucco Gas Pipeline
International GmbH in Liquidation on July 16, 2015, however, the proceeding was
discontinued upon the claimant’s request.



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GUIDE CONTRIBUTORS FOR TURKEY

Alican Babalioglu

Managing Partner

alican.babalioglu@ybk-av.com

+90 212 401 4270

 



Damla Erensoy

Senior Associate

damla.erensoy@ybk-av.com

+90 212 401 4273

 



Naz Ugurlu

Senior Associate

naz.ugurlu@ybk-av.com

+90 212 401 4260

 



Jerfi Dogan

Associate

jerfi.dogan@ybk-av.com

+90 212 401 4278

 

 




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