Oil, Gas and the Transition to Renewables 2024 Comparisons

Under the Turkish Petroleum Law No 6491, the term “petroleum” includes crude oil and natural gas. Petroleum resources in Türkiye are owned by, and are at the disposal of, the state. However, upstream interests are granted by way of licences with definite terms. In such cases, exploration licence and production lease holders must pay the state a one-eighth share (12.5%) as royalty for petroleum produced from an exploration or production area. Furthermore, under the Turkish Petroleum Law, petroleum right-holders are entitled to export 35% of the total crude oil and natural gas produced in the fields discovered after 1 January 1980 for onshore activities and 45% for offshore activities, but the remaining yield and the total amount of crude oil and natural gas produced in the fields discovered before 1 January 1980 as well as the petroleum products generated from such crude oil and natural gas are required to be retained in Türkiye in order to address domestic demand.

The Ministry of Energy and Natural Resources (Enerji ve Tabii Kaynaklar Bakanlığı, or MENR) is the central governmental body in charge of the energy sector and responsible for the determination and implementation of energy policies, as well as the transit passage of petroleum.

The General Directorate of Mining and Petroleum Affairs (Maden ve Petrol İşleri Genel Müdürlüğü, or GDMPA) is the main service unit/department of MENR and the regulatory authority for all mining and upstream petroleum activities. Presidential Decree No 4 on the Organisation of Affiliated, Related and Associated Institutions and Organisations with Ministries and Other Institutions and Organisations regulates the authorities and responsibilities of GDMPA, which mainly consist of the issuance and monitoring of permits and licences for the investigation, exploration and production of petroleum, along with mining-related authorities and responsibilities.

The Energy Market Regulatory Authority (Enerji Piyasası Düzenleme Kurumu, or EMRA) is the agency that regulates and monitors energy market activities, grants licences to conduct market activities (such as the distribution of petroleum), and has the authority to impose administrative fines and cancel licences due to non-compliance with applicable legislation. The EMRA’s organisation, authority and responsibilities are governed by the Law Regarding Organisation and Functions of Energy Market Regulatory Authority No 4628 (Enerji Piyasası Düzenleme Kurumunun Teşkilat ve Görevleri Hakkında Kanun).

The Turkish Petroleum Pipeline Corporation (Boru Hatları ile Petrol Taşıma Anonim Şirketi, or BOTAŞ) is a state-owned economic enterprise involved in the construction and operation of oil and gas pipelines. BOTAŞ does not have any authority to regulate market activities. The legislation governing the activities of BOTAŞ includes the Statutory Decree Regarding State Economic Enterprises No 233. Its activities include construction; the transfer or lease of pipelines for the transportation of petroleum, petroleum products and natural gas; and the transportation, purchase and sale of petroleum, petroleum products and natural gas. BOTAŞ is subject to the Natural Gas Market Law No 4646 and Petroleum Market Law No 5015 with respect to its operations.

The Turkish Petroleum Corporation (Türkiye Petrolleri Anonim Ortaklığı, or TPAO) is another state-owned economic enterprise involved in exploration, drilling and natural gas storage, as well as investing in crude oil and natural gas production. The legislation governing the organisation of TPAO is the Statutory Decree Regarding State Economic Enterprises No 233. TPAO’s activities include the import and export of crude oil, natural gas and petroleum products, and the distribution and marketing of petroleum as defined under the Petroleum Market Law No 5015.

Turkish Petroleum International Company (TPIC) was established in 1988 as a subsidiary of TPAO. In November 2012, TPIC, whose activities involve exploration, production and oil trading, was transferred to BOTAŞ as per the Decree of the Council of Ministers numbered 2012/4152.

TPAO’s former subsidiary Türkiye Petrolleri Petrol Dağıtım AŞ (TPDD) is involved in fuel distribution activities and was privatised at the end of 2016.

Petroleum-related upstream activities are mainly regulated by the Turkish Petroleum Law No 6491, whereas downstream activities are primarily regulated by the Petroleum Market Law No 5015, the Natural Gas Market Law No 4646 and the Liquefied Petroleum Gas (LPG) Market Law No 5307. The main laws regarding petroleum activities are summarised as follows.

• The Turkish Petroleum Law No 6491 (Türk Petrol Kanunu) provides procedures and principles for the regulation, promotion and supervision of petroleum exploration and production activities (both onshore and offshore) in Türkiye. The law regulates investment guarantees, exploration licences, production leases, royalties and incentives, and aims to ensure that petroleum resources in Türkiye are rapidly, continuously and effectively explored, developed and produced, while preserving national interest.
• The Petroleum Market Law No 5015 (Petrol Piyasası Kanunu) regulates and provides guidance, oversight and supervisory activities to ensure and improve the safe and regular operations of the petroleum markets and upstream activities. The law sets out provisions on licensing requirements and regulates EMRA’s authority in relation to the petroleum market.
• The Law on Transit Passage of Petroleum through Pipelines No 4586 (Petrolün Boru Hatları ile Transit Geçisine Dair Kanun) regulates the transit passage of petroleum and other hydrocarbons through pipelines, as well as procedures for the expropriation of lands, safety measures for the prevention of accidents, and insurance specific to transit petroleum pipelines.
• The Natural Gas Market Law No 4646 (Doğal Gaz Piyasası Kanunu) covers the import, transmission, distribution, storage, marketing, trade, and export of natural gas, the licensing requirements for these activities and the rights and obligations of all natural and legal persons involved in these activities.
• The Liquefied Petroleum Gas (LPG) Market Law No 5307 (Sıvılaştırılmış Petrol Gazları (LPG) Piyasası Kanunu ve Elektrik Piyasası Kanununda Değişiklik Yapılmasına Dair Kanun) covers the distribution and trade of LPG, the licensing requirements for the distribution, transmission, storage, dealership and other LPG bottle-related activities (such as production, filling, examination, maintenance and repair), and the rights and obligations of market players with respect to these activities.
• The Regulation on the Implementation of the Turkish Petroleum Law (Türk Petrol Kanunu Uygulama Yönetmeliği) regulates the procedures and principles for petroleum surveying, exploration, production, reporting, taxation, supervision and licensing.
• The Petroleum Market Licence Regulation (Petrol Piyasası Lisans Yönetmeliği) covers EMRA’s functions, responsibilities and authorities with regard to licensing procedures, activities in the petroleum market, and the rights and obligations of petroleum market licence holders.
• The Liquefied Petroleum Gas (LPG) Market Licence Regulation (Sıvılaştırılmış Petrol Gazları Piyasası Lisans Yönetmeliği) covers the LPG licensing procedures and the supply process of LPG procured from domestic and foreign sources to the market in a safe, secure and competitive manner, and determines the qualifications of responsible managers, tanker drivers and other related personnel.
• The Natural Gas Market Licence Regulation (Doğal Gaz Piyasası Lisans Yönetmeliği) covers the principles regarding licensing procedures and the cancellation, termination and renewal of natural gas licences.

Due to Türkiye’s liberalised energy regime, the state-owned oil company, TPAO, no longer has the exclusive right to explore and produce petroleum. Private entities are entitled to acquire permits, licences and leases for upstream activities, mainly for the investigation, exploration and production of petroleum. Upstream activities are also open to foreign participation.

As per the Turkish Petroleum Law, three major types of licences and permits are required to conduct upstream activities:

• an investigation permit;
• an exploration licence; and
• a production lease.

The investigation permit grants the right to survey the land by gathering data from the ground or air through topographic, geological, geophysical, geochemical and similar methods for petroleum exploration purposes, and by performing drilling works in order to gather geological information. This permit does not grant its holder the right to drill an oil well or appraisal wells.

An exploration licence gives its holder the right to explore within the area defined in the licence.

Upon the discovery of a petroleum reserve for commercial production, an exploration licence holder should apply for a production lease that entitles the licence holder to develop and produce petroleum in the area defined in the licence, and to transport and trade the petroleum to downstream licensees that hold a petroleum market activity licence issued by EMRA.

GDMPA is the authority in charge of applications for these licences.

GDMPA issues an investigation permit upon the execution of an agreement between the applicant and GDMPA, which sets forth the permit terms and conditions, the nature of the applicant’s activities, and the rights and obligations of the applicant.

Exploration licences may be granted for onshore and offshore petroleum exploration. Exploration licence applications for grids available for petroleum exploration are published and announced in the Official Gazette, and all applications regarding the available areas, including business and investment plans, should be submitted to GDMPA. Exploration licences are based on map sections on a scale equal to 1/50,000 or 1/25,000. Applicants should provide a bank letter of guarantee to GDMPA in an amount equal to 2% of their total investment; this rate is 1% for offshore activities.

GDMPA examines applications and performs an overall analysis of the applicant’s business, investment plans, financial status, technical capacity, human resources, experience and achievements in the energy sector, if any. Upon its review, GDMPA issues its decision within a maximum period of 60 days. The maximum term for an exploration licence is five years for onshore activities and eight years for offshore activities, with a right of extension (up to nine years and 14 years, respectively).

Applications for production leases are also submitted to GDMPA. Production leases are granted for a maximum term of 20 years, which may be extended twice, for up to ten years each time. Except for force majeure events, production lease holders are required to carry out their activities during the licence term without any interruption, or risk being exposed to administrative fines under the Turkish Petroleum Law.

In addition to the above-mentioned sector-specific licences, environmental permits (eg, an environmental impact assessment report, environment permit and licence certificate) may also be required in order to conduct exploration and production activities. In addition, a workplace opening and operating licence should be obtained from the relevant municipality or governorship (depending on the location).

There are two types of guarantees, namely, an investment guarantee and a loss and damages guarantee, which petroleum right-holders should provide to GDMPA in the form of bank letters of guarantee.

Exploration licence applicants for onshore areas are required to provide an investment guarantee in an amount corresponding to 2% of the total investment required to realise the work programme, submitted together with their applications. If, however, the exploration licence application is in relation to an offshore area, the amount of the guarantee will be equal to 1% of the total investment. The amount of the investment guarantee corresponding to the annually realised rate of the committed work programme is returned to the petroleum right-holder at the end of the relevant period.

Investigation permit holders, exploration licence holders and production lease holders are required to provide collateral to secure compensation for any damages that might be caused during their petroleum-related activities. The amount of the loss and damages guaranteed to be paid per hectare is:

• 5/10,000 of the required application fee for investigation permit applicants;
• 1/1,000 of the required application fee for exploration licence applicants; and
• 5/1,000 of the required application fee for production lease applicants.

The President of the Republic of Türkiye has the authority to increase or decrease this rate by 50%. This guarantee is returned to the licence holder one year after the announcement of the termination of the relevant petroleum licence in the Official Gazette, provided that no loss or damage has occurred and that no third-party claims have been made regarding this guarantee.

At the production stage, explorers or operators should also pay the state share (devlet hissesi) in cash on a monthly basis, which is equal to an eighth (12.5%) of the petroleum produced from the area subject to the production lease. At the request of MENR, the state share may also be paid in kind, in the form of the delivery of petroleum (crude oil) to the state.

Income generated from petroleum activities is subject to corporate tax. Petroleum right-holders must make the necessary withholdings and declarations, as required under Income Tax Law No 193 (Gelir Vergisi Kanunu) and Corporate Tax Law No 5520 (Kurumlar Vergisi Kanunu). As per the Turkish Petroleum Law, the sum of the taxes that a petroleum right-holder is liable to pay or withhold should not exceed 55% of the licensee’s taxable income. Moreover, if a licensee imports materials, tools, fuel and transfer vehicles to be used for petroleum activities or procures such items from a domestic provider, the licence holder will be exempt from customs duties and levies and stamp tax, unless GDMPA categorises these items as being unsuitable or the President of the Republic of Türkiye revokes the exemption by including them in a list of products manufactured in Türkiye that match the quality and quantity of the imported items.

Expired production leases are not automatically returned to TPAO; these sites may be auctioned by GDMPA. However, TPAO has the right of first refusal in respect of such fields. Therefore, MENR should initially confirm with TPAO whether it wishes to acquire the fields. If TPAO’s response is affirmative, the fields should be returned to TPAO.

As a state-owned entity, TPAO is subject to a simplified procedure for expropriation compared to private investors. TPAO files its expropriation requests directly with GDMPA, and GDMPA conducts the expropriation in favour of TPAO, provided MENR approval is obtained.

The current legislation does not impose any requirements for the use of local goods and services, local employment or training programmes in upstream operations.

The exploration licence holder has to notify GDMPA of any petroleum discovery made during the term of the exploration licence. GDMPA will then review the discovery application and register the discovery or reject the application. If GDMPA registers the petroleum discovery submitted by the licence holder, the licence holder will be entitled to apply for the grant of a production lease.

Upon the registration of the discovery of petroleum, but before the grant of the production lease, the licence holder is under an obligation to continue with the production of the petroleum, develop the petroleum field and sell the petroleum produced. These activities will constitute the basis for the production lease. The licence holder must then submit a plan for the development of all discoveries in the petroleum field to GDMPA within six months of the registration date of the discovery with GDMPA.

Production leases are granted by GDMPA for a maximum term of 20 years, commensurate with the applicant’s business and financial investment plans. If production does not commence within one year or is suspended at any stage and not resumed within the 180-day period granted by GDMPA, the relevant production lease will be cancelled.

In general, all administrative acts are subject to judicial review in Türkiye, including the decisions of state authorities and administrative fines imposed by such authorities. MENR usually tries to find an amicable solution in any disputes that arise.

According to the Turkish Petroleum Law, all objections made by applicants or licensees, and all disputes arising between them, should be directed to MENR, which then concludes these applications. However, MENR’s decisions on licence applications, investigation permits, exploration licences or production leases can be challenged before the Council of State (Danıştay), which will act as the court of first instance for the relevant dispute.

Pursuant to Article 6 of the Petroleum Law, an exploration licence is issued on the basis of a 1/50,000 scale map on land borders and in the seas within the territorial waters. This licence has a five-year term on land and an eight-year term offshore. The term of the licence may also be extended up to two years onshore and three years offshore, as long as the licence holder fulfils the work programme and submits a work and investment programme including at least one drilling and a corresponding 2% guarantee. In the case that the operation period required for the completion of an exploration well drilled in the exploration area or the completion of production tests, if any, exceeds the duration of the exploration licence, an additional period of up to six months may be granted upon the request of the petroleum right-holder.

In order to obtain such licence, applications shall be submitted to GDMPA. In the following 60 days, applications covering the same piece of land shall be evaluated and finalised. The applicant shall provide a guarantee of 2% of the investment amount required for the work programme given in the licence application, and this guarantee shall be transferred to GDMPA within 30 days following the finalisation of the licence grant.

Please refer to 2.1 Forms of Private Investment: Upstream, 2.2 Issuing Upstream Licences/Obtaining Hydrocarbon Rights and 2.3 Typical Fiscal Terms: Upstream for a general overview of upstream licences.

Petroleum right-holders may relinquish their exploration licences, either in whole or in part, with at least one month’s prior notice, and their production leases with at least three months’ prior notice, by filing an application to GDMPA and notifying any other public institutions that are associated with the relevant field. Any rights arising from the exploration licence or the production lease expire for the relinquished field on the date of such application.

Upon termination of their rights, petroleum right-holders must reinstate the field to its previous condition. In addition, the licence holders must compensate fully and make necessary payments to the owner of the land for all losses incurred, as well as depreciations in production (eg, agricultural yield) or operating income to which the owner would originally be entitled.

Licence holders are allowed to export 35% of the petroleum, crude oil, natural gas and petroleum products generated from commercial discoveries made after 1 January 1980 if such products are produced onshore, and 45% if such products are produced offshore.

There are two types of transfers:

• licence transfers upon the expiry of their terms; and
• share transfers, which would result in a change of control in a company that holds a petroleum licence or lease.

The transfer of upstream licences upon the expiry of their terms will be made in accordance with the procedure detailed in 2.5 Federal or State Companies.

If share transfers lead to a change of control in the licensed entity, both the transferor and the transferee should file an application to GDMPA, prior to the proposed transfer, together with their reasoning for the proposed transfer. GDMPA will review the application and send it to MENR together with its opinion. If MENR provides its consent to the transaction, the closing for the transfer of shares should be completed before the end of the calendar year in which MENR issued its consent. Evidentiary documentation showing such a change should be provided to GDMPA.

Exploration licences and production leases, as well as petroleum rights arising from them, may be subject to encumbrances in favour of third parties, provided that the prior consent of GDMPA has been obtained and that these pledges are registered with the petroleum registry kept by GDMPA.

The grant or transfer of exploration licences and production leases, as well as the establishment of any encumbrances on them, must be published in the Official Gazette and registered with the petroleum registry.

GDMPA may refuse to give its consent to the transfer of shares, licences or leases, or to the establishment of any encumbrance over the shares of a licensed entity or over the transfer of licences, due to reasons such as a lack of experience or a lack of financial and technical capacity.

Currently, upstream operations in the oil and gas business do not make up a significant portion of the Turkish market, as production rates are not very high. In line with the existing level of operations, no legal or regulatory restrictions are imposed on production rates. On the contrary, upstream activities are supported through various arrangements and incentives. As such, it has been noted in the Presidential Decree No 6003 on the Approval of the Medium Term Programme for the years 2023-2025 that oil and natural gas exploration and production activities in Türkiye and abroad, particularly efforts to commission the Sakarya Natural Gas Field, will be expedited. Furthermore, Türkiye is not a member state of the Organisation of Petroleum Exporting Countries (OPEC) or OPEC+ and therefore is not subject to OPEC quotas, OPEC+ quotas or other restrictions.

According to the Petroleum Market Law and the Natural Gas Market Law, a licence is required in order to perform market activities regulated under such legislation. Licence applications are made to EMRA. Licensees are entitled to benefit from the expropriation process if required by the licensed activities. Please see 3.11 Third-Party Access to Infrastructure for details on the legal framework for expropriation.

The Natural Gas Market Law states that BOTAŞ is the owner of all existing, under-construction or planned sections of the national natural gas transmission network. However, the law permits new transmission companies to be licensed to construct new pipelines, to form a connected system with the existing lines for the purpose of transmission, and to operate such newly constructed pipelines. Legal entities holding licences for transmission activities are obliged to store natural gas in underground storage facilities at a rate determined by EMRA equal to the import amount specified in their licences each year. As the only natural gas transmission licensee, BOTAŞ is effectively a monopoly in transmission activity. In terms of storage, the Silivri Natural Gas Storage Facility, Türkiye’s first underground natural gas storage facility, marks an important milestone. The capacity of BOTAŞ’s Silivri Natural Gas Storage Facility is 4.6 billion cubic metres, and is planned to be increased to 6 billion cubic metres. Concurrently, the Tuz Gölü Underground Natural Gas Storage Facility, a cornerstone in Türkiye’s strategy for natural gas supply security, is still undergoing expansion. This facility sets a benchmark for environmental stewardship, operating entirely on renewable, carbon-free energy. It is autonomously powered by a 3 MW solar power plant that caters to all its energy needs, thereby exemplifying the integration of sustainable practices in critical infrastructure. The current capacity of the storage facility, which stands at 1.2 billion cubic metres, is slated for substantial expansion to 8.8 billion cubic metres by 2028. The works are expected to be completed within three years.

While the Natural Gas Market Law provided for the full opening of the market to private companies in 2009, BOTAŞ maintains its dominant position in the importation of natural gas in Türkiye. Pursuant to current legislation, import companies cannot enter into new gas sale and purchase contracts (except for the purchase of LNG, compressed natural gas (CNG) and spot LNG) with countries that have effective gas sale and purchase contracts with BOTAŞ until such contracts expire. New entrants are not, at present, allowed to import gas from countries with which BOTAŞ has contracts, such as Russia, Azerbaijan, Turkmenistan and Iran. This restriction on executing contracts with BOTAŞ’s existing counterparties is not applicable for LNG, CNG and spot LNG imports. A further requirement was imposed on BOTAŞ, in order to decrease its dominant role in the market: to launch tenders until 2009 in order to transfer BOTAŞ’s existing natural gas purchase agreements to third parties for their access to the import system, entirely or partially.

BOTAŞ cannot execute a new natural gas purchase contract until the share of gas imported by BOTAŞ falls to 20% of the yearly national consumption. In addition, in order for a private company to import gas from other companies with which BOTAŞ does not have a contract, consent is required from the Energy Market Regulatory Authority Board (the “EMRA Board”).

Until and unless such restrictions on natural gas import activities are restructured and adapted to the current realities of market activity, BOTAŞ will continue to be a significant and dominant player in natural gas importation.

Since the liberalisation process started in the 1990s, the most significant type of off-takers of natural gas for power generation purposes have been natural gas combined-cycle power plants. The build-operate (BO), build-operate-transfer (BOT) and transfer of operation (TOR) models were all utilised in the development of these facilities. In 2001, EMRA was given the mandate to issue licences for electricity generation plants, succeeding the former state monopoly. As per the information provided on MENR’s official website, the total installed capacity of Türkiye is 107,959 MW, of which natural gas-fired plants constituted about 21.4% of the total capacity of commissioned electricity generation facilities as of the end of March 2024.

In the natural gas market, companies holding transmission licences are not permitted to discriminate between third parties of equal status. Such companies may reject third-party access requests only on the basis of the grounds exhaustively listed under the Natural Gas Market Law.

Third-party access to the transmission network, and the activities of natural gas storage facilities, is regulated under the Transmission Network Operation Regulation (Doğal Gaz Piyasası İletim Şebekesi İşleyiş Yönetmeliği) and the BOTAŞ Transmission Network Operation Principles (İletim Şebekesi İşleyiş Düzenlemelerine İlişkin Esaslar) (the “Network Code”). In line with the Network Code, BOTAŞ operates the transmission network and manages and co-ordinates the access of third parties to it. In order to access the network, a connection agreement must be entered into between BOTAŞ, as the sole transmission licensee and owner of the existing national transmission network, and the respective import, wholesale, generation or export company.

Following the connection agreement, a standard-form transportation contract should be entered into for the transportation of gas through the transmission system, as well as for capacity allocation at an entry or exit point. The Network Code sets out detailed technical criteria and formulae for the calculation of tariffs applicable to the natural gas transmission activities of third parties.

In order to conduct oil and gas market activities, licence applications should be made to EMRA, which will issue a final decision within a maximum of 60 days from the application date (this period is set at 30 days for import (spot) licences). If the relevant department of EMRA determines that the application is complete, it will notify the applicant to deposit the application fee in an amount corresponding to 1% of the licence fee.

Following payment, EMRA will review and evaluate the licence applications. EMRA will then prepare a report on its evaluation and submit it to the EMRA Board, which is the decision-making body of EMRA for licence applications, for rendering the final decision on licence applications.

As per the Petroleum Market Licence Regulation, the EMRA Board annually determines the specific revenue share (gelir payı) that should be paid by processing licence holders (as explained in 3.8 Other Key Terms: Midstream/Downstream) engaged in the production of biodiesels to refinery holders. The rates determined by the EMRA Board for 2024 are as follows:

• gasoline and ethanol supplied by gasoline – TRY25.29/m³;
• gas oil – TRY25.29/m³;
• aviation fuel – TRY25.29/m³;
• naphtha fuel – TRY25.29/m³;
• distilled maritime fuel – TRY25.29/m³;
• excess maritime fuel – TRY26.87/m³; and
• types of fuel oil – TRY26.87/m³.

Licence holders not engaged in the production of biodiesels are not required to pay any revenue share.

However, all licence holders should pay a contribution share (katılma payı) to EMRA on an annual basis in two equal instalments, except those that have eligible consumers. The amount of contribution shares is calculated by multiplying the total net sales of the licensee made in the relevant year by the annual contribution ratio as decided by the EMRA Board each year.

In parallel to the foregoing, natural gas licence holders are also required to pay contribution shares to EMRA.

Tariffs and pricing policies in petroleum and natural gas activities are determined by EMRA under the Petroleum Market Pricing System Regulation (Petrol Piyasası Fiyatlandırma Sistemi Yönetmeliği) and the Natural Gas Market Tariffs Regulation (Doğal Gaz Piyasası Tarifeler Yönetmeliği), respectively.

The only special tax incentive available is for activities involving the transportation of foreign crude oil and natural gas through transit pipelines and the construction and modernisation of pipelines; as such, these activities are exempt from value-added tax (VAT) in accordance with the Value Added Tax Law No 3065.

In addition, as of 1 January 2014, the construction and modernisation of transit oil pipeline projects are exempt from VAT under specific international agreements. Any VAT incurred from the delivery of goods and services within this scope can be deducted from the taxes calculated on taxable transactions. If these taxes cannot be fully offset through deductions, they will be refunded to the taxpayer upon request.

BOTAŞ’s natural gas-related receivables are subject to the Law on Collection of Public Receivables No 6183 (Amme Alacaklarının Tahsili Usulü Hakkında Kanun), which allows them to benefit from special treatment in terms of enforcement action in debt collection. However, private market players do not benefit from such a mechanism.

Furthermore, the relevant legislation imposes a restriction on the scope of market activities that may be conducted by licence holders. A natural gas market licensee performing activities in the natural gas market may only participate in one of the legal entities performing activities in a field other than its own field of activity. A licensee cannot participate in any other legal entity performing activities in its field of activity, nor establish a separate company. However, such a restriction is not applicable to BOTAŞ or its existing or future subsidiaries.

Please see 3.1 Forms of Private Investment: Midstream/Downstream regarding BOTAŞ’s dominant market position in relation to natural gas import activities.

In parallel to upstream operations (as explained in 2.6 Local Content Requirements: Upstream), there are no requirements for the use of local goods and services, local employment or training programmes in downstream operations.

Pursuant to the Petroleum Market Licence Regulation, licences granted by EMRA may be summarised as follows:

• refinery licence holders are entitled to establish and operate a refinery facility, purchase and sell petroleum, obtain new products from crude oil, purchase and sell crude oil domestically only with other refiners and producers, and store and process petroleum;
• processing licence holders are entitled to produce new products from petroleum, biodiesel, HVO diesel from sustainable aviation fuel, and diesel types under the sub-heading of biorefinery and other petrochemical products, except for the production of fuel oil from waste of non-biological origin, besides those classified as hazardous waste in the relevant legislation under the waste subheading, and may also alter the quantity and quality of the product and operate a processing facility;
• lubricant oil licence holders are entitled to produce lubricant oil in the lubricant oil production facilities, and provided that it is included as a subcategory in their licences, they may also produce base oil from waste lubricating oil;
• storage licence holders are entitled to provide storage services and operate a storage facility;
• transmission licence holders are entitled to transfer petroleum via pipelines and operate a transmission facility;
• eligible consumer licence holders are entitled to acquire heating oil, fuel oil and diesel from distributor licence holders;
• bunker fuel delivery licence holders are entitled to procure bunker fuel from refineries, distributors and other bunker fuel delivery licence holders from Türkiye and abroad, and to supply bunker fuel subject to the transit regime or in free circulation to sea or air vessels and other legal entities holding bunker delivery licences. They are also allowed to blend products with each other in the preparation of maritime fuels within the scope of the transit regime, limited to the warehouse area, provided that the final product is maritime fuel, and to operate bunker delivery facilities.

• distributor licence holders are entitled to distribute fuel to dealers, conduct wholesale of fuel to eligible consumers, transport fuel through pipelines to plants located near storage facilities, and import certain types of fuel, and if included as a subcategory in their licences, sell fuel exempt from Special Consumption Tax directly to commercial marine vessels. Additionally, they can engage in bunker delivery, storage, lubricating oil and transportation activities without needing additional licences, provided these activities are included in their licences;
• dealership licence holders are entitled to supply fuel (except for LPG), solely from their own distributors and third-party dealers; and
• transportation licence holders are entitled to transport petroleum through vehicles.

The Petroleum Market Law imposes a national petroleum storage (ulusal petrol stoğu) obligation, in order to secure the availability of petroleum against fluctuations in supply. To that end, refinery and distributor licence holders are required to store fuel products in the amount of 20 times the daily average supply of the previous year in their own storage facilities.

Except for refinery licences, there are no domestic supply requirements. In the case of refinery licences, licensees are required to prioritise the procurement of crude oil from local producers as opposed to foreign suppliers.

All licences are granted for up to a maximum of 49 years. Licence holders must file an electronic application with EMRA for an extension to the licence term between two and six months prior to the expiry of the licence term.

Licences are terminated by the decision of the EMRA Board, upon the occurrence of any of the following events:

• bankruptcy of the licence holder;
• dissolution of the legal entity licence holder;
• death of a natural person licence holder;
• in case of failure to submit a distributor amendment application within 30 days from the termination of the dealership agreement for any reason or from the cancellation or termination of the distributor licence belonging to the distribution company registered to the licence, or failure to submit a new dealership agreement to the authority;
• upon determination of the loss of any of the licence acquisition conditions, except for the workplace opening and operating licence required within the scope of licence application, amendment and extension, and upon failure to submit valid documentation proving the reinstatement of the condition to the authority within 15 days following the notification to the licensee despite the request for submission of valid documentation until the end of this period;
• in case of failure to fulfil the obligation to register within a certain period specified in the licence issuance, amendment and extension stages;
• in case it is later understood that the workplace opening and operating licence required within the scope of licence application and amendment has lost its validity;
• suspension of operations of dealership licence holders for a term of more than six months, except due to force majeure events or on reasonable grounds;
• in case distributor licence holders fail to establish or maintain the dealership network within the specified period;
• in case the taxpayer identification of the licensee is terminated for any reason or similar situations eliminating taxpayer identification; or
• receipt of a termination request from a licence holder (except from refinery licence, transmission and storage licence holders).

In the case of a voluntary termination, refinery, transmission and storage licensees would be subject to the following additional requirements:

• refinery licence holders should complete the takeover of facilities and stock inventory in relation to national petroleum storage and income accounting;
• transmission licence holders should inform their dealers as well as EMRA at least three months prior to ceasing their activities; and
• transmission and storage licensees should submit documents to EMRA indicating that all commitments towards third parties have been satisfied.

Unless terminated earlier due to the foregoing termination grounds, licences terminate upon the expiry of the licence term.

The legislation further imposes certain insurance obligations on licensees. As per the Natural Gas Market Licence Regulation, the types of licences and authorities granted are summarised as follows.

• Import licence holders are entitled to carry out the activities of importing natural gas in the form of LNG, CNG or gas from abroad for domestic sale or for export purposes. Importers must obtain a separate licence for each import connection.
• Transmission licence holders are entitled to plan, construct and operate the transmission system. They are also responsible for connecting users to a suitable transmission line, and for making the necessary arrangements for the natural gas flow and operation of the system.
• Storage licence holders are entitled to operate, construct and design the underground and above-ground storage and LNG facilities.
• Wholesale licence holders are entitled to sell natural gas to export companies, eligible consumers, CNG companies, importers, distributors and other wholesale companies.
• Distribution licence holders are entitled to sell and deliver natural gas to retail consumers and eligible consumers by providing access to the distribution system.
• CNG licence holders are entitled to compress natural gas, fill the CNG into pressurised containers and sell the same. Moreover, licence holders are authorised to transport CNG by means of special vehicles to cities that are out of reach of the transmission network.
• Export licence holders are entitled to buy natural gas from production, wholesale or export companies, and to market the natural gas to foreign buyers. Legal entities wishing to export LNG may engage in LNG transport activities, provided that it is included in their export licences; however, they may not engage in domestic delivery activities.
• CNG licence holders are entitled to deliver CNG to the facilities where CNG-fuelled vehicles are produced by legal entities in order to ensure that such vehicles can be tested and delivered to the delivery point.

Natural gas market licences terminate upon the expiry of the term of the licence, the bankruptcy of the licence holder, or a request for termination of the licence by the licence holder (except for refinery, transmission and storage licences).

Natural gas market licences are granted for a term ranging between ten and 30 years. Licensees may file an extension request with EMRA between nine months and one year prior to the expiry of the relevant licence. Similar to the petroleum market requirements, natural gas market players should also maintain sufficient insurance coverage.

The Regulation on Measures Regarding Natural Gas Market Distribution Licenses (Doğal Gaz Piyasası Dağıtım Lisanslarına İlişkin Tedbirler Yönetmeliği), which entered into force on 19 August 2023, provides a regulatory framework to secure the natural gas distribution service, prevent service disruption and protect consumers, mainly by imposing certain administrative measures on distribution licence holders, under certain circumstances such as deterioration of the licensee’s financial capacity, the licensee’s recurring violations of applicable legislation, or interruption of distribution activities (quality- or quantity-wise) due to such violations. In doing so, the EMRA Board shall have the discretion to implement the measures (and the extent of same) foreseen under the legislation, such as reappointment of some or all of the management and administrative staff of the distribution licensee, investigation over the licensee to assess its compliance with applicable legislation, and eventually licence cancellation.

In respect of publicly owned land, petroleum or natural gas licence holders may submit a request to EMRA to establish property rights other than ownership over publicly owned property (such as usufruct rights, servitude rights or construction rights) or to lease the publicly owned property required for the licensed activities on a long-term basis. If EMRA approves the licence holder’s request, it will then procure the establishment of such rights in favour of the licence holder according to the needs of the project. Licence holders are required to pay the costs for the grant of those rights, and the term of such rights will be limited to the licence term. If, however, the land is private property, an expropriation process would need to be triggered, analogous to the common law process of eminent domain.

Both the Petroleum Market Law and the Natural Gas Market Law allow the expropriation of private property if it is required for licensed activities. Under the Petroleum Market Law, land rights necessary for petroleum activities where private property is affected should, in principle, be acquired through negotiation between the licensees and the landowners. If this is not possible, land rights may be acquired through expropriation. According to the Natural Gas Market Law, expropriation proceedings may be initiated to perform relevant natural gas market activities.

Following the expropriation process, under both the Petroleum Market Law and the Natural Gas Market Law, the state treasury becomes the owner of the property, which usually allocates the land directly to the licence holder by the granting of a contractual usage right or property right other than ownership over the relevant land.

As explained above, the legislation governing activities of BOTAŞ includes the Statutory Decree Regarding State Economic Enterprises No 233. Its activities include construction; the transfer or lease of pipelines for the transportation of petroleum, petroleum products and natural gas; and the transportation, purchase and sale of petroleum, petroleum products and natural gas. BOTAŞ is subject to the Natural Gas Market Law No 4646 and Petroleum Market Law No 5015 with respect to its operations.

Law No 4586 of 23 June 2000 on the Transit of Petroleum by Pipelines (Pipeline Law) is the main legislation governing the transport of hydrocarbons. Domestic transmission and transport is also regulated by the Petroleum Market Law No 5015 dated 4 December 2013 and the Natural Gas Market Law No 4646 dated 18 April 2001.

While the Pipeline Law regulates the principles and procedures for projects (eg, expropriation, pipeline safety, third-party liability and insurance), the inter-governmental agreements (IGAs) to be signed for the construction and operation of each project would typically feature more detailed, project-specific provisions that would supersede the law.

As part of the legislation on this subject, the Decree published on 11 November 2011 in the Official Gazette prohibits the import, export and transit of petroleum by road and rail unless a special permit is obtained from the Ministry of Customs and Trade.

Currently, BOTAŞ is the only natural gas transmission licensee and the sole owner of the existing transmission network. See 3.1 Forms of Private Investment: Midstream/Downstream and 3.2 Downstream Operations Run by a National Monopoly: Rights and Terms of Access for details on private parties’ access to the transmission network.

A large portion of state-owned distribution companies have been privatised (some have yet to be finalised), with a notable exception being the distribution company in İstanbul (İstanbul Gaz Dağıtım Sanayi ve Ticaret Anonim Şirketi, or İGDAŞ). EMRA is responsible for granting distribution licences for the supply of gas to cities with no natural gas distribution network. As BOTAŞ’s transmission network reaches a new city, EMRA organises a natural gas distribution licence tender for that city. Access to the distribution network is regulated separately under the Natural Gas Distribution and Customer Services Regulation (Doğal Gaz Piyasası Dağıtım ve Müşteri Hizmetleri Yönetmeliği). Distribution companies are required to connect all consumers within their designated region upon request. A connection agreement between the parties is executed, and the technical connection and service lines are established. Subscription agreements, transportation service agreements and delivery service agreements may also be executed between the distribution companies, natural gas market licensees and retail consumers (including eligible consumers).

Pursuant to the Petroleum Market Law and the Petroleum Market Licence Regulation, a refinery, distributor or dealership licence is required in order to conduct the distribution and/or sale of petroleum. Under the Natural Gas Market Law, the wholesale and distribution of natural gas is permitted by obtaining licences for such activities from EMRA.

Refinery licence holders are obliged to store petroleum/petroleum products equivalent to 20 times the daily average supply in storage facilities in order to satisfy the national petroleum storage obligation. Furthermore, distribution licence owners are obliged to realise white product (gasoline and diesel oil) sales of:

• 20,000 tonnes in the second calendar year;
• 30,000 tonnes in the third calendar year;
• 40,000 tonnes in the fourth calendar year; and
• 60,000 tonnes of white products annually as of the fifth calendar year,

in each case, following the date they obtain their licences.

Under the Natural Gas Market Law, the annual amount of imported natural gas held by any wholesale company cannot exceed 20% of the annual national gas consumption forecast, which is determined by EMRA on an annual basis.

Import licence holders may conduct the wholesale of natural gas without obtaining a separate wholesale licence. To that end, it is sufficient for such legal entities to inform EMRA about their suppliers of natural gas and the types of transportation methods they intend to use, as well as their technical and financial capabilities.

A producer of natural gas is entitled to sell the gas it produces directly to eligible consumers, as long as the volume of gas sold in such a manner does not exceed 20% of the national consumption forecast, as determined by EMRA, for that year. It may sell the excess quantity of natural gas to import companies, distribution companies or wholesale companies. Producers may also export the gas produced, if they obtain an export licence. As for restrictions concerning significant off-takers from the oil and gas markets, concurrent ownership limitations and unbundling requirements apply to electricity generation and distribution licensees, which are licensed under Electricity Market Law No 6446 (Elektrik Piyasası Kanunu) and secondary legislation issued by EMRA.

The Turkish Petroleum Law imposes an export capacity restriction: only 35% of petroleum, crude oil, natural gas and petroleum products produced onshore and 45% of petroleum, crude oil, natural gas and petroleum products produced offshore may be exported. The remaining yield must be retained in Türkiye to fulfil domestic demand. Furthermore, the Natural Gas Market Licence Regulation mandates that exports cannot interrupt local requirements or the supply system, which becomes relevant especially in the transfer of natural gas via pipelines. Exporters of natural gas must adhere to the technical specifications introduced by EMRA, taking into account the capacity of the transmission network and the export exit points.

In respect of natural gas exports, if a petroleum right-holder producing natural gas wishes to export its production, it should obtain a natural gas wholesale licence. Any other party wishing to export natural gas must obtain an export licence from EMRA. Accordingly, export licence holders are entitled to buy natural gas from production, wholesale or export companies, and to export the natural gas to foreign buyers.

As per the Petroleum Market Licence Regulation, crude oil and petroleum products may be exported freely. However, publicly available records reveal that no crude oil is currently being exported, solely petroleum products. In order to export petroleum products, various export authorisations must be obtained from the relevant state authorities, including GDMPA and EMRA, depending on the type of activity.

Pursuant to the LNG Market Licence Regulation, LNG distribution licence holders and refinery licence holders are entitled to export LNG, and LNG export licence holders will also be entitled to transport LNG provided that such transportation right is annotated to their licences.

There are no taxes or duties applicable for the export of these products. On the contrary, if export companies have purchased these products from local parties by paying VAT or special consumption tax, there are incentives available for the export companies to have these taxes reimbursed.

The Petroleum Market Licence Regulation and the Natural Gas Market Licence Regulation prohibit the transfer of downstream licences, but both provide for an exception in favour of project lenders (ie, banks and other financial institutions). Accordingly, depending on the terms and conditions of the financing agreements, lenders are entitled to request EMRA to reissue the subject matter licence in the name of another legal entity, provided that all the initial licence holder’s undertakings in relation to the licence are transferred to that third party and the new licensee satisfies the criteria sought for licence applicants within the scope of the above-mentioned regulations.

Applications for downstream oil and natural gas licences can only be filed by Turkish companies. That said, there is no limitation that prevents a Turkish licensee company from being wholly or partly owned by foreign individuals and/or legal entities.

The Foreign Direct Investments Law No 4875 (Doğrudan Yabancı Yatırımlar Kanunu) provides that all companies established in Türkiye are accepted as Turkish companies, regardless of the nationality of their shareholders. It also sets forth that companies with foreign investors must be treated the same as those with domestic investors. As such, foreign direct investments cannot be expropriated or nationalised, except as justified by public interest and only against payment of compensation and in accordance with the due process of law, which is available to Turkish citizens and foreign investors alike.

International arbitration is frequently used as a method of dispute resolution. Türkiye is a signatory to both the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Convention on Settlement of Investment Disputes between States and Nationals of Other States. In addition, Türkiye has executed bilateral investment treaties with 98 countries, 86 of which are currently in force, including with the US; all EU member states, excluding Ireland; all OECD member countries, except Iceland, Canada, Norway and New Zealand; a number of Asian countries, such as China, Japan and the Republic of South Korea; and Middle Eastern countries such as Lebanon, BAE, Qatar and Iran. TPAO holds almost 80% of all exploration licences (including all offshore exploration licences) and almost half of all production licences, with relatively small foreign investment in the upstream sector.

The Turkish Petroleum Law, however, provides some tax incentives and low royalties in this regard. For instance, while the general VAT rate is 20%, deliveries of goods and services specifically related to petroleum exploration activities to persons carrying out such activities remain exempt from VAT. The Turkish Petroleum Law also provides for customs duty exemption related to petroleum operations: all imports of materials, equipment and fuel, and land, sea and air transport vehicles approved by GDMPA are exempt from customs duties, either by a petroleum right-holder itself or by a contractor approved by GDMPA. The Law also provides that contracts entered into by petroleum right-holders in relation to exploration and production activities are exempt from stamp duty. Furthermore, the withholding tax applicable to foreign companies for exploration services is applied at a rate of 5% instead of 20%.

No information has been provided in this jurisdiction.

Environmental Law No 2872 (Çevre Kanunu) and its secondary regulations are the main pieces of legislation that govern environmental matters. In addition, the Turkish Petroleum Law, the Petroleum Market Law, the Regulation on the Implementation of the Turkish Petroleum Law, the Petroleum Market Licence Regulation and the Natural Gas Market Law impose rules and standards relating to environmental protection, as follows.

• Environmental Law No 2872 – all related parties must prevent, stop and take necessary precautions to mitigate the effects of pollution. The law sets forth a strict liability rule.
• The Turkish Petroleum Law – petroleum right-holders must not commit any dangerous act (as defined under the legislation) directly or indirectly during the conduct of petroleum operations.
• The Petroleum Market Law – persons who conduct petroleum market activities should take all necessary precautions to prevent damage to the environment and notify public authorities in the event of any risk of damage to the environment.
• The Regulation on the Implementation of the Turkish Petroleum Law – petroleum right-holders must take all necessary measures to protect the environment and cultural assets, and comply with the respective petroleum procedures provided in the regulation to prevent any adverse impact on the environment.
• The Petroleum Market Licence Regulation – persons who conduct petroleum market activities are obliged to refrain from any dangerous acts and should take all necessary precautions to prevent any damage to the environment.
• The Natural Gas Market Law – the law sets the policy goal of providing natural gas to consumers in a secure, competitive and cost-efficient manner without damaging the environment.
• The Environmental Impact Assessment Regulation (Çevresel Etki Değerlendirmesi Yönetmeliği) – petroleum refineries, natural gas facilities, and petroleum, natural gas and chemical transportation systems and storage facilities are subject to an environmental impact assessment (EIA) process.
• The Environmental Permit and Licence Regulation – facilities where petroleum market activities are conducted are required to obtain an environmental permit or an environmental permit and licence certificate prior to the commencement of their activities.
• The Law Regarding the Principles of Emergency Intervention and Compensation of the Damages in Cases of Sea Pollution from Petroleum and Other Hazardous Materials No 5312 (the “Sea Pollution Law”) (Deniz Çevresinin Petrol ve Diğer Zararlı Maddelerle Kirlenmesinde Acil Durumlarda Müdahale ve Zararların Tazmini Esaslarına Dair Kanun) – as per the Sea Pollution Law, all vessels carrying petroleum products and all persons responsible for offshore facilities must take all necessary precautions to prevent damage. Furthermore, public authorities must be informed of any hazardous materials carried in vessels that may pose a pollution risk.
• The Law on the Transit Passage of Petroleum through Pipelines (Petrolün Boru Hatları ile Transit Geçişine Dair Kanun) – participants in pipeline projects are required to prevent environmental damage to the sea, air, lakes, flora, animals and other natural resources. In the event of any damage, the project participants are required to provide compensation.
• The Regulation on Control of Soil Pollution and Contaminated Sites (Toprak Kirliliğinin Kontrolü ve Noktasal Kaynaklı Kirlenmiş Sahalara Dair Yönetmelik) – crude oil and natural gas production are regarded as potentially soil-polluting activities. Accordingly, facility owners/operators are required to cease any pollution-creating activities, to determine the effects of the pollution and to carry out activities in order to clean contaminated areas.
• The Industrial Air Pollution Control Regulation (Sanayiden Kaynaklı Hava Kirliliğinin Kontrolü Yönetmeliği) – this regulation sets out the principles with which crude oil facilities, petroleum refineries and storage facilities should comply in relation to industrial air emissions.

The main regulatory authority regarding environmental safety is the Ministry of Environment, Urbanisation and Climate Change (Çevre, Şehircilik ve İklim Değişikliği Bakanlığı, or MoE), the primary responsibilities of which are the protection of the environment, the prevention of environmental pollution, and the setting forth of standards and procedures for environmental safety.

Major petroleum projects are subject to an EIA process, and are also required to obtain certain environmental licences prior to commencement of their upstream and midstream operations, such as refinery operations. The Environmental Impact Assessment Regulation requires an EIA report to be filed for certain projects, or an “EIA not required” decision to be issued for projects subject to the Selection and Screening Criteria (if applicable).

Accordingly, as per the Environmental Impact Assessment Regulation, projects that carry a high risk of environmental pollution are subject to an EIA process. With respect to projects falling within the scope of the regulation, unless an affirmative opinion or an “EIA not required” decision is issued, no approval, permit, incentive or usage licence can be issued. The MoE has the authority to evaluate the application and make the final decision.

In addition, as per the Environmental Permit and Licence Regulation, facilities engaged in certain petroleum activities, as detailed under Annexes I and II of the Environmental Permit and Licence Regulation, are required to obtain a temporary activity permit (geçici faaliyet belgesi) prior to the commencement of their activities. However, they should obtain an environmental permit (çevre izni) or environmental permit and licence certificate (çevre izin ve lisans belgesi) within a maximum period of one year following the issuance of the temporary activity permit.

Furthermore, in order to prevent any possible accidents, licensees are also required to comply with various obligations imposed under specific legislation throughout the conduct of their activities, summarised as follows.

• The Regulation on the Protection of Employees from the Dangers of Explosive Environments (Çalışanların Patlayıcı Ortamların Tehlikelerinden Korunması Hakkında Yönetmelik) states that employers should prepare a document that sets out the health and safety precautions to be adopted for the protection of employees due to possible explosions in such workplaces.
• The Regulation Regarding the Prevention of Major Industrial Accidents and Mitigation of their Effects (Büyük Endüstriyel Kazaların Önlenmesi ve Etkilerinin Azaltılması Hakkında Yönetmelik) states that entities that keep hazardous substances should take all necessary precautions in order to mitigate the effects of major industrial accidents. Furthermore, the Regulation requires operators of entities that store hazardous substances to prepare a major accident prevention policy document (büyük kaza önleme politikası belgesi) and submit that document to the MoE within one year of the commencement of their operations.

The Sea Pollution Law and the Regulation on the Implementation of the Law Regarding the Principles of Emergency Intervention and Compensation of the Damages in Cases of Sea Pollution from Petroleum and other Dangerous Materials (the “Sea Pollution Regulation”) regulate marine safety and the prevention of marine pollution.

According to the Sea Pollution Law, offshore facilities are obliged to prevent any pollution or potential hazard, and should mitigate any damage in the event that a polluting event occurs and provide compensation in respect of all damage caused. Such facilities are also required to hold liability insurance for damages covered under the Sea Pollution Law. Otherwise, offshore facilities will not be permitted to conduct their activities.

As per the Turkish Petroleum Law and its secondary legislation, upon the expiry of an upstream licence, petroleum right-holders are required to reinstate the site to the physical status it held prior to the commencement of their upstream activities. Furthermore, if licence holders fail to remove any of the movable or immovable properties located on the site within a six-month period following the expiry of their licences, ownership of the movable or immovable property left on the site will pass to the owner of the site.

Türkiye has undertaken a wide range of legislative initiatives and acceded to certain international agreements relating to climate change, the most significant of which are as follows:

• the Montreal Protocol, aimed at stopping the production of ozone-depleting substances;
• the Vienna Agreement for the Protection of the Ozone Layer;
• Law No 5627 on Energy Efficiency, aimed at promoting energy efficiency and preventing the waste of energy;
• the Regulation on the Increase of Energy Sources and Efficiency in Energy Use, promoting the efficient use of energy; and
• the Regulation on Reduction of Ozone-Depleting Substances.

As a non-EU member, Türkiye has not taken steps to implement the EU Climate Change Package. However, Türkiye recently became a party to the Kyoto Protocol, which shares the primary goals of the EU Climate Change Package, including a reduction in greenhouse gas emissions, increasing the proportion of energy produced from renewable energy resources, and a reduction of energy consumption compared with projected levels by way of improving energy efficiency. Türkiye is in the process of preparing legislation to conform to the requirements of the Kyoto Protocol, which will ultimately result in compliance with EU requirements. However, Türkiye is no longer among the Annex II signatories. Therefore, Türkiye’s status under the Kyoto Protocol is limited to general undertakings without being bound by quantitative limitations on current emissions levels.

The Paris Climate Agreement, being the most comprehensive climate agreement agreed upon at the 21st UN Conference of the Parties on Climate Change (COP21) in 2015, was signed by Türkiye on 22 April 2016 in New York and entered into force upon ratification on 7 October 2021.

In this context, the MoE leads domestic climate change strategies and regulates the government’s National Climate Change Strategy and Climate Change Action Plan. Accordingly, the MoE introduced voluntary carbon emission markets in late 2010 in compliance with the UN Framework Convention on Climate Change and the Kyoto Protocol. The MoE introduced international carbon emission trading schemes and adopted corresponding national regulations through a board, namely the Climate Change and Air Management Co-ordination Council. Currently, there is no binding emissions reduction undertaking on a national level, and carbon emissions trading proceeds on a voluntary basis.

However, the draft Climate Change Law, which has been prepared but not yet approved by the Grand National Assembly of Türkiye (but is expected to be on the agenda of the Parliament within 2024), aims to address climate change concerns. The current draft outlines measures for the reduction of greenhouse gas emissions, the establishment of a carbon emissions market, the implementation of a carbon tax, emission trading, climate change adaptation activities, revenues, permits, audits, and the related legal and institutional framework. The scope of the regulation and the legal framework will be clarified once the legislation is passed by Parliament and enters into force.

As long as a producer holds the necessary licences and authorisations – whether market-related (ie, upstream operations) or environmental, health and safety related – and complies with the terms and conditions of such licences as well as the applicable legislation in all respects, then neither the government nor the relevant state authorities are entitled to limit oil and gas development or restrict the operations of the licence holder.

In Türkiye, significant strides have been made in energy transition, primarily driven by the Twelfth Development Plan approved by the Grand National Assembly of Türkiye for the period between 2024 and 2028. The Plan, under the scope of the Presidency of Strategy and Budget, outlines several key objectives in the energy sector. One major focus is the promotion of renewable energy in residences, which involves identifying and increasing the use of renewable energy sources and creating a road map for their cost-effective and efficient utilisation. Additionally, the plan includes developing and investing in electrical grids to accommodate potential new renewable energy sources and the growth of the market share of electric vehicles. Institutional capacity building aims to enhance the capacity to accurately predict and efficiently manage the production of electricity from intermittent renewable energy sources. Furthermore, the flexibility of electrical grids will be increased to mitigate the negative impacts of intermittent renewable energy production.

The Plan also focuses on local production capabilities in renewable, nuclear, energy storage and hydrogen technologies by conducting an inventory and developing a road map for advancement. International collaborations, particularly in the development of green hydrogen technologies and infrastructure, are supported. Efforts are being made to develop local electrolysers to support green hydrogen production. Recycling initiatives are being expanded to minimise the environmental impact of decommissioned solar panels and batteries, fostering a circular economy. Comprehensive regulations for the recycling of raw materials used in energy technologies are being implemented, and awareness is being raised among manufacturers and consumers through incentive mechanisms. Additionally, EMRA prepared a draft regulation on the Operation of Carbon Markets, published for consultation at the end of 2023. Inspired by the cap-and-trade model in the European Directive, this draft regulation proposes the establishment of primary and secondary carbon markets in Türkiye, operated by the Energy Exchange Istanbul (EXIST).

The implementation of these laws and programmes significantly impacts traditional energy development in Türkiye. Encouraging a shift from fossil fuels to renewable energy sources reduces dependency on traditional energy. Upgrading electrical grids to support the integration of renewable energy and electric vehicles modernises the overall energy infrastructure. Sustainable practices are fostered through recycling initiatives and the development of green technologies. The introduction of carbon markets creates economic incentives for reducing carbon emissions, thereby influencing the market dynamics of traditional energy sectors. In summary, Türkiye’s legislative and regulatory framework for energy transition is driving a transformative shift towards renewable energy, modern infrastructure and sustainable practices, while also reshaping the traditional energy landscape.

Oil and gas facilities such as refineries are developing renewable energy resources for self-consumption. Tüpraş is commissioning solar energy power plants at its refineries to increase the share of renewables in its energy consumption. Open source research indicates that the EIA process has been initiated to increase the capacity of the solar energy power plants at the same plant by 2024. In a study carried out to calculate CO2 emissions from thermal power plants with an installed capacity of over 500 MW, cement factories, the steel industry, sugar factories and refineries in Türkiye and to determine suitable geological environments for CO2 storage in Türkiye, it was indicated that 7 billion standard cubic metres of CO2 had already been produced for the West Raman Enhanced Oil Recovery (EOR) project from the Dodan field, which hosts a natural CO2 reservoir that can be extracted from the ground using techniques similar to oil and natural gas. The know-how on CO2 injection gained from CO2–EOR applications at West Raman will enable future CO2 capture and storage projects.

Energy transition in Türkiye seeks to improve security of supply, while at the same time improving energy access and sustainability. Türkiye is assessing the feasibility of its first-generation energy transition projects such as carbon capture, utilisation and storage (CCUS) and hydrogen electrolysis. Currently, Türkiye has not deployed any CCUS practices. However, Türkiye has experience in similar applications, such as enhanced oil recovery and the capture and reinjection of CO2 for pressurisation in geothermal fields. These experiences are expected to guide the development of Türkiye’s CCUS policies. Under the Turkish Petroleum Law, CO2 produced in oil fields can be used in enhanced oil recovery activities. Türkiye is one of the pioneering countries in injecting CO2 into underground geological structures for enhanced oil recovery. Furthermore, the Draft Climate Change Law, mentioned in 5.5 Climate Change Laws, is expected to introduce provisions addressing the use of capture and storage practices to reduce emissions. Lastly, with the Twelfth Development Plan approved by the Grand National Assembly of Türkiye for the period between 2024 and 2028, the government outlined certain plans for inventory studies to assess domestic production capabilities in renewable energy, energy storage and hydrogen technologies. Additionally, a road map for hydrogen technology development, especially green hydrogen, and support for international cooperation in relevant areas were emphasised.

Unconventional upstream activities (such as the exploration for, and production of, shale gas, shale oil, aquiclude gas, gas hydrates, bituminous coal and coal bed methane) are regulated under the Turkish Petroleum Law, the Regulation on Implementation of the Turkish Petroleum Law and secondary regulations. It is worth mentioning that the Law and secondary regulations do not explicitly define unconventional petroleum. Furthermore, there is no special regime for unconventional upstream interests. In the absence of a special regime, unconventional upstream activities will nevertheless be subject to the regime set forth for conventional upstream operations.

Activities concerning LNG fall within the Natural Gas Market Law as well as secondary legislation, namely the Natural Gas Market Licence Regulation and the Regulation on the Principles and Procedures for the Use of LNG Storage Facilities (Sıvılaştırılmış Doğal Gaz Depolama Tesisi Temel Kullanım Usul ve Esaslarının Belirlenmesine Dair Yönetmelik). In order to conduct LNG activities, companies are required to obtain a relevant licence from EMRA. Furthermore, the Regulation on the Procedures and Principles for the Use of LNG Storage Facilities governs the process for the establishment of LNG storage facilities.

Companies authorised to export LNG may also conduct LNG transportation operations, provided that these are included in their export licences and they refrain from engaging in domestic distribution activities.

Moreover, as per the Council of Ministers’ Decree No 2012/3305 (Yatırımlarda Devlet Yardımları Hakkında Karar), LNG investments amounting to a minimum of TRY50 million are entitled to benefit from various regional incentives, including a VAT exemption, a customs tax exemption, a tax deduction, and advantages relating to social security premiums.

In line with Türkiye’s goal of establishing a liberalised oil and gas market capable of competing with markets in other countries, various legislative instruments have been brought into force over the past decade. These legislative instruments are aimed at establishing an environment conducive to the safe and secure supply of oil and gas from both domestic and foreign sources to consumers in Türkiye under transparent and regulated market conditions. Furthermore, Türkiye’s geographical advantages allow it to tap into wider regions where there are large energy reserves, such as the Middle East and Asia, while at the same time serving as a safe, cost-efficient and reliable energy transit corridor for Western markets. Despite the fact that production activities in the Turkish oil and gas markets are rather limited, Türkiye long ago began to play a leading role as an internationally significant oil and gas transit state in major oil and gas pipeline transportation projects, some of which pass solely through, or terminate within, Turkish borders.

There have been a number of changes to the oil and gas legislation over the past year. With the amendment introduced to the Natural Gas Market Law, the activity of liquefying domestically produced and/or imported natural gas for export or resale within Türkiye was separated from storage activities and defined as a distinct midstream/downstream activity. Accordingly, companies operating liquefaction facilities must obtain a licence from EMRA. These entities must demonstrate technical and financial capacity and meet other regulatory conditions. Furthermore, EMRA, upon receiving the opinion of MENR, can now make exceptional arrangements regarding the operation and relocation of floating LNG facilities. Additionally, storage companies are now required to publish the unit prices and facility capacities for the services they provide.

Changes have also been introduced to the Energy Efficiency Law. Amendments made introduce concepts such as specific energy consumption and carbon intensity, and provide support to applicants that reduce energy consumption or carbon intensity, or utilise specific forms of energy consumption through projects aimed at increasing energy efficiency. These supports are envisaged to be provided in the form of grants or interest support. Additionally, the Scientific and Technological Research Council of Turkey (TÜBİTAK) will prioritise supporting research and development projects focused on increasing energy efficiency and utilising new and renewable energy resources. MENR’s opinion will be considered in the guidance and evaluation of these projects.

With the amendment to the Natural Gas Market Licence Regulation, legal entities holding distribution licences and non-state-owned entities holding storage licences must obtain EMRA’s permission to conclude any transaction that would constitute collateral, such as the transfer of receivables, a mortgage, surety, account or business pledge, or any other form of collateral.

Overall, while there are still some anticipated legislative changes in the pipeline, especially with respect to crude oil supply by local producers, the past year’s legislative agenda has been characterised by limited modifications of the existing system, rather than substantial systemic changes being introduced.