oil and gas market law in turkey

Attorney Arzu ONGUR ERGAN Oil & Gas Submit 2010 by East Euro Link İSTANBUL TURKEY

LEGAL FRAMEWORK OF THE OIL AND GAS MARKETS IN TURKEY

ATTORNEYARZU ONGUR ERGAN L.LM

www.ongurergan.av.tr

http://www.ongurergan.av.tr/


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Legal Background of Oil & Gas Market

There are some factors that have effects on oil and gas market’s regulations in Turkey, such as; Geographical position European Union accession International market requirements National market requirements

Petroleum Market Law Law No: 5015 Enacted:04.12.2003 Gazetted:20.12.2003


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What kind of market structure is required What kind of market structure is required by the Oil Market Lawby the Oil Market Law??

Transparent Non discriminatory Sustainable/Secure Cost efficient Competitive Equitable

What are thefunctions of the Oil

Market Law?

Guidance Surveillance Supervision


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Energy Market Regulatory Board

Independent Regulatory Agency

Created in 19.11.2001 Law No: 4646 Annex:1 Law No: 5015 Art. 6 Oil Market Natural Gas Market Electricity Market LPG Market

Is there any constitutionalbackground? Article 167Article 167 Article 168Article 168 Article 47/4Article 47/4


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What kind of Oil Market Licenses are required for market players?

Refining licenseRefining license Processing licenseProcessing license Lube oil production licenseLube oil production license Storage licenseStorage license Transmission licenseTransmission license Eligible Consumer licenseEligible Consumer license Bunker licenseBunker license Distributor licenseDistributor license Transportation Transportation lliiccenenssee Vendor Vendor lliiccenenssee


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Request for Licensing?

Licensing authority is Energy Market Regulatory Board

Request of licensing Turkish Company Foreign Company Documents needed 60 days


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Assessment of request of license…

60 days Technology for entrances of the market Quality Security Sustainability of the service and the applicant 1% or 100% license fee


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The license certificate has to consist….

Name of the real or legal person granted the rightName of the real or legal person granted the right Activity typeActivity type Facility typeFacility type Geographic positionGeographic position TechnologyTechnology QuantitiesQuantities Time limitsTime limits


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Basic Rights and Liabilities of Licensee

Article 4 of 5015 Avoid any kind of activity that would result in

malicious intent Or Unsafe activities Take necessary measures Eliminate any undesirable situation Act in accordance with the legislation Prevent environmental risks


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Expiration of licenses…

Time completionTime completion Cancellation of the licenseCancellation of the license Inefficient usage of Eligible Consumer license Inefficient usage of Eligible Consumer license Vendor’s contract cancellationVendor’s contract cancellation


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Pricing in oil market

Article 10 Principle is free market price To support national crude oil production Tax dimension State’s intervention EMRB’s regulation


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Expropriation

Law No.2942 Expropriation of lands, estates, buildings State property Right of usage for licensee


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Security of SupplySecurity of Supply

90% imported oil dependency Relationship with National Security Petroleum Stocks 5015/16a) Sustainability in the market, crisis preventionb) EU petroleum stocks regulationc) International Energy Program Agreementd) Prevention of the market after the liberalization and

privatization


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NATIONAL MARKERNATIONAL MARKER

Article 18 of 5015 Indication of legitimate ;c) Productiond) ImportBoard’s auditing;National marker is important for:7. Market control8. Quality analyze9. Tax evasion


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Penalties, Administrative SanctionsPenalties, Administrative Sanctions

A) Administrative Fines

Article 19 of 5015 a) Administrative fines; up to 600.000 TLb) Administrative fines; up to 250.000 TLc) Administrative fines; between 50.000 TL and 100.000 TLOne fifth of the fines above mentioned shall be

applied to vendors.


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Administrative Sanctions

Article 20 Notification to eliminate the incompliance within 15

days Suspension of the activities temporarily (30-180

days) Termination of the activities permanently Article 274 of Turkish Criminal Code Repetition in 2 years the above fines shall be two-

folds.


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Cancellation of LicenseCancellation of License

Contraband product usage, saleContraband product usage, sale Submission of false statement during license Submission of false statement during license

application periodapplication period

Vendor's Vendor's positionposition

Article 20/3Article 20/3

a)a) Suspension of sealing temporarilySuspension of sealing temporarily

b)b) Suspension of sealing for an undefined periodSuspension of sealing for an undefined period


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Procedure for sanctions and/or administrative fines

Article 21 of 5015Article 21 of 5015 Preliminary InquiryPreliminary Inquiry Direct Investigation (6 months)Direct Investigation (6 months) Legal ActionsLegal Actions Submission of defenses in 30 daysSubmission of defenses in 30 days Information gathering, records, auditInformation gathering, records, audit


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Decisions of the Board without investigation

1.1. Illegitimately produced product Illegitimately produced product sealingsealing during the during the regular auditingregular auditing

2.2. Maintaining market activities without liMaintaining market activities without liccenenssee


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The lawsuits against the decision of the Board

The relevant party can file a lawsuit against the The relevant party can file a lawsuit against the Energy Board decisionEnergy Board decision

Article 21 of the 5015Article 21 of the 5015 The Council of the State is defined as court of first The Council of the State is defined as court of first

instance for energy casesinstance for energy cases Urgent matterUrgent matter


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Competition in Oil Market-I

Protection of Competition Law dated 07.12.1994 Protection of Competition Law dated 07.12.1994 No. 5054No. 5054

5054 is 5054 is applicable in the oil marketapplicable in the oil market Competition Regulatory Board has Competition Regulatory Board has an an authorityauthority in in

the Oil Market as well.the Oil Market as well.1) Agreements which considerably prevent, restrict or

distort competition;2) Abuse of dominant position,3) Mergers &Acquisition,


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Competition in Oil Markets-II

Energy Market Regulatory Board’s & Competition Energy Market Regulatory Board’s & Competition Regulatory Board’s authorities.Regulatory Board’s authorities.

Article 10 of 5015Article 10 of 5015 The agreements, which considerably prevent,

restrict or distort competition concerning the market prices, are under the control of Energy Market Regulatory Board.


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LEGAL FRAMEWORK OF THE NATURAL LEGAL FRAMEWORK OF THE NATURAL GAS MARKET IN TURKEYGAS MARKET IN TURKEY

The legal framework of the Natural Gas Market is regulated by the Law No: 4646 and dated 18.04.2001

Before this Law the Natural Gas Market was regulated by the Decree Law Numbered 397 and dated 02.09.1990


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Objectives

Supply of Natural Gas with; Good-quality Stable Competitive priceFOLLOWING CONDITIONS ARE REQUIRED: Competitive market Liberalization of the market Environmentally sound Financially sound Transparent market Sustainable market Independent supervision and control mechanism


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New market conditions provided by the Law Numbered 4646

Free entrance to the market by private entities To abolish Natural Gas Monopoly of the BOTAŞ Protection of the natural gas end-users by

competitive market prices Market efficiency for any kind of market activities Market shares limits are regulated Free consumer structure Liberalisation of the distribution grids


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Liberalization and Competition

EU accession period requirementsEU accession period requirements Integration with international marketIntegration with international market Attract the private investmentAttract the private investment Protection of the environmentProtection of the environment


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Types of the Natural Gas Licenses:

Import licenseImport license Transmission license Transmission license Storage license Storage license Wholesale licenseWholesale license Distributor LicenseDistributor License CNG LCNG Liicensecense Exportation licenseExportation license


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License and Certificate

License is defined by the 4646 as a permission for market activities

Certificate is defined by the Law 4646 as a demonstration document for design, construct, revise, maintain, repair, control, consult or conduct for the facilities.


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Notion of the Licenses

Respectively for each market activities Licenses are not transferable Licenses are granted for minimum 10 maximum 30

years, Separate accounts,


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License Application ProcedureLicense Application Procedure

Article 8 of the License RegulationArticle 8 of the License Regulation Application documentApplication document Commitment letterCommitment letter Other documentsOther documents 1% License fee receipt1% License fee receipt


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Evaluation of the License Application

Conclusion in 60 daysConclusion in 60 days Financial capacity of the applicantFinancial capacity of the applicant Background and previous experience of the Background and previous experience of the

applicantapplicant Applicant’s effect on competition, development of Applicant’s effect on competition, development of

the market and market pricesthe market and market prices


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Expiration of licenseExpiration of license

Time completionTime completion LicenseLicenseee’s bankruptcy’s bankruptcy Licensee’s renounceLicensee’s renounce Decision of the Energy Market Regulatory BoardDecision of the Energy Market Regulatory Board


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Administrative Sanctions and Fines in Natural Gas Market

Article 9 of the 4646Article 9 of the 4646 Incorrect information premises,Incorrect information premises, BrBreeach of the legislation,ach of the legislation, Failure in performing license and certificate Failure in performing license and certificate

conditionsconditions Misleading document and information Misleading document and information Prohibited affiliate relationsProhibited affiliate relations Performing activities outside of the license Performing activities outside of the license

conditions,conditions, Failure about informing Board about changed Failure about informing Board about changed

conditionsconditions


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Procedure

Set forth administrative fines between 300.000 TL and 600.000 TL

Upon a compilation Preliminary investigation Directly investigation Submission of defenses in 30 days


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The lawsuits against the decision of the Board

The relevant party can file a lawsuit against the The relevant party can file a lawsuit against the Energy Board decisionEnergy Board decision

Article 10 of the 4646Article 10 of the 4646 The Council of the State is court of first instanceThe Council of the State is court of first instance Urgent matterUrgent matter


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Competition in Natural Gas MarketCompetition in Natural Gas Market

Protection of Competition Law dated 07.12.1994 Protection of Competition Law dated 07.12.1994 No. 5054No. 5054

Applicable in the natural gas marketsApplicable in the natural gas markets Competition Regulatory Board has authority on the Competition Regulatory Board has authority on the

Natural Gas Market as well.Natural Gas Market as well.1) Agreements, which considerably prevent, restrict or

distort, competition;2)Abuse of dominant position,3)Mergers &Acquisition,


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Final Final

Thank you for your attention…Thank you for your attention…SEE OIL &GAS 2010 SUBMITSEE OIL &GAS 2010 SUBMIT

25-26 JUNE 201025-26 JUNE 2010İSTANBUL/ TURKEYİSTANBUL/ TURKEY

http://www.easteurolink.co.uk/past-event/2010-06-25.htmlhttp://www.easteurolink.co.uk/past-event/2010-06-25.html

Attorney Attorney Arzu ONGUR ERGANArzu ONGUR ERGAN L.LM L.LM

www.ongurergan.av.trwww.ongurergan.av.tr

http://www.ongurergan.av.tr/