Turkish Parliament opens way to oil market liberalization

ISTANBUL - Hürriyet Daily News

A draft code that regulates oil exploration and production with the intention of easing the conditions for private actors passed into law on May 29. DHA photo

The Turkish Parliament’s General Assembly has approved a draft code on the petroleum market that comprises regulations to boost the dynamism in the sector by easing the circumstances for private actors and to end rentiers in the sector.

The new law, which is designed to regulate oil exploration and production operations in compliance with the country’s energy policies has passed into law late on May 29.

The government says the new regulations would liberalize the sector significantly.

But opposing groups say that it would leave the state-run Turkish Petroleum Company (TPAO) in a weaker position.

During the discussion of the draft in Parliament, one of the main opposition Republican People’s Party deputies attacked the draft, blaming the government for “not thinking to make exploration and production more efficient and rather seeking ways to please foreign capital.”

The real aim is to transform TPAO into a company that can operate flexibly in international markets, Turkish Energy Minister Taner Yıldız said, answering questions. “As long as we can achieve this, it can remain a state company, can become a private company, can be offered to the public, or not.”

According to the existing law, TPAO may acquire more licenses in each region provided that the total number of licenses does not exceed 10 times the number of petroleum regions. However, the limitation on the number of licensees per region has been completely removed in the draft law. Furthermore, TPAO no longer has any special privileges over other exploration companies.

Yıldız said none of top global energy companies like BP, Shell or Exxon were state firms, noting that 41 percent of the world’s integrated companies are private firms.“Total being owned by France doesn’t mean it is France’s national company,” he added.

End to rentiers

Another prominent reform to be brought with the new law is the measure taken against inefficient operations in the market.

The new scheme suggests regulations to force companies to search for oil and gas promptly, instead of holding fields without making any investments for long periods.

Under the present law, companies are able to hold petroleum fields without making any investments. However, according to the new law draft, companies that do not make investments in the areas they are committed to will be discharged from the petroleum field and their deposits will not be refunded.

The law also divides Turkey into two petroleum regions – onshore and offshore – instead of 18 regions as it had been. The offshore region is also divided into two regions: interior and exterior territorial waters.

The companies will be also obliged to present their annual investment plan in order to obtain their research license.