As is known, the petroleum explorations have come to the fore in Turkey within the discovery of new oil wells. Even if its oil production does not meet the oil demand, Turkey has been working also on reforms in oil market like in other energy sub-sectors.
The downstream and midstream market activities such as refining, distribution, transport, export and import activities are regulated by the EMRA under the condition of a convenient license obtaining. The relevant authority for oil exploration licenses is the General Directorate for Oil Affairs (“GDOA”). Together with the energy market liberalizations in other sub-sectors, oil market has also been opened to competition within the new legislation. The Petroleum Market Law and License Regulation include rules which opens the market activities to private sector companies.
New Petroleum Law
The recent Petroleum Law with Law No. 6491, which has been in force since 11.06.2013, provides several amendments and incentives regarding oil exploration and operation in order to support and increase of the oil exploration and manufacturing activities in Turkey. This law includes advantageous principles that will attract the interest of investors and increase the oil manufacturing activities in Turkey.
Simplified licensing procedures
Licensing bureaucracy for oil exploration and operation has been minimized and license procedures have been accelerated. According to this Law, license applications are completed within 60 days. Moreover, the license terms have been extended depending on the related exploration area and license extension criteria have been amended. Due to these amendments, the oil exploration activities have been supported and the increase of the number of oil exploration activities has been provided.
New Petroleum Areas
Petroleum areas have been divided into sea and land, which had been regulated as 18 petroleum areas. Different criteria and conditions have been set forth for each petroleum area and the license terms are longer for the seas. Application of the same license terms for all petroleum areas according to the repealed law influenced the investments negatively regarding their terms.
New Criteria for Calculation of State’s Share
State’s share on the manufactured petroleum is based on the market price whereas this amount was calculated depending on the wellhead price. Moreover, state share payment exceptions have been regulated to support the oil manufacturing under certain conditions.
Market Opened to Competition
License applications for the same petroleum area which are made within 90 days have been accepted. Applications for the same petroleum area were not accepted after 4 working days according to the repealed law. The extension of evaluation term leads to establishment of a more competitive oil market. Moreover, the market control of TPAO (Turkish Petroleum Corporate) has been decreased, even if it’s control has not been abolished completely. According to the repealed law, the oil exploration and operation license obtaining right belonged solely to the TPAO, whereas the New Petroleum Law opens the market to private sector companies while the TPAO has a privilege in extension of expired licenses under certain conditions.
The New Petroleum Law provides several customs and stamp tax reductions or exepmtions for import and transfer of certain equipments used in petroleum activities under certain conditions. Moreover, the external transfer of financial assets, current fonds has also been exempted from income and corporate tax under the conditions stated in the Law.
In addition tax incentives, the petroleum exploration or operation license owners may benefit from the other general investment incentives with the Council of Ministers’ resolution. Structure and contidions of these investments have been regulated by the related laws and resolutions and it may depend on the location, type and amount of the investment.