1 Legal and regulatory framework

1.1 What role does the national state play in the oil and gas industry in your jurisdiction? Are oil and gas rights owned by the state or is private ownership allowed?

Under the Turkish Constitution, natural wealth and resources are under the authority and at the disposal of the state. The right to explore and exploit them also belongs to the state. The state has the right to delegate this right to individuals or legal entities for a certain period. The Turkish Petroleum Law (6491) and the Turkish Petroleum Law Implementation Regulation of 22 January 2014 also provide for the state's ownership of, and total authority over, oil and natural gas resources. Private ownership of oil and natural gas rights is not allowed.

The state also plays an important role as a policy maker in the oil and gas industry. The Turkish Petroleum Law aims to ensure that Turkey's petroleum resources are rapidly, continuously and effectively explored, developed and produced in accordance with national interests. The Natural Gas Market Law (4646) aims to:

  • establish a financially sound, stable and transparent natural gas market through liberalisation in order to ensure the supply of natural gas to consumers in a high-quality, sustainable, low-cost, competitive and environment-friendly manner; and
  • ensure the independent regulation and supervision of the market.

Similarly, the Petroleum Market Law (5015) aims to regulate guidance, surveillance and supervisory activities to ensure the transparent, non-discriminatory and stable conduct of market activities pertaining to the delivery of petroleum supplied from domestic and foreign resources to consumers in a reliable, cost-effective manner within a competitive environment.



1.2 Which national legislative and regulatory provisions govern the oil and gas industry in your jurisdiction?

Exploration and production activities relating to petroleum and natural gas are governed by the Turkish Petroleum Law, based on a 'tax and royalty' regime. Midstream activities (eg, transportation and storage) and downstream activities (eg, refining and sales) are considered market activities, and are governed by the Natural Gas Market Law and the Petroleum Market Law.

The Turkish Petroleum Law sets out the main principles and procedures governing:

  • the regulation, management, incentivisation and supervision of petroleum exploration and production activities in Turkey; and
  • the compilation, evaluation and provision of necessary information and data for exploration and production.

The Turkish Petroleum Law defines:

  • 'crude oil' as "natural hydrocarbons in liquid and solid state produced or producible from the ground"; and
  • 'petroleum' as "crude oil and natural gas".

The Turkish Petroleum Law Implementation Regulation includes more detailed provisions on the implementation of the Turkish Petroleum Law, especially regarding:

  • the conditions and procedure for licensing;
  • the purpose of the petroleum registry;
  • the transfer of rights;
  • the transfer of capital abroad; and
  • the import and export of materials used by petroleum rights holders during their operations.

With respect to market activities, the Natural Gas Market Licence Regulation dated 2 November 2002 and the Petroleum Market Licence Regulation dated 17 June 2004 are the main statutes that set out the conditions and procedure for licensing in the natural gas and petroleum markets.



1.3 What other national legislative and regulatory provisions have relevance for oil and gas activities in your jurisdiction?

Other legislative and regulatory provisions that are relevant to oil and gas operations may be classified under the following categories:

  • regulations on energy and petroleum market activities;
  • technical regulations on the production of oil and gas products;
  • regulations on the transmission and distribution of oil and gas products;
  • financial regulations on the sale of oil and gas products; and
  • regulations on oil and gas storage facilities.

The retail price of natural gas is determined by the Energy Market Regulatory Authority (EMRA), which is the competent body for the regulation of the energy markets in Turkey. Other tariffs for transmission and storage are also determined according to specific criteria under the legislation; hence, an important proportion of the natural gas secondary legislation pertains to the determination of tariffs. Similarly, the petroleum market legislation includes specific regulations on tariffs, especially with regard to the retail price of fuel prices.



1.4 Are there any regional treaties or laws that need to be taken into account?

Several bilateral agreements relate to oil and gas imports or transit pipeline projects between Turkey and neighbouring countries. The main international treaties and agreements relating to oil and natural gas pipeline projects include the following:

  • The Iraq-Turkey Crude Oil Pipeline was built under the framework of the Crude Oil Pipeline Agreement between Turkey and Iraq signed on 27 August 1973 in order to transport crude oil produced in Kirkuk and other fields of Iraq to the Turkish port of Ceyhan. An amendment was signed on 19 September 2010 to extend the term of the agreement and its protocols for 15 years. The pipeline is 986 kilometres (km) in length and has a capacity of 1.4 million barrels per day.
  • The Baku-Tbilisi-Ceyhan Main Export Crude Oil Pipeline, aimed at transporting crude oil produced in the Caspian region to Ceyhan, was built under an intergovernmental agreement between Azerbaijan, Georgia and Turkey of 18 November 1999, which was followed by a host government agreement between Turkey and the pipeline participants on 19 October 2000. The pipeline is 1,768 km in length and currently has a capacity of 1.2 million barrels per day.
  • The Russia-Turkey Natural Gas Pipeline (West Line) was built within the context of an intergovernmental agreement between Turkey and the former Soviet Union of 18 September 1984. The current capacity of the pipeline is 18.8 billion cubic metres (bcm) per year.
  • The Blue Stream Natural Gas Pipeline was built within the scope of a 25-year contract between BOTAŞ (the Turkish National Pipeline Company) and Gazprom for the import of natural gas from Russia to Turkey. The pipeline has a capacity of 16 bcm per year.
  • The Eastern Anatolian Natural Gas Pipeline was built under an agreement between Iran and Turkey of 8 August 1996. The pipeline became operational in 2001 and has a capacity of 10.4 bcm per year.
  • The Baku-Tbilisi-Erzurum Natural Gas Pipeline was initially developed based on an intergovernmental agreement between Turkey and Azerbaijan of 12 March 2001 to supply natural gas produced from the Shah Deniz field in the southern Caspian Sea region of Azerbaijan to Turkey. The expansion of the pipeline began in 2015 and was realised as part of larger project, the Trans-Anatolia Natural Gas Pipeline Project (TANAP), under an intergovernmental agreement between Azerbaijan and Turkey and a host governmental agreement between Turkey and the project company that were both signed on 26 June 2012. The TANAP pipeline became operational in 2012 and has a capacity of 16 bcm per year.
  • The Turkstream Gas Pipeline Project was realised within the framework of an intergovernmental agreement between Turkey and Russia of 19 October 2016. The pipeline became operational on 2020 and has a capacity of 31.5 bcm per year.


1.5 Which national regulatory bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

Three major regulatory bodies are responsible for the enforcement of laws and regulations relating to oil and gas:

  • the Ministry of Energy and Natural Resources (MENR);
  • the General Directorate of Mining and Petroleum Affairs (GDMPA); and
  • the EMRA.

The GDMPA is responsible for the regulation of upstream activities and the implementation of the Turkish Petroleum Law and the Turkish Petroleum Law Implementation Regulation. The GDMPA is the main government entity in charge of issuing licences for the exploration and production of oil and natural gas resources. The EMRA is responsible for the regulation of midstream activities (eg, transportation, import and storage) and downstream activities (eg, refining, wholesale and distribution) – mainly under the Natural Gas Market Law and the Petroleum Market Law – and the issuance of licences for these activities.

While the GDMPA and the EMRA have more specific authorities with regard to oil and gas activities, the MENR is responsible for certain matters under the Turkish Petroleum Law, such as:

  • expropriation of lands required for oil and gas operations;
  • approval of share transfers that may lead to a change of control over the petroleum rights holder's capital; and
  • participation in amicable settlement meetings between applicants or licence holders.


1.6 What is the national regulators' general approach in regulating the oil and gas industry?

Due to its high dependence on oil and natural gas imports, Turkey has required structural changes to its energy sector. As the overall reliance on natural gas and oil imports presents major challenges from both a commercial and strategic perspective, the Turkish government shifted over the years from a role of investor to a role of policy maker and market regulator.

Regarding natural gas imports, Turkey's policy aims to increase its import and transit capacity through two projects: TANAP and TurkStream. Out of TANAP's total capacity of 16 bcm, it is expected that 6 bcm will be used for Turkey's internal consumption needs, while 10 billion bcm will transit to Europe via the Trans-Adriatic Pipeline. With a capacity of 31.5 bcm, TurkStream is important to Turkey for two reasons:

  • It will enhance supply security by eliminating transit countries such as Ukraine (which is one of the transiting countries of the West Line) and hence establish a direct line between Turkey and Russia in addition to the Blue Stream pipeline; and
  • It will strengthen Turkey's position as a potential gas hub.

Exploration activities are also underway for offshore natural gas reserves in the Mediterranean Sea and Black Sea. In August 2020 the government announced a discovery in the Black Sea with an estimated reserve of 540 bcm. Given the size of the reserve, the project could reduce Turkey's gas import dependency.

With the aim of improving its energy security, Turkey is also increasing the capacity of existing liquefied natural gas receiving terminals and building new floating storage and regasification units, as this will allow greater flexibility in importing and storing natural gas. The Turkish government also plans to increase its underground storage capacity from the current 3.4 bcm to 10 bcm by 2023.



1.7 What role do provincial, state and/or other local government regulatory bodies play in the regulation of the oil and gas industry?

Provincial and local bodies play no role in the regulation of the oil and gas industry. Three major regulatory bodies are responsible for the enforcement of laws and regulations relating to oil and gas:

  • the Ministry of Energy and Natural Resources (MENR);
  • the General Directorate of Mining and Petroleum Affairs (GDMPA); and
  • the EMRA.

(For further details please see question 1.5.)



2 Oil and gas industry

2.1 How mature is the oil and gas industry in your jurisdiction?

The first petroleum law was enacted in the early days of the Republic of Turkey and was later replaced with the Turkish Petroleum Law (6326) in 1954 to encourage private and foreign ownership. The Turkish Petroleum Law (6326) regulated upstream, midstream and downstream activities under one single law. As of today, upstream activities remain largely controlled by the Turkish Petroleum Corporation (TPAO), which is the state-owned oil company involved in exploration and production activities. Domestic production is limited; in 2020, Turkey imported approximately 94% of its crude oil needs from 13 countries and refined products from over 20 countries. Although the Turkish Petroleum Law provides some tax incentives (especially during the exploration phase), as well as low royalties, foreign investment remains limited in the upstream sector. TPAO owns almost 80% of all exploration licences (including all offshore exploration licences) and almost half of all production leases. However, domestic crude oil production increased by almost 30% between 2017 and 2020.

Natural gas production is also quite limited; in 2020, Turkey imported almost 100% of its natural gas needs. Likewise, although the Natural Gas Market Law enacted in 2001 aimed to liberalise the natural gas market, midstream and downstream activities in the natural gas industry (eg, imports, transportation and storage) are mainly conducted by BOTAŞ, which is the state-owned pipeline company. Although exploration activities are ongoing in the Thrace Basin and Southeast Anatolia Basin, potential discoveries in these areas are not expected to increase production in the long term. The announcement of the Sakarya gas field in the Black Sea could enhance Turkey's natural gas supply security, given the size of the discovery, as increased domestic gas production could reduce the country's dependency on imports and result in lower prices for industry and consumers.



2.2 What are the key oil and gas products which are produced in your jurisdiction and where are activities typically based?

The main oil products produced in Turkey are gasoline types, diesel types, aviation fuels and marine fuels. There are five refineries in Turkey. The capacity and locations of the refineries are set out in the following table.

Capacity (b/d) Location Company
İzmir Refinery 257,000 İzmir Tüpraş
İzmit Refinery 244,000 Kocaeli Tüpraş
STAR Refinery 214,000 İzmir SOCAR
Kırıkkale Refinery 115,000 Kırıkkale Tüpraş
Batman Refinery 30,000 Batman Tüpraş


2.3 Who are the key players in the oil and gas industry in your jurisdiction?

TPAO is a state-owned oil company which is the main player in exploration and production activities. As of December 2020, TPAO had historically drilled more than half of all exploration wells and almost 75% of all production wells in Turkey. TPAO produces 75% of all hydrocarbons in Turkey.

BOTAŞ, the state-owned pipeline company, is the key player for midstream and downstream activities in the natural gas industry, including:

  • crude oil and natural gas transportation and pipeline operation;
  • liquefied natural gas (LNG)/floating storage and regasification unit terminal operations;
  • marine terminal operations;
  • project design, engineering, land survey, expropriation and construction of crude oil and natural gas pipelines and compressor stations;
  • natural gas and LNG trade;
  • natural gas and LNG storage facilities; and
  • international natural gas and oil transportation projects.


2.4 How are the following reflected in the domestic energy mix?
(a) Oil and gas
(b) Imports and exports?

(a) Oil and gas

Oil accounts for almost one-third of Turkey's total primary energy supply. Almost two-thirds of oil consumption in Turkey is in transport. Natural gas accounts for approximately one-quarter of Turkey's total primary energy supply. Out of Turkey's total consumption, approximately:

  • one-third is consumed by households;
  • one-quarter by the industry; and
  • one-quarter by power generation facilities.

(b) Imports and exports

Domestic crude oil production is limited. In 2020, Turkey imported approximately 94% of its crude oil needs from 13 countries and refined products from over 20 countries. In 2020, approximately:

  • 40% of crude oil was imported from Iraq;
  • 33% from Russia;
  • 11% from Kazakhstan; and
  • 11% from Saudi Arabia.

Natural gas production is also quite limited; Turkey imports almost 100% of its natural gas needs. As of 2020, Turkey imported roughly:

  • 33% of its natural gas consumption from Russia;
  • 24% from Azerbaijan;
  • 11% from Iran; and
  • 11% from Algeria (as LNG).


3 Exploration and production

3.1 What rights are required to undertake exploration and production in your jurisdiction? Do these vary depending on the type or location of the activity?

Both petroleum and natural gas require either:

  • an investigation permit or an exploration licence in order to conduct investigation or exploration activities; and
  • a production lease to conduct production activities.

The General Directorate of Mining and Petroleum Affairs (GDMPA) is the competent authority for the issuance of licences for exploration and production.

Generally, the requirement to undertake exploration and production does not vary depending on the type or location of the activity. Turkey is divided into two districts as onshore and offshore in terms of oil and gas activities. Offshore is divided into two parts:

  • inner territorial waters; and
  • outer territorial waters.

The grant of investigation permits, exploration licences and production leases, their transfers and time extensions in the outer territorial waters are subject to the approval of the President; and they cannot have less favourable conditions than those under the general provisions of the Turkish Petroleum Law for the issuance of investigation permits, exploration licences or production leases. Outer territorial waters may be partially or thoroughly closed to exploration and production, modified or reopened by decision of the President.

Exploration licences are based on map sections with scales of 1/50,000 for territorial borders and territorial waters. The largest area covered by a licence would be a complete map section at a scale of 1/50,000. The smallest area of a licence would be a complete map section at a scale of 1/25,000, provided that it is included in the same map section at a scale of 1/50,000.



3.2 What regulatory or contractual requirements must be satisfied to obtain exploration and production rights?

Applications for exploration rights must be made to the GDMPA. The GDMPA mainly assesses the technical and financial capability of the applicant based on the documents to be submitted with the application for an exploration licence. The area covered by an initial exploration licence application for a field available for petroleum exploration should be publicly announced. Other applicants can bid to obtain an exploration licence for the same area during a 90-day period. All applications covering the same area will be evaluated together and the GDMPA will then decide on the issuance of the exploration licence.

If any petroleum reserve is reached during exploration drilling, the exploration licence holder will carry out tests to determine the amount of the reserve. If the reserve that is reached is suitable for production, this will be regarded as a discovery and notice will be provided accordingly to the GDMPA. Following the examination of the information and the documents to be presented with the notice of discovery, the GDMPA can either accept or reject the discovery within six months of presentation of the notice of discovery, during which time the reserve amount will be assessed. If the discovery is accepted by the GDMPA, the exploration rights holder is obliged to develop the field. The exploration licence holder must submit a detailed programme for the development of the field to the GDMPA within six months of the registration date of the discovery.



3.3 If there is state ownership of oil and gas rights in your jurisdiction, what is the procedure for obtaining exploration and production rights? How long does this typically take?

In addition to the points discussed in question 3.2, an applicant for an exploration licence must provide a security corresponding to 2% of the financial investment required for the work and investment programme submitted to the GDMPA. The amount of the security is 1% for an offshore licence. The security must be submitted to the GDMPA within 30 days of grant of the exploration licence, failing which the licence will be cancelled. The applicant for an exploration licence or a production lease must also provide a security for any loss and damages that may arise during operations, the amount of which is calculated based on the size of the exploration licence area (0.1% per hectare of the relevant exploration area) or the production lease area (0.5% per hectare of the relevant production lease area).

The Turkish Petroleum Law (6491), as a rule, sets a 60-day period for the GDMPA to review and conclude certain applications such as:

  • exploration licences (including extensions of the same);
  • registration of joint operating agreements; and
  • establishment of rights and encumbrances over the petroleum rights (including royalty interests).

In practice, the GDMPA's approval or rejection may take longer due to its workload or requests for additional documents or information. However, the GDMPA's failure to conclude an application within 60 days of the date of application does not lead to an implied acceptance; nor is it tied to any legal consequences in favour of or against the applicant.



3.4 Who can own exploration and production rights in your jurisdiction? Do specific requirements or restrictions apply to foreign operators? Do any indigenous ownership requirements apply?

As per the Constitution and Article 3 of the Turkish Petroleum Law, petroleum resources – including natural gas – are under the authority and at the disposal of the state. As petroleum resources are not legally bound to the ownership of the land, they cannot be subject to private ownership. Therefore, the GDMPA grants exploration and production licences, and the petroleum produced under the licences may be privately owned by a licence holder only. However, the licence holder is liable to pay a royalty corresponding to one-eighth of the petroleum produced.

As per Article 22(5) of the Turkish Petroleum Law, exploration and production licences may be granted to Turkish or foreign corporations; although foreign corporations must have a place of business in Turkey as well as a resident representative. Therefore, for foreign investors that wish to apply for exploration licences in Turkey, there is a requirement to incorporate a legal entity, such as a branch, in Turkey; although such entity can be wholly owned by a foreign entity. There are no further restrictions on the shareholding or management of petroleum companies.

The Turkish Petroleum Law provides, however, that any transfer of shares that may lead to a change of control over the petroleum rights holder's capital is subject to the approval of the Ministry of Energy and Natural Resources.



3.5 If there is state ownership of oil and gas rights in your jurisdiction, what fees and other charges are incurred in obtaining exploration and production rights?

For all licence applications, the applicant must first pay an application fee which is determined and notified to the applicant by the GDMPA during the application process. The fees for exploration licences and production leases are determined under Annex 8 of the Fees Law (492) and are updated annually.

Additionally, an applicant for an exploration licence must provide a security corresponding to 2% of the financial investment required for the work and investment programme submitted to the GDMPA. The amount of the security is 1% for an offshore licence. The security must be submitted to the GDMPA within 30 days of grant of the exploration licence, failing which the licence will be cancelled. The applicant for an exploration licence and a production lease must also provide a security for any loss and damages that may arise during operations. The amount of the loss and damages security is calculated based on the size of the exploration licence area (0.1% per hectare of the relevant exploration area) or the production lease area (0.5% per hectare of the relevant production lease area).



3.6 What is the duration of exploration and production rights? What is the process for renewal?

Exploration licences provide for an exploration period of five years for onshore explorations and eight years for offshore explorations. Exploration licences may be extended twice for periods of two years for onshore explorations and three years for offshore explorations, provided that the licence holder:

  • has performed its undertakings under the work programme;
  • pays the corresponding security of 2% for onshore licences and 1% for offshore licences; and
  • undertakes the drilling of at least one exploration well.

The term of an exploration licence, including extensions, may not exceed nine years for onshore areas and 14 years for offshore areas. However, upon the expiry of an exploration licence, an additional period up to two years may be provided so that commercial evaluation of a petroleum discovery can be made for the lands on which the petroleum was discovered.

Production leases provide for a production period of 20 years and can be extended twice for 10-year periods, provided that the licence holder has performed its undertakings under the work programme. Lease extension application documents must include:

  • the business and financial investment programme;
  • the latest reserve information of the fields; and
  • the yearly production schedule for the requested extension period.

The GDMPA will mainly assess whether:

  • there is continuous production in the field;
  • the production lease still has an economic value; and
  • the production programme is suitable for the lease to be extended.


3.7 What are the operator's rights and obligations under exploration and production rights?

Under the Turkish Petroleum Law Implementation Regulation, an 'operator' is defined as a company that:

  • owns shares or rights in a licence; and
  • will carry out operations on behalf of all petroleum rights holders that jointly hold rights in an exploration licence or production lease under an agreement between the rights holders.

Petroleum rights holders that jointly hold rights in an exploration licence or production lease must comply with the following requirements:

  • The joint operation agreement signed among themselves should be notified to the GDMPA within 30 working days of their signature;
  • Changes regarding operatorship should be notified to the GDMPA within three working days;
  • The share and the role of the petroleum rights holders in the expenses incurred by the operator should be defined in the joint operating agreement; and
  • The method of registration and distribution of the imported assets among the joint petroleum rights holders should be specified under the joint operating agreement.


3.8 Are there any requirements re relinquishment of exploration and production rights or part of the area covered by such rights?

A petroleum rights holder may partially or completely relinquish its exploration licence or its production lease by:

  • making an application to the GDMPA; and
  • informing any public institution or organisation related to the field, if any, at least one month in advance and at least three months in advance, respectively.

Any rights arising from the licences will expire for the relinquished field on the date of such application and the relinquishment must be published in the Official Gazette. In case of a partial relinquishment, work and financial obligations undertaken under the work programme will apply to the portion of the licence area that is not relinquished. If the petroleum rights holder has fulfilled its obligations by that date, all obligations will terminate. A licence holder that ceases operations must return the field in its previous condition.



3.9 Can exploration and production rights be transferred or assigned? If so, how and subject to what government consents? Do any fees, taxes or other charges apply to direct or indirect transfers?

Exploration and production licences can be transferred.

In order to transfer a licence, the following documents must be fulfilled:

  • application petitions for both the transferor and the transferee;
  • a receipt for the fees paid separately by both parties;
  • if the transferor will maintain any share in the licence, a joint decision of both parties with regard to the appointment of a joint representative and a notarised power of attorney issued to such joint representative;
  • if the transferor will maintain any share in the licence, a joint operating agreement executed by both parties;
  • relevant documentation based on the grounds of the licence transfer (eg, relating to the technical or financial capability of the transferee); and
  • the source file and other relevant documentation for the transferee, if the transferee becomes a licence holder for the first time.

The fees regarding licence transfers are determined under Annex 8 of the Fees Law and are updated annually. Such fees are generally low.

With respect to indirect transfers, the Turkish Petroleum Law provides that any transfer of shares that may lead to a change of control over the petroleum rights holder's capital is subject to the approval of the Ministry of Energy and Natural Resources. Share transfers under Turkish law may be subject to certain taxes and fees such as stamp tax, depending on the specifics of the transaction.



3.10 Can security be taken over exploration and production rights?

Under the Turkish Petroleum Law Implementation Regulation, exploration and production licences may be subject to contracts to be made on immovables and the establishment of rights that require the use of petroleum rights; and may be divided into shares. In practice, licences can be subject to attachment orders issued by the courts. However, unlike under the mining legislation, exploration and production rights cannot be pledged under the Turkish petroleum legislation.

The petroleum legislation does not provide for a specific procedure or regulate the requirements for the sale of shares of petroleum rights holder companies through debt enforcement proceedings. Nevertheless, it generally provides that any share transfers in a petroleum licence holding company that may lead to a change of control is subject to the approval of the Ministry of Energy and Natural Resources; hence, any sale of shares in petroleum rights holder companies (including through debt enforcement proceedings) involving a change of control requires the approval of the ministry.



3.11 What contractual or regulatory provisions apply with regard to cessation of exploration and production or abandonment of exploration and production rights?

There are three main grounds of forfeiture of petroleum rights:

  • termination of the licence by the GDMPA;
  • expiry of the licence term; and
  • abandonment/relinquishment.

The GDMPA may terminate the licence unilaterally based on specific grounds, including but not limited to the following:

  • failure to pay the licence fee within the specified term;
  • failure to submit the required security to the GDMPA within thirty days following the final decision for the granting or extension of the licence;
  • failure to submit or to comply with the work programmes;
  • failure to comply with the provisions of the Turkish Petroleum Law, regulations and other relevant legislation,
  • failure to comply with the provisions of the licence in general,
  • failure to pay the state royalty,
  • failure to compensate the owner and the possessor of the land on which operations are conducted, for all damages to the land, loss of product or loss of revenue; and
  • failure to notify immediately the GDMPA, when a condition arises that threatens a petroleum operation that has the potential to affect adversely other petroleum right holders operations.

Further, a petroleum right holder may apply to the GDMPA for the partial or complete abandonment of the field and notify any other relevant bodies. The petroleum rights holders' rights pertaining to the abandoned field ends, starting from the application date. A petroleum rights holder that ceases operations must return the field in its previous condition.

4 Surface rights

4.1 Does the law of your jurisdiction distinguish between exploration and production rights and surface rights? If so, how does an owner of exploration and production rights acquire surface rights?

Yes, Turkish law distinguishes between exploration and production rights and surface rights, as the grant of an exploration licence or production lease gives no surface rights to the licence holder. An exploration licence or production lease holder can acquire the right to use the land by:

  • acquiring rights in rem over the land (eg, ownership, usufruct or other easement rights);
  • leasing the land; or
  • acquiring a right of use through expropriation.

Treasury lands and state-owned lands may be rented by the Ministry of Finance to the licence holder and forestry lands may be rented by the Ministry of Agriculture and Forestry.

Any transfer of ownership or creation of an easement right regarding immovable property must be registered with the land registry in accordance with the Civil Code. Lease agreements between the landowner and the licence holder need not be registered, but can be registered if the parties so agree.



4.2 Where surface rights are acquired, what are the operator's rights and obligations as regards the landowner? And what are the landowner's rights and obligations as regards the operator?

The most common easement rights involved in oil and gas activities are the usufruct and the easement of construction. A usufruct gives the rights holder a right to use property, rights or assets that belong to another person. A utility easement is a form of usufruct right according to which pipes, cables and conduits for water, gas, electricity and the like located outside the parcel of land which they serve are, except where otherwise regulated, the property of the utility plant from which they come or to which they lead. A utility easement may be created over a land only by establishing an easement right.

An easement of construction gives a person the right to own a building that is built on another person's property. The licence holder must compensate the landlord in case of any damage to the land and must leave the land in a proper condition upon expiry of the licence.



4.3 Is there a process for the mandatory acquisition of surface rights? If so, what does this involve?

Under the Turkish Petroleum Law (6491), petroleum rights holders can obtain a right of use over property that is subject to private ownership through agreement with the landowner or, if an agreement cannot be reached, through expropriation. The Turkish Petroleum Law sets forth the main principles of expropriation and refers to the Law of Expropriation (2942) as the procedure for expropriation. Under the Law of Expropriation and the Turkish Petroleum Law Implementation Regulation, in order to initiate the expropriation procedure, the petroleum rights holder must apply to the General Directorate of Mining and Petroleum Affairs (GDMPA). The Ministry of Energy and Natural Resources (MENR) is the competent governmental authority that is entitled to resolve on expropriation for public interest. The expropriation decision of the MENR will serve as a public interest decision and the subsequent procedure will be carried out pursuant to the Law of Expropriation. Under the Natural Gas Market Law (4646) and the Petroleum Market Law (5015), the authority to issue a public interest decision for the purpose of expropriation lies with the board of the Energy Market Regulatory Authority.

The Law of Expropriation also provides licence holding companies with the right to apply for an expedited expropriation procedure which is faster than the standard expropriation procedure. This immediate seizure enables the petroleum rights holder to use the land before the expropriation procedure is fully completed and the ownership is transferred to the Treasury.



4.4 Are any native title issues applicable?

No.



4.5 Are any other rights needed to use the land (eg, zoning permissions or planning requirements)?

No other rights are needed to use land under the Turkish Petroleum Law, the Natural Gas Market Law and the Petroleum Market Law, except as mentioned in questions 4.1 to 4.4. However, the construction of buildings and other facilities required for oil and gas operations may require special permits such as construction permits and workplace operation permits. The construction of any structure should also comply with the land development plan applicable in the municipality where the operations are conducted.



5 Processing, refining and export

5.1 What requirements and restrictions apply with regard to the processing and refining of oil and gas?

Exploration and production activities relating to petroleum and natural gas are governed by the Turkish Petroleum Law (6491). Midstream activities (eg, transportation and storage) and downstream activities (eg, refining and sales) are considered market activities and are governed by the Natural Gas Market Law (4646) and the Petroleum Market Law (5015).

According to the Turkish Petroleum Law, the right to produce oil or natural gas as part of a production lease includes the right to:

  • drill the required number of wells; and
  • build surface facilities, transportation lines and storage facilities in the vicinity of the field as part of the development activities.

Refining activities of oil and gas are regulated under the Petroleum Market Law and require a refining licence to be issued by the Energy Market Regulatory Authority, which is responsible for the regulation of midstream activities and downstream activities. In addition to refining, refining licensees are authorised to conduct the following activities:

  • processing and storage activities within the facility or in the vicinity, and transportation activities to other facilities in the vicinity via pipelines, provided that these are registered in the licence; and
  • the distribution of liquid fuel through a distribution company.

Oil trade within the country must be performed by producers and refining undertakings. Refiners are obliged to purchase crude oil from domestic producers at a minimum price set under the Petroleum Market Law



5.2 What requirements and restrictions apply to the export of oil and gas?

Under Article 22/12 of the Turkish Petroleum Law, licence holders have the right to export 35% for onshore and 45% for offshore of the total crude oil or natural gas produced in fields discovered after 1 January 1980. The following must be reserved for domestic needs:

  • the remaining portion of the total crude oil or natural gas produced in fields discovered after 1 January 1980;
  • the entirety of the crude oil or natural gas produced in fields discovered before 1 January 1980; and
  • petroleum products derived from the same.

The licence holder must notify the General Directorate of Mining and Petroleum Affairs on a quarterly basis of the following:

  • the amount of oil exported;
  • the foreign currency amount of the revenue provided and the Turkish lira equivalent;
  • customs information; and
  • other related information.


6 Transport and storage

6.1 What requirements and restrictions apply with regard to the transport and storage of oil and gas? Do these vary in the case of cross-border transportation?

According to the Turkish Petroleum Law (6491), production as part of a production lease includes the following activities:

  • production drilling and development;
  • extraction of petroleum;
  • pre-processing of petroleum;
  • storage of petroleum in the field or in the vicinity of a field; and
  • transportation of petroleum to storage facilities, transmission lines or refineries through pipeline or other means.

However, the wording "storage of petroleum in the field or in the vicinity of a field" and "transportation of petroleum to these [storage facilities]" does not correspond to the commercial transport and storage of oil and gas, but only to such activities as are necessary to assist the licence holder in its production activities.

Under the Petroleum Market Law (5015), a licence is a prerequisite in order to operate in the petroleum market. As such, storage activities and transportation activities fall within the activities that require specific licences from the Energy Market Regulatory Authority (EMRA).

Suppliers of crude oil and liquid fuel from foreign countries must hold a refinery, distribution or bunker delivery licence. Producers of crude oil in Turkey must be able to import crude oil in sufficient amounts to blend with low-gravity domestic crude oil.

Companies that intend to import, export or store natural gas must likewise apply to the EMRA under the Natural Gas Market Law (4646).



6.2 What requirements and restrictions apply to the construction and operation of transport and storage infrastructure?

According to the Petroleum Market Licence Regulation, a separate licence must be obtained for each market activity and for each facility at which activity is carried out. For this reason, facility-specific provisions are included in the licences issued for petroleum market activities. Any facilities to be constructed in relation to petroleum market activities must comply with the Regulation for the Technical Criteria Applicable in the Petroleum Market dated 10 September 2004.

Regarding natural gas transport and storage facilities, the Natural Gas Market Law provides that companies active in the natural gas market may enter into service contracts with companies that have obtained a certificate from the EMRA. Services companies that engage in activities such as the following must obtain a certificate from the EMRA for those activities:

  • feasibility studies, project development, consulting, supervision and audits;
  • construction; and
  • servicing, maintenance and repair.

Services companies that intend to engage in construction and service activities must apply to the EMRA as per the provisions of the Certificate Regulation dated 25 September 2002.

Under the Natural Gas Facilities Regulation dated 26 October 2002, all activities on the natural gas market (including storage and pipelines) relating to the following must conform to specific standards:

  • design, construction and installation;
  • testing and control;
  • commissioning and operation;
  • maintenance and repair; and
  • provision of minimum safety conditions.

At every stage of the works, from design to commissioning of the facilities in question, the natural gas licence holder must have a separate EMRA certificate holder perform testing and/or controls to check whether the activities are being performed in line with the applicable legislation. Natural gas market licence holders must also maintain all kinds of records and reports relating to such tests and controls, and to the operation, maintenance and repair of the facilities.



7 Environmental issues

7.1 What environmental authorisations are required to undertake oil and gas activities in your jurisdiction? Do these vary depending on the type or location of the activity?

Under the Turkish Petroleum Law (6491), licence holders must not directly or indirectly commit dangerous acts during the petroleum operations. Licence holders may install the required facilities and equipment to conduct petroleum operations under the licence, provided that this does not disrupt the lives of local people or harm the environment or nature.

Under the Environmental Law (2872), companies must prepare an environmental impact assessment (EIA) report or project information file if a project could result in pollution. Permits, consents, incentives and licences will not be issued and operations thereunder cannot commence unless a positive decision on an EIA or an 'EIA not required' decision has been issued by the competent authorities. The administrative and technical procedures and principles relating to EIAs must be conducted as per the EIA Regulation dated 25 November 2014. Article 7 of the EIA Regulation lists the projects which require an EIA report. The competent authority to issue an EIA report is the Ministry of Environment and Urbanisation (MEU), which may also authorise the provincial governorates to issue such reports and decisions.

Oil and gas activities are listed under Annex 1 of the EIA Regulation and therefore require an application to the MEU in order for the latter to assess whether the operations require a positive EIA report.



7.2 What environmental regulations or contractual obligations must the operator observe while oil and gas facilities are operational?

As explained in question 7.1, in accordance with the Environmental Law, companies and institutions are obliged to prepare an EIA report if a project could result in pollution. Hence, once an EIA report has been approved by the MEU, the operator must observe the provisions of the report while the oil and gas facilities are operational.

Under the Environmental Law, individuals and legal entities are responsible for the protection of the environment and the prevention of pollution. Polluters are responsible for stopping or reducing the impact of pollution or environmental degradation that they have caused, directly or indirectly.

Under the Turkish Petroleum Law Implementation Regulation, during the drilling, completion, production and development operations at the wells, petroleum rights holders must:

  • refrain from carrying out activities which could jeopardise human health or cause harm to nature, the environment or cultural assets; and
  • take all precautions to prevent:
    • the flow of fluids from the well to the surface or from the surface into the well, and from one formation into another; and
    • over-production in the wells which negatively affects the dynamic of the reservoirs.

More generally, operators carrying out exploration and production activities (including through unconventional methods) must prevent and minimise possible damage to, and negative effects on, ground and underground water, air and soil, in order to protect human health and the environment.



7.3 What environmental regulations or contractual obligations must the operator observe in relation to decommissioning?

Under the Turkish Petroleum Law, the applicant for an exploration licence or a production lease must provide security for any loss and damages that may arise during operations, the amount of which is calculated based on the size of the exploration licence area (0.1% per hectare of the relevant exploration area) or the production lease area (0.5% per hectare of the relevant production lease area).

In addition to the information set out in question 7.2, under the Turkish Petroleum Law Implementation Regulation, licence holders that conclude their petroleum operations must restore the land to its former condition. Licence holders must also fully compensate and pay for damage caused to:

  • the landowner;
  • the land;
  • the facilities on that land; and
  • the product price or operating profit that the landowner is deprived of.

Under the Environmental Law, if polluters do not take all necessary precautions, the costs incurred by government entities for the prevention, limitation, removal or remediation of pollution may be collected from those polluters as per the Law on Collection Procedure of Public Assets (6183).



7.4 What are the potential consequences of breach of these requirements – both for the operator itself and for directors, managers and employees?

The environmental legislation and other relevant laws provide that breaches of environmental laws or acts causing environmental pollution, degradation or damage are punishable by:

  • administrative fines;
  • criminal penalties; and
  • other monetary liabilities

The Environmental Law sets out the main principles for the protection of the environment and the prevention of pollution, and the administrative sanctions and criminal penalties for violation of the same.

Under the Environmental Law, polluters that cause environmental pollution or degradation are liable for damages that arise from pollution or degradation based on the principle of liability without fault, without prejudice to their liability under the general provisions of Turkish law. The provisions on tort, liability of the property owner, employer liability or danger liability may create a basis for liability with fault or liability without fault of the persons in relation to environmental damages if the relevant conditions are met.

In terms of criminal penalties, the Criminal Code provides that anyone that intentionally pollutes the environment in violation of the regulations on waste disposal will be sentenced to imprisonment for between six months and two years. Legal entities are not subject to such penalties; although individuals who are responsible and authorised to conduct waste disposal activities may be subject to the criminal penalties depending on their job description and responsibilities. Where waste disposal requires corporate investments to be made for a legal entity, the board of directors and managers may be subject to the criminal penalties for their failure to make such investments and/or take relevant decisions.



7.5 Which national, provincial/state and/or local government regulatory bodies are responsible for enforcement of environmental obligations?

The MEU is responsible for:

  • enforcing the environmental legislation;
  • issuing the relevant permits; and
  • reviewing EIA reports.

Moreover, the MEU is entitled to delegate its authority to provincial governorates, subject to administrative law principles.



7.6 What is the regulators' general approach in regulating the oil and gas sector from an environmental perspective?

Regulators in the oil and gas industry place significant importance on the protection of the environment before, during and after the conduct of oil and gas activities. In other words, compliance with environmental regulations is a prerequisite for conducting oil and gas activities and obtaining EIA reports. The regulators' current approach is to increase inspections and sanctions for environmental violations.



8 Health and safety

8.1 What key health and safety requirements apply to oil and gas operators in your jurisdiction?

The main occupational health and safety legislation and regulations in Turkey applicable to oil and gas operators are:

  • the Occupational Health and Safety Law (6331) (OHS Law);
  • the Occupational Health and Safety Regulation (OHS Regulation), dated 9 December 2003; and
  • the Occupational Health and Safety in Mining Workplaces Regulation (OHSMW Regulation), dated 19 September 2013.

The OHS Law and the OHS Regulation generally set out:

  • the main health and safety principles in workplaces;
  • provisions to improve health and safety in workplaces; and
  • the duties, authorisations, rights and obligations of both employees and employers.

As a general rule, the OHS Law applies to all employees in a workplace, regardless of their job definition.

The Turkish Petroleum Law Implementation Regulation also sets out principles on 'dangerous acts', which are acts or negligence during the conduct of petroleum operations that:

  • endanger or are likely to endanger the life or health of a person within the field; or
  • give rise to environmental pollution, destruction or depredation of properties or places under the Law on the Conservation of Cultural and Natural Properties (2863) dated 21 July 1983.

The General Directorate of Mining and Petroleum Affairs is responsible for taking necessary measures for cessation and prevention of such dangerous acts.



8.2 Which national, provincial/state and/or local regulatory bodies are responsible for enforcement of health and safety regulations or obligations? What reporting requirements apply with regard to oil and gas accidents in your jurisdiction?

The Ministry of Family, Labour and Social Security is responsible for the implementation and monitoring of health and safety obligations.

As per the OHS Law, an employer must:

  • keep a list of all occupational accidents and diseases suffered by its workers;
  • draw up reports once the required studies have been carried out; and
  • investigate and draw up reports on accidents that might potentially harm workers, the workplace or work equipment, or that have damaged the workplace or equipment, despite not resulting in injury or death.

The employer must also notify the Social Security Institution:

  • within three working days of the date of an accident; and
  • within three working days of receiving notification of an occupational disease from healthcare providers or occupational physicians.

Additionally, occupational physicians or healthcare providers must refer workers who have been pre-diagnosed with an occupational disease to healthcare providers authorised by the Social Security Institution. Occupational accidents referred to healthcare providers must be notified to the Social Security Institution within 10 days; and authorised healthcare providers must notify the Social Security Institution of occupational diseases within the same timeframe.



8.3 What are the potential consequences of breach of these requirements – both for the operator itself and for directors, managers and employees?

Under the OHS Law, if any situation, working method or equipment is found to be dangerous for workers, operations must be stopped at the site or any part of thereof – taking into account the nature of the hazard and the part of the site and the workers affected by the hazard – until such hazard is eliminated. In addition, in workplaces that are classified as very hazardous (eg, mines), operations must be stopped if no risk assessment has been conducted. Also, where a fatal work accident occurs and a court finds that the employer was at fault, the company will be banned from public tenders for two years. A copy of the court decision will be sent to the Public Procurement Authority to be registered in the employer's registry and announced on the website of the authority.

In addition, the legal representatives of an employer that does not comply with a decision to stop its activities may be subject to imprisonment for between three and five years.



8.4 What best practices in relation to health and safety should operators consider adopting in your jurisdiction?

The approach to health and safety in petroleum operations is mainly based on the OHS Law and the Turkish Petroleum Law Implementation Regulation. Accordingly, licence holders are obliged to:

  • avoid all kinds of dangerous acts during the petroleum operations;
  • take necessary measures to avoid possible dangerous acts; and
  • eliminate undesirable situations as soon as possible.

To fulfil their obligations, licence holders must:

  • provide an explicit job description to each worker; and
  • provide training on occupational health and safety, including:
    • fire training;
    • first aid training;
    • well control training;
    • well closing training; and
    • other specific training that is relevant to petroleum operations.


8.5 What is the regulators' general approach in regulating the oil and gas sector from a health and safety perspective?

The operational health legislation applicable in Turkey adopts a human-oriented approach which prioritises the continual improvement of employees' health, safety and working conditions. While the OHS Law and the OHS Regulation set out general provisions on a safe working environment, more specific occupational health and safety regulations focused on oil and gas operations would introduce more sector-based requirements and preventive measures to minimise the risk of workplace accidents.



9 Taxes and royalties

9.1 What national, provincial/state and/or local taxes, royalties and similar charges are levied on oil and gas operators in your jurisdiction? How are these calculated?

A licence holder is liable to pay a royalty corresponding to one-eighth of the petroleum produced. No royalty will be collected from the petroleum used in petroleum operations in relation to the exploration or production lease. The royalty that is payable by a petroleum producer is calculated:

  • per barrel, for crude oil produced on a unit of petroleum, based on the market price; and
  • for natural gas, based on the sales price applied to distribution companies or consumers.

The royalty accrues by declaration to the General Directorate of Mining and Petroleum Affairs (GDMPA) until the end of the 20th day of the following month after the production was effected, and must be paid by the end of the month to the tax office where the related party is affiliated in terms of income or corporate tax. Where the Ministry of Energy and Natural Resources so requests, the royalty may be paid in kind.

For 2021, the corporate income tax rate is 25%. The withholding tax applicable to the services related exploration activities is reduced to 5% instead of 20%. Under Turkish law, the general withholding tax rate applicable to dividend payments is 15%; however, it may be reduced under bilateral double taxation avoidance treaties.



9.2 Are any tax incentives available for oil and gas operators?

The general value added tax (VAT) rate is 18% in Turkey. However, the VAT Law (3065) provides for a special VAT exemption in relation to petroleum exploration operations. Under the VAT Law, the delivery of goods and services to persons that conduct petroleum exploration activities is exempt from VAT. This exemption applies only with respect to petroleum exploration operations; production operations are not covered by the exemption. The VAT exemption applies to goods and services delivered to a petroleum rights holder or to any contractor which has been approved by the GDMPA as a 'rights holder's contractor' and whose contract with the rights holder (in relation to the provision of registered exploration-related goods and services) has been registered with the GDMPA.

The Turkish Petroleum Law (6491) also provides for a customs duty exemption with respect to petroleum operations. The import of all materials, equipment, fuel and land, sea and air transportation vehicles approved by the GDMPA (excluding materials relating to the construction, erection or operation of buildings, installations and equipment; and to administrative activities) by a petroleum rights holder itself or a contractor approved by the GDMPA is exempt from customs duty.

Also, under the Turkish Petroleum Law, contracts executed in relation to exploration and production activities conducted by a petroleum rights holders are exempt from stamp tax.



9.3 What other strategies might oil and gas operators consider to mitigate their tax liabilities?

With regard to share purchases of Turkish oil and gas companies, the establishment of legal entities in Turkey by foreign entities and investments in oil and gas projects more generally, it is important to obtain legal advice within the framework of the Turkish tax legislation and the double taxation treaties to which Turkey is a signatory, in order to structure the investment in the most tax-efficient way.



9.4 Have there been any significant changes to the taxation rates applicable to oil and gas operators in the last three years?

According to a recent amendment to the Corporate Tax Law (5520), the corporate tax rate of 20% which applied in the past was increased to 25% for 2021 and 23% for 2022.



10 Disputes

10.1 In which forums are oil and gas disputes typically heard in your jurisdiction?

Under the Turkish Petroleum Law (6491), all disagreements between applicants for or holders of petrol under the Turkish Petroleum Law (eg, licences) will be resolved by the Ministry of Energy and Natural Resources. Parties may challenge the ministry's decision before the Council of State, which is the highest court for administrative disputes in Turkey.

Disputes regarding the pricing of oil and gas under the terms of the Petroleum Market Law (5015) will be resolved by the Energy Market Regulatory Authority (EMRA). More generally, disputes regarding decisions of the EMRA in relation to the rights and obligations of licence holders under the Petroleum Market Law and the Natural Gas Market Law (4646) may be challenged before the Council of State.

Finally, with regard to expropriation procedures, a landowner may challenge an expropriation decision before either the administrative courts or, under an expedited expropriation procedure, the Council of State. If the landowner and the licence holder cannot reach an agreement regarding the price of the land which is required to be expropriated, the dispute regarding the price determination will be resolved before the civil court of first instance. Disputes arising from administrative fines issued in accordance with the Turkish Petroleum Law and the Environmental Law (2872) are also resolved before the Turkish administrative courts.



10.2 What issues do such disputes typically involve? How are they typically resolved?

Disputes in the oil and gas sector typically relate to expropriation and environmental matters, as well as issues concerning administrative fees and the grant or refusal of licences.



10.3 Have there been any recent cases of note?

Most recent cases relate to expropriation and environmental matters in relation to exploration and production operations under the Turkish Petroleum Law. There are also recent cases relating to the pricing of oil and gas under the Petroleum Market Law.



11 Trends and predictions

11.1 How would you describe the current oil and gas landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

As Turkey imports almost all oil and gas consumed, the prevailing trend is to increase security of supply, which is especially important in Turkey due to seasonality. In order to ensure security of supply of natural gas, policy makers have established a short-term spot market, which has introduced a new balancing regime and new rules on import capacity allocation. The mechanism aims to allow market players to trade gas anonymously and allows the transmission system operator to balance the system when required. As it introduced more transparent rules on the supply and pricing of balancing gas, the new balancing regime in force since 2018 has also enhanced competition and transparency in the Turkish gas market.

A recent reform project regarding the Natural Gas Market Law (4646) is also aimed at enhancing Turkey's natural gas supply security. The legislature has proposed that the Ministry of Energy and Natural Resources (MENR) be tasked with the preparation of a Long-Term National Energy Plan. The purpose of this plan is to identify, taking account of the general energy balance of the country, adequate measures required to enhance electricity energy and natural gas supply security; and to strengthen the legislative infrastructure to implement such measures. The Long-Term National Energy Plan will be prepared and published by the MENR every five years, informed by the opinions of the Presidency Strategy and Budget Department, the Ministry of Treasury and Finance and the Energy Market Regulatory Authority. The MENR will ensure that necessary measures are taken to ensure natural gas supply security in the short, medium and long term.



12 Tips and traps

12.1 What are your top tips for oil and gas operators in your jurisdiction and what potential sticking points would you highlight?

Our main recommendations are as follows:

  • Closely monitor changes to the Turkish oil and gas legislation and government investment schemes; and
  • Engage legal, oil and gas and environment experts in the early stages of a project.

Another likely sticking point for oil and gas operators relates to the transparency and pace of the upstream licensing regime. Most investors in the exploration and production business are adversely affected by the processing time of licence issuance applications and extension applications. Likewise, although bids for new exploration areas are conducted on a competitive basis, almost all new exploration licences are issued to the Turkish Petroleum Corporation (TPAO), which is the state-owned oil company involved in exploration and production activities. Competing bidders should be entitled to verify that the licensing process for exploration licences is conducted transparently; and the minimum work obligation programme of the winning bidder should be made accessible to the other bidders.

With regard to production leases, the provision under the Turkish Petroleum Law (6491) granting a right of first refusal to TPAO for production leases whose term has expired constitutes a constraint to competition in the market. Hence, a review of the regulation and procedures for upstream licensing aimed at improving the speed, transparency and competitiveness of the licensing regime would make the country more attractive to investors.



The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.