Oil Market Activities in Turkey
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Overall, this article mainly focuses on the oil market activities in Turkey. A robust investment strategy is needed for the irreplaceable action plan on oil-centric business in Turkey. It is remarkable to emphasize at the outset that the oil market is under the strict control of the Turkish government.
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What kind of oil market activities may be carried out?
Of course it depends on the country profiles and relevant legal or regulatory framework. Nevertheless, following activities are of great importance in every jurisdiction:
- oil investigation permit,
- oil exploration or exploratory drilling activities,
- using the state jurisdiction only for “a transfer country” for oil,
- buying processed petroleum derivatives,
- the purchase of crude oil from the Turkish government,
- buying the processed oil from private companies such as SHELL,
- the purchase of petroleum derivatives,
- the establishment of an oil seller company such as OPEC.
How much oil reserve does Turkey have?
According to recent reports, the south-east of Turkey has a substantial amount of crude oil reserves. It is, however, unfortunate to stress that Turkey mainly depends on oil importation. It necessarily means that oil production does not meet oil consumption rates in Turkey. Hence, Turkey attaches particular importance to core oil market activities including oil investigation, oil exploration and oil production.
Where does Turkey buy its oil from?
Only 5-7% of oil can be produced locally in Turkey. In this context, the main gasoline suppliers for Turkey are the Russian Federation, Kazakhstan, Iraq and India. Recently, it is notable that Turkey has doubled Russian oil imports.
Generally speaking, there are four critical institutions engaging in regulating the petroleum activities:
Firstly, the Ministry of Energy and Natural Resources,
Secondly, the General Directorate of Mining and Petroleum Affairs.
Thirdly, Turkish Petroleum Corporation (hereinafter TPAO) takes several initiatives in the field of oil exploration and production.
Fourthly, the Investment Office of the Presidency of the Republic of Turkey is recognized as the primary authority providing assistance to investors before, during, and after their entry into Türkiye.
Are oil and gas rights owned by the state or is private ownership allowed?
In accordance with the Turkish Constitution, the State exercises full authority upon exploration and exploitation of natural resources. Article 3 of the Turkish Petroleum Law (Numbered 6491) reiterates the same principle. According to Article 168 of the Turkish Constitution, natural wealth and resources shall be under the authority and at the disposal of the State.
Are the exploration and exploitation rights open to foreign investors in Turkey?
The right to explore and exploit oil essentially belongs to the State. Accordingly, private ownership of oil rights is not allowed to private companies and persons in principle. However, the State may delegate this right to persons or corporate bodies for a certain period of time in accordance with article 168 of the Turkish Constitution. So foreigner or local companies have a right to apply for any kind of oil investigation or oil exploratory license in Turkey.
What is meant by “petroleum right” in Turkey?
This paper prefers to make a reference to a legal definition, irregardless of numerous different aspects of the meaning of “petroleum right”. For that reason, through this paper, petroleum right means any of the rights arising from an investigation permit, an exploration license or a production lease.
What are the main legal instruments on investigation permits for oil?
In accordance with article 5 of the Turkish Petroleum Law, an investigation permit may be granted for sixty days. The information acquired as a result of the investigation shall also be presented to the General Directorate. It is important to stress that the General Directorate is obligated to keep this information confidential for eight years.
What are the main legal instruments to oil exploration licenses and exploratory drilling activities in Turkey?
There are two basic opportunities for oil exploration and related activities in Turkey: first, the acquisition of a license from the General Directorate of Mining and Petroleum Affairs (Ministry of Energy); second, working as a subcontractor within the framework of the state-owned Turkish Petroleum Corporation. It is very useful to keep in mind at the outset that both options require long-lasting legal procedures and very powerful political power.
License or tender procedures for oil-based activities including oil exploration activities in Turkey are performed on the basis of an application to the General Directorate of Mining and Petroleum Affairs and TPAO. Under Article 6 of the Turkish Petroleum Law, an exploration license is issued with the aim of performing exploration activities within the land that the exploration license covers, undertaking investigations around the land covered by the exploration license, developing the land where petroleum is found and to produce petroleum in these land and making an application of exploration.
To sum up, this paper has provided a brief outline of oil market entry strategies in the field of oil. This work has established that oil-centric activities are subject to supervisory control of the Turkish government. Any investor involved in oil exploration activities must take very careful steps in providing concerned licenses and permits. Relevant legal requirements should be fulfilled for the exercise of petroleum rights, as discussed earlier.