Draft oil law grants equal rights to foreign investors

Merve Erdil ANKARA / Hürriyet

Turkey is working on regulating its energy search environment. Hürriyet photo

Energy companies will have to submit an investment program making an investment commitment based on annual schedules to carry out energy exploration, according to a draft oil law discussed at Cabinet.

They will also only be able to keep their rights to a field for a maximum of one year if they stop their activities there.

Officials said the new law would encourage local and foreign investors in terms of investments in fields.

The draft law is expected to accelerate the oil and gas search in Turkey, as the cost of oil and natural gas hit $49.4 billion in 2011, expanding the current account deficit to some 477 billion Turkish liras.

The public and private licenses will be canceled once they are due and will not be extended, according to an energy professional who has been a part of the draft-sketching process.

The biggest aim of the draft law is to get intermediaries called baggers out of the way, a source said. The baggers buy the rights to energy projects at low prices from those who have won tenders at high prices and then sell them with high margins to real investors, or companies.

The biggest obstacle in front of exploration and production activities is that all fields have been licensed, the source added.

“Cancellations of due licenses will pave the way for foreign investors to come in. According to the current law, a company can keep its license for eight years without performing any activity. This is unpenalized. The draft law envisages companies making a commitment to the Directorate General for Oil Affairs based on their business and investment program regarding annual investments.”

If a company applies for license to operate in a field, the directorate will make an announcement to let potential bidders act in 90 day-period, the draft says. The best bidder, which is granted license, will have to deposit 2 percent of the investment value as collateral, according to the new draft law.