Regulation of natural gas production

Ownership and organisation

What is the ownership and organisational structure for production of natural gas (other than LNG)? How does the government derive value from natural gas production?

Pursuant to the Turkish Petroleum Act No. 6491 (the Petroleum Act), natural gas reserves located in Turkey are under the state’s control and possession. The expression ‘control and possession’ is a term of art under Turkish law referring to the situation in which a certain thing is not subject to private property but controlled by the Turkish state. Exploration and production activities are conducted by public and private companies that have licences of exploration and production granted by the General Directorate of Petroleum Affairs (GDPA) as per the Petroleum Act. While the activity of production is not classified as a market activity in the Petroleum Act, production companies can obtain a wholesale licence and market the natural gas they are producing to wholesale companies, import companies, export companies and eligible consumers. They can also export this natural gas provided that they also obtain a licence to export it.

According to the Petroleum Act section 9(1), explorers or operators should pay for one-eighth of the natural gas that they produce as the state share. The amount of state share that is to be paid by the producer of natural gas is calculated based on the selling price of natural gas to distribution companies or eligible consumers. They are also obliged to make payments of applicable taxes that accrue as a result of their profits out of petroleum activities.

Regulatory framework

Describe the statutory and regulatory framework and any relevant authorisations applicable to natural gas exploration and production.

The main regulatory instrument for natural gas exploration and production is the Petroleum Act and the Turkish Petroleum Act Implementation Regulation (Official Journal No. 28890 of 22 January 2014) (the Petroleum Regulation). Pursuant to the Petroleum Act and the Petroleum Regulation, there are two licences concerning petroleum activities: exploration licences and production licences. In addition to these, there is also a ‘search consent’, which gives its beneficiary the authority to conduct research activities (ie, gathering data using topographical, geological, geophysical and similar methods, as well as methods related to geochemistry, and, except for exploration drillings, making drillings for gathering geological data) within a designated geographical area. These, which are collectively defined as ‘petroleum activities’ can be issued by the GDPA. The GDPA has the power to monitor the conduct of petroleum activities. Therefore, from the moment of the application for petroleum rights, those who perform petroleum activities will be subject to the administrative decisions to be rendered by the GDPA.

Under Turkish Law, all administrative decisions, including the decisions rendered by the GDPA or the Ministry pursuant to the Petroleum Act, can be challenged before the administrative courts of Turkey. It is possible to file an administrative lawsuit for cancellation of any final and enforceable decision of the GDPA or the Ministry within 60 days from the date on which the decision is notified. Instead of filing a lawsuit, it is possible to pursue the administrative appeal path for the decisions rendered by the GDPA by filing a complaint before the Ministry within the same 60 days. If the Ministry rejects the complaint or does not take any action regarding it within 60 days, the time limit to initiate the lawsuit restarts from the rejection date or the date on which 60 days had elapsed.

Unconventional gas production

Are there different rules for, or any restrictions on, unconventional natural gas production (including fracking)?

The legal regime and classification for conventional and unconventional gas production is the same as per the applicable law. However, the work plan, the production methodology and the technical details of each project are subject to approval by government authorities to make sure that they are in compliance with health, safety and environmental legislation, which may be subject to different evaluation criteria owing to the differences in the associated methods.

Required security and guarantees

Are participants required to provide security or any guarantees to be issued with a licence to explore for or to store gas?

Pursuant to the Petroleum Act, those applying for an exploration licence are required to provide a bank guarantee in the amount of 2 per cent of their investments. The guarantee must be in the form stated in the appendix 51 of the Petroleum Regulation. In addition to this, further security is required to cover any damages that may arise during the petroleum activities. The amount of this security varies depending on which consent or licence is utilised. It is designated as: 5 per ten thousand of the search permit charge; 1 per thousand of the exploration licence charge; and 5 per thousand of the operating licence charge.

Storing natural gas is defined as a market activity pursuant to the Natural Gas Market Act No. 4646 (NGMA) and, hence, subject to the NGMA. The NGMA or the Natural Gas Market Licence Regulation (Official Journal No. 24869 of 7 September 2002) (NGMLR) do not require the applicants or licence holders to submit security. However, as per section 34 of the NGMLR, the licence holders are required to insure their assets through which they conduct their natural gas activities. The participants of this market are required to pay licence fees for each of the respective activities they are conducting.

 

Licence/certificate type

Fee type

Fee criterion

Fee (Turkish lira)

 

Storage licence

Licence obtaining fee

 

699.390,00

Storage licence

Licence modification fee

 

 

7.090,00

Storage licence

Licence copying fee

 

 

1.840,00

Storage licence

Licence renewal fee

50 per cent of the licence fee determined for the relevant activity

349.695,00

Storage licence

Annual licence fee

Kr per kWh stored

0,0005