Turkish Petroleum Law Implementing Regulation - ONGUR&PARTNERS

LEGISTLATIONS

Turkish Petroleum Law Implementing Regulation


TURKISH PETROLEUM LAW IMPLEMENTING REGULATION

PART ONE
Objective and Scope, Legal Basis and

Definitions

Objective and scope

ARTICLE 1 - (1) Objective of this Regulation is to regulate the procedures and principles related with the implementation of the Turkish Petroleum Law No. 6491, dated 30/05/2013.

(2) This Regulation, in relation with the proceedings of the petroleum exploration licence and production lease and the investigation permit covers the procedures and principles regarding the duties, authorities, rights and obligations, applications, licensing procedure, registration and announcement, reports, collection of field data and archiving and marketing them, transfer of petroleum rights, bonds, royalty, utilization right, removal of facilities, taxation, capital assets, capital, profit transfer, export and import of materials, notices to the General Directorate, financial ability, evaluation criteria regarding the work and investment programs, examination and supervision of the activities, and other issues as to the implementation of the Law.

Legal Basis

ARTICLE 2 - (1) This Regulation has been issued as per the provisions of Article 25 of the Turkish Petroleum Law No. 6491.

Definitions

ARTICLE 3 - (1) For the implementation of this Regulation; the following definitions shall apply:

  1. a) Exploration: all the facilities of investigation, exploratory drilling, appraisal drilling and investigatory drilling,
  2. b) Exploration expenses: expenses made for exploration activities except for expenses for the materials and facilities whose economic life is more than one year,
  3. c) Exploration license: petroleum exploration license issued in accordance with the Law,

ç) Exploration field: field covered under the exploration license,

  1. d) Exploratory drilling: drillings made for the discovery of petroleum,
  2. e) Investigator: investigation permit holder,
  3. f) Investigation: investigation of a land from the ground or air by topographical, geological, geophysical, geo-chemical, and similar methods to gather data, and the drilling activities made to obtain geological information, except for exploratory drilling,
  4. g) Investigation permit: permit granted by the General Directorate for conducting investigation within a specified area,

ğ) Investigatory drilling: drillings made in the investigation field to obtain geological information,

  1. h) Waste: all matters in the solid, liquid or gas state that originate during or at the end of any kind of petroleum operations; that cause direct or indirect damages to their receiving environment by leading to a change in the compound and characteristics of the environment because of the physical, chemical, bacteriological features within themselves; and that may affect the utilisation potential of that environment,

ı) Waste water: water appearing together with the petroleum or separately during the exploration and production activities and the liquid phase of the waste,

  1. i) Waste water injection: delivery of the waste water to reservoirs not generating fresh water and isolated with an impermeable layer ensuring sufficient preservation, in formations including fresh water and in fresh water resources,
  2. j) Minister: Minister of Energy and Natural Resources,
  3. k) Ministry: Ministry of Energy and Natural Resources,
  4. l) Pipeline Construction Permit: permit to be given by the General Directorate for the connection pipelines to be constructed by the petroleum producer up to the closest refineries or main transmission pipelines and the points of sale and for the gathering pipelines within the petroleum field.
  5. m) District: onshore and offshore districts, and offshore parts as inner territorial waters and outer territorial waters,
  6. n) Evaporation: evaporation of the produced waste water by gathering it in wells,
  7. o) Royalty: share to be given to the State on the basis of the petroleum produced,

ö) Natural gas: natural hydrocarbons in gaseous state produced or producible from the underground,

  1. p) Injection well: well used to discharge waste water or to increase production,
  2. r) Injection drilling: drilling made, to be used as injection well,
  3. s) Gas hydrate: natural gas enclosed in water ice in the sea bottom,

ş) Exploration and production of unconventional resources: exploration and production of unconventional resources such as shale gas, shale oil, impermeable formation gas, gas hydrates, and bituminous rock in the source rock that these resources are derived directly,

  1. t) Development: the drilling of the required number of wells and establishment of surface facilities, transportation lines and storage to develop a petroleum field,
  2. u) General Director: General Director of Petroleum Affairs,

ü) General Directorate: General Directorate of Petroleum Affairs,

  1. v) Crude Oil: natural hydrocarbons in liquid state produced or producible from the underground,
  2. y) Work and investment program: to be presented in the license applications and extension of them, the detailed work and financial investment program concerning exploration and production activities which were committed to be made by years in the field covered by the license,
  3. z) Production lease: permit given pursuant to this Law to carry out production activities in the specified field,
  4. aa) Operator: production lease holder,
  5. bb) Good will: Effort, competence, efficiency, foresight and prudence required by oil industry, in carrying out a petroleum operation,
  6. cc) Law: Turkish Petroleum Law No. 6491,

çç) Source file: up-to-date file including the information and the documents regarding the applicant and the right holders,

  1. dd) Discovery: finding of a petroleum accumulation that is suitable for production,
  2. ee) Utilization right: the leasing of a field and possible usufruct and easement on that field,
  3. ff) Material: petroleum, fuel oil, all goods either crude, in process or finished; equipment, instruments, tools and machinery; means of transportation and all other means and spare parts thereof to be used in petroleum operations,
  4. gg) Joint representative: legal representative determined jointly by the legal entities holding the same petroleum right through shares or holding the ownership of petroleum right registered to petroleum registry, with the aim of carrying out the legal proceedings related with the concerned petroleum right

ğğ) Operator: as the right or shareholder of the concerned license, the company to carry out the petroleum operations on behalf of all the other companies collectively holding the petroleum right in an exploration license or production lease, pursuant to a contract signed among themselves and approved by the General Directorate,

  1. hh) Petroleum: crude oil and natural gas,

ıı) Petroleum unit: 158,984 litres (one barrel) of crude oil measured at 15.5° C at 1 atmospheric pressure, or 1 cubic meter of natural gas measured at 15.5° C at 1 atmospheric pressure,

  1. ii) Petroleum finding: petroleum presence determined during the exploration activities made through drilling,
  2. jj) Petroleum right: any of the rights arising from an investigation permit, an exploration license or a production lease,

kk)Petroleum operation: exploration, production and sale of the petroleum produced within the country; construction, establishment, and operation of power and water facilities, and pipelines necessary for transportation of the produced petroleum within the field or to a main transmission line or to a refinery close by or necessary for the transportation of natural gas to eligible customers; relevant housing, camping, and all other facilities and equipment necessary for any of the above mentioned operations; and administrative, commercial and financial activities regarding these operations,

ll)Petroleum to be used in petroleum operation: Petroleum to be used by the petroleum right holder out of the petroleum it produced, in a way not to subsidize the market activities and as necessary to carry out petroleum operations more efficiently and within a shorter period, and oil which is deemed appropriate amount.

  1. mm) Petroleum register: Records to be kept by General Directorate regarding the applications of investigation permit, exploration and production lease, the results and decisions regarding these applications and the petroleum rights granted accordingly

nn)Petroleum field: part of land where the amount of petroleum accumulation is sufficient for operation

  1. oo) Market price: for the crude oil produced on a unit of petroleum, the market price for domestic crude oil per barrel regulated pursuant to the Article 10 of the Petroleum Market Law No. 5015, dated 4/12/2003, and for the natural gas, the sales price for the distribution companies and the free consumers,

öö) License: exploration license or the production lease,

  1. pp) Capital assets: assets included within the economic operations pursuant to the valuation criteria provided under the Tax Procedure Law No. 213 dated 4/01/1961, and those exploration expenses, intangible drilling costs and the expenses for drilling wells which are unproductive for the national economy that the petroleum right holder has charged to capital accounts as an asset in line with the aforesaid Law,
  2. rr) Capital asset base: the value of the capital asset allocated by the petroleum right holder for use in connection with its petroleum operations in Turkey as computed in accordance with the Law No. 213,
  3. ss) Incidental drilling costs: all expenses for labour, fuel, repair and maintenance, haulage, supply, leasing and materials for and incidental to drilling, cleaning, deepening or completing wells or preparations thereof, except for expenses of installations or materials with an economic life of more than one year that are not yet installed or used, or that have a utilization life of more than one year or a salvage value at the end of one year after being installed or put in use,

şş) Notification: notices to the applicants, and right holders or legal representatives of them made in line with the provisions of the Law and the Regulation,

  1. tt) Dangerous act: an act or negligence during the conduct of an petroleum operation that endangers or is likely to endanger the life, limb or health of a person within the field, and to give rise to environmental pollution, to damage or destruct places within the scope of Law Protection of Cultural and Natural Properties No. 2863 and dated 07.27.1983
  2. uu) Facility manager: person responsible for the implementation of the petroleum operation in the facility and the surroundings pursuant to the related legislation, and assigned to prepare and present all kinds of information and documents concerning the petroleum operation in that facility to the supervisors during supervisions to be made to determine the performance of obligations by the petroleum right holder,

üü) Appraisal drilling: a limited number of drillings of wells made to determine the size of the petroleum field explored and necessary to be made in line with the technical criteria approved by the General Directorate,

  1. vv) Land of Turkey: the territory, inland waters and territorial waters of the Republic of Turkey and further to that, continental shelf and exclusive economic zones whose borders are determined as per the international law,
  2. yy) Cost of drilling and abandonment of the wells that were unproductive for the national economy: expenses made for any physical economic value used or required for the drilling of wells that do not produce of petroleum in economic quantities, and incidental drilling costs, except for drilling equipment and similar equipment,
  3. zz) Production: the work of production drilling and development, extraction of petroleum, pre-processing of petroleum, storage of petroleum within the field or in the vicinity of a field, transportation of petroleum to these storages, a transmission line or to a refinery through pipeline or other means,

aaa) Enhanced recovery method: method used for achieving additional production by enhanced recovery methods in order to improve the flow of petroleum in the reservoir and/or to increase the decreasing reservoir energy in the production field by fluid injection,

bbb) Production field: petroleum field covered under the production lease and exploration license.

ccc) Production drilling: drilling of wells in the petroleum field for production.

ççç) Investment bond: bond necessary to be taken from the exploration license applicant over the financial investment amount, for the work and investment program presented,

ddd) Cushion gas: minimum in-place gas amount not produced and necessary to be kept in the reservoir to ensure that the underground gas storage serves for the storage activity,

eee) Natural gas underground storage facility: storage facility reserved for the storage of the gas produced or outsourced by the operator, in his own petroleum reservoir,

fff) Resident representative: person representing the petroleum right holder company as legal representative and residing in Turkey and who is responsible for the legal activities of petroleum right holder in Turkey,

ggg) Contractor: real or legal entities or their partnerships supplying service or goods for the petroleum operations, to the petroleum right holder based on a contract

ğğğ) Loss and damage bond: Bond taken from the applicant to cover the loss and damage to the environment, security of life and property and to the third persons, that may occur during the petroleum operation,

hhh) Lost petroleum: the amount of petroleum not exceeding five per thousand of the total production at maximum in each production field during the extraction, transmission, storage and special processing of the petroleum.

PART TWO

Authorities

Minister

ARTICLE 4 - (1) In the performance of his/her duty granted with the Law, the Minister shall be authorized to carry out or have somebody carry out all kinds of inquiries she/he deemed necessary; to examine the evidence and all operations, accounts and records of the petroleum right holders related with the inquiry and to supervise the petroleum operations and the equipment.

General Directorate

ARTICLE 5 - (1) General Directorate shall be responsible for the implementation of the Law.

(2) It shall fulfil any procedure regarding the notifications, announcement and registrations necessary as per the Law and this Regulation

(3) It shall determine the operations to be published in the Official Gazette except the ones mandatorily published as per the Law and this Regulation, and the operations to be notified through other procedures.

(4) It shall ensure cooperation and coordination among the institutions and organizations which have been assigned for some operations in accordance with the Law and the Regulation in order to accelerate the rapid implementation of these operations by the concerned institutions and organizations.

(5) It shall make arrangements related with the petitions, reports, maps, samples, declarations, forms and similar documents to be presented by the applicants and the petroleum right holders.

(6) It shall notify the applicants and petroleum right holders in writing about all kinds of aimed decisions, invitations, announcements or circulars in accordance with the provisions of the Notification Law no. 7201, dated 11/2/1959. On the condition that there is no special time limit for these notifications under the Law and the Regulation, the Directorate shall determine the appropriate time periods in line with the characteristics of the matter and require the observance of this period.

(7) In line with the purposes of this Law, the Directorate shall be authorized to preserve the presence of petroleum, prevent extravagancy, operate petroleum fields based on good will, supervise and control the precautions taken by the right holders within the framework of legislation for occupational health and safety, and for the protection of the environment as well as removing in inconsistencies if any.

PART THREE

Procedures and Principles regarding the Application of Petroleum Rights, First Application, Source file, Application, Examination and Evaluation and Conclusion

First Application

ARTICLE 6 - (1) applications shall be made via internet by using the application form published in the web site of the Directorate or personally presenting the original and the copy of the application form in annex 1 to the General Directorate

  1. a) for investigation permit, by the preparation of the information and documents stated in the forms in annex-2, annex-3 and annex-7,
  2. b) for exploration license, by the preparation of the information and documents stated in the forms in annex-2, annex-4, annex-7 and annex-8
  3. c) for production lease, by the preparation of the information and documents stated in the forms in annex-2, annex-5, annex-7 and annex-9

in compliance with annex 6, with the payment of the application fee determined in accordance with Act of Fees No 492 necessary to be granted a right envisaged in the Law.

(2) If the applicant is a foreign company, it shall provide the information and documents proving its registration in Turkey within sixty days, after it has been entitled as a petroleum right holder.

Source File

ARTICLE 7 - (1) In the first application, the companies shall present the source file including the information, papers and documents required in the form in annex-2 to the General Directorate. It is obligatory that the General Directorate is informed about any change in the information and documents within the source.

Applications to be made by the petroleum right holder

ARTICLE 8 - (1) With reference to the investment permit, exploration license and production lease, after the acquisition of a right stipulated in the Law, applications regarding time extensions, transfer of shares, granting rights, expropriation and utilization right, abandonment of the field, partial abandonment of the field, additions to fields shall be made to the General Directorate in compliance with annex-6,with a petition, a sample of which can be found in annex-10:

  1. a) for investigation permit, by the preparation of the information and documents stated in the forms in annex-3, and annex 7
  2. b) for exploration license, by the preparation of the information and documents stated in the forms in annex-4, annex-7 and annex-8
  3. c) for production lease, by the preparation of the information and documents stated in the forms in annex-5, annex 7 and annex-9

ç) for time extensions, the information and documents stated in annex-11,

  1. d) for the transfer and establishment of shares in annex-12,
  2. e) for expropriation and utilisation right in annex-13,
  3. f) for the partial abandonment of the field and additions to the field in annex-14, in

(2) Partial abandonment of the field or additions to the field within the borders of the exploration license field in the territory and territorial waters shall be based on map sections of scale 1/25.000 provided that they are included in the same map section with scale 1/50.000.

(3) Partial abandonment of the field or additions to the field within the borders of the exploration license field in the exclusive economic zone shall be based on map sections of scale 1/100.000 provided that they are included in the land of one degree.

(4) Partial abandonment of the field or additions to the field within the borders of the production lease shall be made within the map sections with scale 1/25.000 with four corners in the directions of east-west, north-south, provided that they are included in the same map section with scale 1/50.000.

Examination and evaluation

ARTICLE 9 - (1) The area covered with the first application made for the exploration license of an open area shall be announced in the Official Gazette.

(2) Work and investment programs regarding this application and the other applications thoroughly covering the same field shall be presented to the General Directorate in a sealed envelope until the end of the working day of the ninetieth day at the latest. Work and investment programs presented to the General Directorate shall be kept confidential within this period. The sealed envelope of the work and investment programs shall be opened with the participation of the applicant and a minute shall be taken accordingly. Within this period, the applications for the exploration license partially covering the same field and the applications made for the same field after the mentioned ninety days shall not be taken into account. Applications deemed to be complete and in compliance with the legislation by the General Directorate shall be considered.

(3) Work and investment program undertaken for the license field and its implementation plan by years shall primarily be taken into account in the applications. Compliance of the work and investment program presented with the requirements of the petroleum industry shall be asked. In the evaluation of the applications, financial power, technical capacity, adequacy of its human resources, its experience in the sector and the success achieved in the other sectors, if any, of the company shall be considered.

(4) If more than one application is made for the same field, compliance of the work and investment program with the purposes of this Law shall be considered.

(5) First of all, equity of the company shall be considered in terms of the financial resource necessary for the realization of the committed investments. When the equity is not enough, it is compulsory to present additional financial resource.

(6) With regard to the financial capability, assets of the company such as its properties, estates, bank deposits, shares, partnership shares, means of capital market, heavy equipment and vehicles shall be considered.

(7) Investment amount presented for the license application, the investment amount committed by the applicant for other licenses it holds, if any and the status regarding the realization of these commitments shall be considered.

(8) That the application for license is taken for examination and evaluation shall not mean the acquisition of the right for license.

(9) With the aim of concluding the examination, any additional information and documents which indicate financial power, technical capability, adequacy of its human resources, its experience in the sector and the success achieved in the other sectors, if any, may be asked from the applicant. The applicant or the authorized representative of the applicant may be called for interview.

Conclusion of the Applications

ARTICLE 10 – (1) The applicant whose application has been found eligible and who has been entitled to receive license shall present the General Directorate the damage and loss bond as required in the paragraph eight of the Article 22 of the Law within fifteen days at the latest following his/her notification about the decision.

(2) If the damage and loss bond is not presented within the determined period or presented incomplete, the applicant shall be deemed to have waived from his/her request. General Directorate may propose the same license to the next applicant, if any. The Law stipulates the same procedures for the applications for fields under the authority of the Council of Ministers.

(3) When the application is rejected, reasons of rejection shall be notified to the concerned in accordance with the provisions on notification of the Regulation, hereby.

(4) Investment bond which should be provided pursuant to the paragraph three of the Article 7 of the Law shall be provided within thirty days following the publication of the decision in the Official Gazette. Otherwise, the license shall be cancelled.

Rights and Obligations

ARTICLE 11 – (1) In addition to the rights and obligations in the Law and this Regulation, the holder of license and permit shall also bear the rights and obligations as to;

  1. a) make commitments regarding the petroleum operations,
  2. b) carry out the activities through contractors
  3. c) comply with the procedures and principles stated in the legislation regarding the design, construction and operation of the facilities necessary for the activities

ç) avoid any kind of dangerous act, take necessary precautions for the possible dangerous acts and to eliminate the undesired conditions within a short while.

PART FOUR

Petroleum Registry Order of Records, Registration and Announcement

Petroleum Registry Order of Records

ARTICLE 12 – (1) General Directorate shall keep a petroleum registry regarding the petroleum rights. Registry records, applications regarding the petroleum rights, exploration license, production lease, investigation permit and transfers in relation with these, any records, conditions, and rights and restrictions to be imposed shall be kept in accordance with the procedure to be determined by the General Directorate.

Validity of the petroleum registry and preservation of the documents

ARTICLE 13 - (1) Petroleum registry records shall be kept in electronic environment. Records of the petroleum registry are public and valid until the contrary is proved. The documents presented to the General Directorate upon and after the acquisition of the petroleum rights shall be preserved for three years for the investigation permit, for five years for the exploration license and for ten years for the production lease, as of the termination of the right. At the end of these periods, proceedings shall be carried out in accordance with the relevant legislation provisions

(2) Right holders shall receive a document which shows the nature and validity of the right, complying with the forms in annex-15, annex-16 and annex-17 and approved by the General Directorate.

(3) Any kind of action related with the transfer of shares that may lead to a change of control in the capital of the petroleum right holder shall be subject to the prior authorization of the Ministry. In such cases that may lead to a change of control in the capital of the petroleum right holder company, two companies or parties of the share transfer shall make an application regarding the matter to the General Directorate at the same time by presenting the grounds. General Directorate shall make the necessary evaluations and submit the applications for the approval of the Minister together with its own opinion. When deemed appropriate by the Minister, this shall be notified to the concerned companies. Transfers regarding the change of control in capital shall be realized within sixty days following the acquisition of the prior authorization, and the necessary documents shall be sent to the General Directorate.

Matters to be announced and the notification

ARTICLE 14 - (1) Matters to be announced in the Official Gazette shall be

  1. a) First exploration license application for an open exploration field,
  2. b) Production lease application,
  3. c) Decisions on the granting of investigation permit, exploration license and production lease,

ç) Decisions on the expropriation and utilisation rights,

  1. d) Time extensions of exploration license and production leases,
  2. e) Matters related with the production fields to be auctioned,
  3. f) Applications of abandonment, partial abandonment and additions under the licences and how they are concluded,
  4. g) Decisions on the transfer of licenses and rights and restrictions to be established accordingly,

ğ) Other matters deemed appropriate to be published.

The above mentioned matters shall be announced in the Official Gazette within fifteen days following the application or the decision. The publication date of the announcements in the Official Gazette shall be deemed as the effectiveness date of the application or the right.

(2) Decisions on granting exploration license, and production lease and on the rejection of the applications for these, published in the Official Gazette as per the provisions of the Law and this Regulation shall be notified to the resident representative and/or joint representative separately by the General Directorate. This notification shall be deemed to have been made to the petroleum right holder.

(3) In accordance with the Article 7/a of the Notification Law no. 7201, notifications may also be made through electronic means. The notification made through electronic means shall be deemed to have been made at the end of the fifth day following the delivery of the notification to the electronic address of the concerned.

PART FIVE

Investigation Permit, Exploration License and Production Lease

Procedures and principles regarding the investigation permit

ARTICLE 15 - (1) When investigation permit is requested, it shall be granted within the framework of a contract prepared by the General Directorate to carry out the matters stated in the Article 5 of the Law and signed between the General Directorate and the applicant.

(2) The contract to be made shall cover the duration of the permit, nature, method and implementation program of the field activities to be carried out by the investigator, right and obligations of the permit holder, matters regarding the preservation and precedence of the petroleum rights given or to be given in the permitted field, the way and duration for the submission of the copies of the data to be obtained under the scope of the permit export of the data and other matters agreed.

(3) On the condition that the district which is the subject matter of the investigation permit covers another exploration license or production lease, the General Directorate shall inform the concerned right holder about the contract within 30 days following the enforcement of the contract signed between the General Directorate and the investigator.

(4) Claimants shall pay 50 Kurus fee per hectare of the investigation field for once only. This fee shall be re-determined every year by the General Directorate in accordance with the provisions of the Article 5 of the Law. This fee shall be deposited in the account of the related accounting department that the General Directorate is attached, prior to the termination of sixty-day evaluation period before the signing of the contract, and the document of payment shall be submitted to the General Directorate. If this payment is not made within the specified period, the applicant shall be deemed to have waived from his/her request.

Procedures and principles regarding the exploration license

ARTICLE 16 - (1) Exploration license shall be given for two districts as onshore and offshore. Coastal line constitutes the natural border of these two districts. Duration of the license shall be five years for onshore and eight years for offshore. These time limits may be extended for the determined durations in accordance with the provisions of the Article 6 of the Law, provided that the obligations in the licenses are realized.

(2) As regulated in the second and third paragraphs of the Article 6 of the Law, the largest and smallest land of license shall be limited with a map section with scale 1/50.000 and map section with scale 1/25.000 within that section for territory and territorial waters, and land of one degree and map sections of 1/100.000 within these lands for exclusive economic zones outside the territorial waters.

(3) When the fields of licenses are contiguous, coastal line shall be taken as basis for the shores, in accordance with the specified limits determined with Coastal Waters Law No. 2674 dated 05.20.1982 and dated 05.29.1982 and 82/4742 Decision of the Council of Ministers for the fields within or outside territorial waters, map sections and degrees in the directions of north-south, east-west for other fields.

(4) If the petroleum right holder requests time extension at least sixty days before the termination of the duration, time extension may be allowed by considering the status with regard to the realization of the work and investment program committed previously under the license, provided that the work and investment program and the corresponding bond are presented within the periods stated in the paragraphs 6 and 7 of the Article 6 of the Law.

(5) In the application for exploration license, General Directorate is reassured of the work and investment program. Work program to be presented shall include the compilation and interpretation of the previous work in the application field, if any, and the information on gravity, magnetics, seismic work, detailed field geology, geochemistry, and the drilling work. Amount, duration and unit prices of the work are also covered and accordingly, total investment amount to serve as the basis for the investment bond shall be determined. When it is determined that the investment amount declared for the mentioned work is not realistic, the General Directorate shall require the applicant to correct the total investment amount on the basis of the unit prices of the up-to-date practices so as to cover the information and technology utilisation necessitated by the petroleum industry. Work and investment program not corrected shall not be evaluated and shall be returned to the applicant together with the justification.

Petroleum finding and discovery

ARTICLE 17 - (1) After the finding of petroleum is determined during the exploratory drilling, required tests shall be carried out. When the results of the testing production in the exploration well point to a finding of a petroleum accumulation suitable for production, the notice of this discovery shall be submitted to the General Directorate in compliance with the form in annex-18.

(2) Following the examination of the information and the documents to be presented with the notice of discovery, the General Directorate shall either register or reject the discovery by giving a decision within six months at the latest on the monitoring of the production after the notice of discovery, on the performance of long term flow and pressure tests in the wells and on the production of the discovered petroleum accumulation commercially. Unless the registry of discovery is presented, application for production lease cannot be made.

(3) Upon the registry of the discovery, the investigator shall be obliged to maintain investigative production, develop the field with petroleum to serve as basis for the production lease, and sell the petroleum produced. Within this framework, the investigator shall submit a detailed program of the determination work to be made within the petroleum field to the General Directorate within six months at the latest as of the registry date of the discovery.

4) If the maximum time period of registered discovery licence is not sufficient to complete the procedures referred in the paragraph 3 above, with the request of petroleum right holder, additional time extension which referred in the paragraph 8 of Article 6 of the law may be specified.

Procedures and principles regarding the production lease

ARTICLE 18 - (1) Production lease registry of the discovery shall be granted for a determined petroleum field whose borders have been determined and which has been approved by the General Directorate, As a result of the evaluation of the information to be presented in the application, size of the production lease shall be determined so as to cover the surface projection of the petroleum reservoir.

(2) Size of the production lease shall be determined by considering the size of the petroleum field provided that it is included within the map section with scale 1/50.000, in map sections with scale 1/25.000 and outside the borders of the district and state from four corners in the directions of east-west, and north-south. The field outside the production lease shall maintain under the exploration license until the termination of the field. After the termination of the exploration license, this field shall be re-covered under the exploration license in accordance with the licensing procedures in the Law.

(3) Application regarding petroleum field registered for discovery to obtain the production lease stemming from the exploration license shall be made to the General Directorate. Applications made in compliance with the procedures shall be concluded within sixty days.

(4) Production lease shall be granted for twenty years by considering the reservoir, and economic life of the field and the work and investment program to be presented. It is essential that the operator shall maintain the production continuously except for the force majeure. Otherwise, provisions of the Article 24 of the Law shall be applied.

(5) If the production continues economically under the production lease and that the production program to be presented by the right holder is found appropriate, duration of the lease may be extended twice, provided that each will be ten years at the maximum.

(6) For the gathering pipelines needed within the petroleum field owned and for the connection lines to be constructed up to the closest refineries or main transmission pipelines and the points of sale, operator shall apply to the General Directorate with the information and documents stated in annex-19 in order to obtain the pipeline construction permit stipulated in the paragraph 6 of Article 8 of the Law. The General Directorate shall conclude the application within ninety days.

(7) If the waste is to be prevented, production and efficiency is to increase and the costs are to decrease when the petroleum operations under the neighbouring licenses are united, operators may unite the petroleum operations. Accordingly, they shall apply to the General Directorate, with the operator contract signed inter se. If deemed appropriate by the General Directorate, petroleum operations may be united.

(8) If the same reservoir is included in more than one license or in case of a conflict, license holders shall firstly be asked to reach an agreement inter se. Dimensions of the reservoir in the licenses shall be determined by an expert institution compromised by the parties. In accordance with the obtained result, sharing of the reservoir shall be determined within the knowledge of the General Directorate.

PART SIX

Notices

Principles regarding the Notices

ARTICLE 19 - (1) Notices to be made pursuant to the related legislation shall be made in writing and/or in electronic environment by the legal representatives or the agents of the petroleum right holder. The notices should include the investigation permit, exploration license and production lease constituting the subject of the notice, the subject of the notice and name/title and signature of the petroleum right holder making the notice.

(2) If the papers and its annexes have information and documents in a foreign language, translations of these into Turkish made by sworn translation offices attached to notaries shall also be included.

(3) If the notices are not sent on time or sent incomplete, action shall be taken as per the paragraph 2 of the Article 23 of the Law.

Types of Notices

ARTICLE 20 – (1) Notices to the General Directorate shall be made periodically or based on the condition. In the notices to be made and in the preparation of the annexes of the notices, the content of the "Annex on Notices" shall be taken into account.

  1. a) Periodical notices

1) Annual activity report: In compliance with the form in annex-20, annex-21, annex-22 and annex-23, investigator, explorer or operators shall separately prepare and submit a report to the General Directorate on the petroleum operations they realized in the last calendar year on the basis of each permit or license, within the first forty five days of the following year.

2) Annual activity program: In exploration and productions to be made on the basis of each permit or license and in the acquisitions of license, on the condition that there are additions to the presented work program, the investigator, explorer or operator shall separately submit the program of investigation activities to the General Directorate within the first forty five days of the year in compliance with the form in annex-24 and annex-25.

3) Monthly activity report: In compliance with the form in annex-26 and annex-27, the investigator, explorer and operator shall separately prepare and submit a report to the General Directorate on the petroleum operations they made within each calendar month on the basis of each permit or license within the first fifteen working days of the following month.

4) Monthly report on the discharge of waste water: In compliance with the form in annex-28, monthly information on the discharge of waste water resulting from the petroleum operations shall be prepared and submitted to the General Directorate within the first fifteen working days of the following month.

5) Royalty declaration: With the declaration prepared in compliance with the annex-29 and annex-30, explorers and operators shall submit the true copies of the sale invoices for natural gas and market price calculation tables on the basis of fields for crude oil to the General Directorate until the end of the twentieth working day of the month following the month of production. Moreover, true copies of the sales contracts regarding the natural gas shall be given to the General Directorate with the declaration in the month following the signature of the contract.

6) Weekly drilling report: In compliance with the form in annex-31, investigators, explorers and operators shall prepare and present a report to the General Directorate on the drilling operations made in the previous week within the first working day of the following week. When deemed necessary, the General Directorate may require daily reports by considering the nature and progress of the drilling operation. These daily reports may be prepared in compliance with the form of weekly information or a separate form may be introduced serving this aim.

  1. b) Notices based on condition

1) Notice on the well program and start of drilling: In compliance with the for in annex-32, the petroleum right holder companies shall prepare and submit a drilling program for each well to be drilled or re-drilled at least ten working days prior to the start of the operation to the General Directorate. Notice on the start of the drilling shall be submitted to the General Directorate three days in advance.

2) Well completion report: "Well Completion Report" regarding the investigation, exploration, production and appraisal wells, prepared in compliance with the form in annex-33, and analysis reports and the samples of any kind of cores, cuttings and samples taken in accordance with the criteria set out in annex-37 shall be submitted to the General Directorate within sixty days following the completion of the well.

3) Abandonment report: Information and documents regarding the investigation made in the field related with the exploration license terminated because of abandonment, partial abandonment, termination or expiry of the time periods or made outside the field for the benefit of the concerned field, and regarding all the operations made within the exploration field shall be prepared as one original and a copy in compliance with the form in annex-34 and submit to the General Directorate within sixty days following the termination of the right.

4) Notice of the petroleum finding: If the presence of petroleum is determined in the exploration well, this shall be notified to the General Directorate in compliance with the form in annex-36.

5) Notice of discovery: If the production tests made after the finding of petroleum in the exploration well point to the possibility of commercial production, this shall be notified to the General Directorate within thirty days at the latest, in compliance with the form on annex-18.

6) Notice of dangerous act: When conditions threatening the petroleum operations emerge, the petroleum right holder shall primarily and immediately inform the General Directorate and other petroleum right holders that may be affected about the matter as well as the precautions taken.

(2) Petroleum right holders or contractors or their facility managers cannot avoid providing information and documents to the General Directorate on the grounds that they are confidential.

PART SEVEN

Transfer and Granting of Rights, Expropriation and Utilisation Right

Procedures and principles regarding transfers and granting of rights

ARTICLE 21 - (1) Exploration license and the production lease may be the subject of contracts on immovable and granting of rights necessitating the utilisation of petroleum rights and they may be divided into shares.

(2) With regard to the performance of the rights and obligations necessitated by the petroleum right, in accordance with the purpose of law, the General Directorate may refuse the request regarding the operations of encumbrance or transfer of rights to persons who are not found sufficient in terms of financial and technical capacity, and who are deemed insufficient in sector experience.

(3) When the petroleum rights stated in the paragraph 1 above are owned by more than one person or when a separate person owns the right necessitating the utilisation of one of these rights, if one of these persons acts against the Articles 6, 9, 10, 11, 15, 16, 18, 19 and 22 of the Law and the fourth paragraph given below, the consequences and sanctions stemming from the Law shall be implemented regardless of the right holders, the contracts among them and without considering whether they have displayed a misconduct or not. Consequences and sanctions resulting from the non-performance of the obligations and liabilities stemming from the Law and this Regulation shall be imposed to the petroleum right holders in proportion to their shares and the scope of the rights.

(4) In order to enable more than one person to own an exploration license and production lease and one of the petroleum rights stemming from these and a right based on these rights, it is obligatory that a joint representative be assigned.

Procedures and principles regarding the expropriation and the utilisation right

ARTICLE 22 - (1) All the applications regarding the expropriation and utilisation right shall be made to the General Directorate with the documents listed in annex-13, in accordance with the provisions of the Law and this Regulation. Expropriation decision to be given by the Ministry shall serve for the public welfare and the subsequent operations shall be carried out pursuant to the provisions of the Expropriation Law No. 2942 dated 4/11/1983.

(2) If the field which is the subject of utilisation right belongs to the Treasury or under the heel and disposal of the state, requests deemed appropriate by the General Directorate shall be submitted to Ministry of Finance to act accordingly.

(3) Ownership of the expropriated immovable shall belong to the Treasury, and the utilisation right shall belong to the petroleum right holder paying the expropriation price. Utilisation right expect for the lease agreement shall be granted in the name of the petroleum right holder by recording it to the land registry. These shall constitute a part of the investigation license, exploration license and production lease and shall continue during the period of lease and license.

4) The opinion of General Directorate and licence holder is asked to rent the private property of the Treasury or places under the disposal of State by Ministry of Finance except for petroleum exploration and production activities.

PART EIGHT

Licensing through Public Auction, Abandonment and Additions to Fields and Removal and Transfer of Facilities

Procedures and principles regarding the licensing through public auction

ARTICLE 23 - (1) In granting exploration license and production lease through auction sale,

  1. a) For non-licensed fields determined to bear high potential in terms of the presence of petroleum, as a result of the examination of the current underground data obtained from the petroleum activities, in the archives of the General Directorate, exploration license may be granted through auction sale, unlike the application and licensing procedure stated in the Article 7 of the Law. Decision of auction sale shall be granted by the General Directorate. Proposals regarding the public auction shall be carried out through the comparison of the work program and investment proposals to be presented by the investors for this field within the framework of the technical specifications prepared by the General Directorate.
  2. b) Field whose production lease has terminated may be put up for public auction for the production lease, after the approval of the Minister, if not requested by the Turkish Petroleum Corporation. One year prior to the termination of the production right, the operator shall notify the General Directorate of the inventory of all the underground and surface facilities in the filed which is the subject of public auction, and necessary to maintain production, together with the prices required for each. General Directorate shall include these facilities and the equipment under the auction specifications.
  3. c) Operations of public auction regarding the licensing in the subparagraphs (a) and (b) of the paragraph 1 shall be carried out by the General Directorate as stated in the paragraphs below.

(2) Organization, working procedures and principles of the tender committee shall be determined by the Ministry.

(3) Public auction of the field shall be announced in the Official Gazette and in the web-site of the General Directorate, at least thirty days prior to the deadline of the acceptance of the proposals. When deemed necessary, public auction of the field may also be announced abroad.

(4) Tender notice shall include information on the deadline, hour, and the place of the letter of proposal, the amount of the loss and damage bond, the geology, coordinates and the map section of the field; and the information that the General Directorate may review the specifications and the underground data regarding the field, may copy them; and that the General Directorate shall not be responsible for the delays and damage occurred during the postal service; and the information on the date, hour and place of opening of letters of proposal. Moreover, besides the other matters to be deemed necessary by the committee, it shall be clearly stated that the tender committee shall be free to carry out a tender.

(5) Public auction shall be carried out through sealed tender. Letter of proposal shall be put in an envelope, the envelope shall be sealed and the name and address of the bidder shall be written on the envelope.

  1. a) Map sections and coordinates of the fields, with a declaration stating that the specification has been approved economic benefits ensured to the state shall be included in the letter of proposal. Letters of proposal may be given to the General Directorate by hand or may also be sent, enclosed in a second envelope, by return-receipt registered mail.
  2. b) A bidder may file a letter of proposal more favourable than its previous one until the last hour at which letters of proposal must be submitted.

(6) Following the end of the bidding period, letters of proposal shall be numbered in accordance with their sequence of filing and given to the chairman of the tender committee against a receipt. All the proposals received after the announced date shall be recorded in a minute and shall not be processed.

(7) Opening of the letters of proposals and the following proceedings are as follows:

  1. a) On the day and at the hour designated or opening of the letters of proposal, the minutes on the receipt thereof shall be read out and signed by the members of the tender committee prior to opening the letters of proposal and the envelopes shall be opened per numerical order and the contents thereof shall be studied.
  2. b) Tender committee shall evaluate the proposals by considering the taking into consideration the conformity of the letter of proposal to legislation; the compliance of the bidder with legislation during its past activities, the experience, financial capacity and order of application of the bidder and the "economic benefits to the state" and shall conclude them within thirty days. The company winning the auction shall be asked to deposit the bond stated in the paragraph 8 of the Article 22 of the Law, within the period stipulated in this Regulation. If the bidder does not deposit the bond, proposal of the next bidder may be evaluated.
  3. c) Provisions on licensing shall be applied in accordance with the related articles of the Law and this Regulation.

Abandonment, Additions to Fields and Removal and Transfer of Facilities

ARTICLE 24 - (1) Petroleum right holder may abandon its exploration license, production lease and investigation permit within the periods stated in the first paragraph of the Article 11 of the Law. Inventory of the underground and surface facilities in the field and detailed layout plans shall be provided together with the application for abandonment made before the abandonment. The way and duration of the removal of these facilities and equipment in the field shall be presented to the General Directorate in compliance with the form in annex-34. Except the production lease, petroleum right holder shall remove the facilities in the fields to be abandoned until the termination date of the right.

(2) Following the termination of the utilisation rights, petroleum right holder shall restore the field not for commercial activities. On the condition that the petroleum right holder does not remove movable and immovables within six months following the termination of the right, ownership of the movables and immovable shall be transferred to the land owner.

(3) Petroleum right holder shall be obliged to fully compensate and pay to the person who is the possessor or owner of the field the production cost or operating cost that owner of the field could not receive, as well as the damage to the properties and facilities in this field or in its surroundings.

In order to compensate the damage from the loss and damage bond of the petroleum right holder, in the General Directorate, it is obligatory to present the finalized decision of the court. If any, the residual damage shall be covered by the petroleum right holder.

(4) Transfer of the terminated production lease shall be carried out as follows:

  1. a) In the production leases to be given to the Turkish Petroleum Corporation or to be put in auction, for the maintenance of production, the General Directorate shall submit the proposal to the new right holder that will take over the operation over the prices required by the present operator for all necessary underground and surface facilities and the equipment. Cost of the protection pipes used within the scope of the program of drilling and finalization of wells for the production in wells and the protection of the environment shall not be taken into account in the price to be appraised.
  2. b) The committee shall be composed of at least five members. In the committee, transferor and transferee shall be represented by one representative for each. Working procedures and principles of the committee shall be determined by the Ministry.
  3. c) Price appraisal committee shall meet with at least three participants and take decisions by absolute majority of the total number of its members. Substitute member shall attend the meeting when the permanent member cannot attend because of an excuse. Abstention shall not be allowed.

ç) If an agreement is not reached on the price determined by the valuation committee, present facilities and equipment shall be transferred to the Ministry free of charge, in accordance with the paragraph 4 of the Article 11 of the Law. In this case, parties shall not be allowed to propose the removal of the facilities and equipment that may lead to a decrease or halt of production in the production field. If required by the new right holder within thirty days, the Ministry shall realize the transfer over the price determined by the valuation committee. In the case that the new right holder does not want to take over the facilities with the appraised price, it shall be deemed that the enterprise has waived from its request for lease. Accordingly, production lease shall be put up again for auction. Until the conclusion of the auction and the lease is transferred to its new holder, the Ministry shall take the necessary precautions to ensure the maintenance of production.

PART NINE

Financial Obligations and Bonds

Type of the bond

ARTICLE 25 - (1) In accordance with the Articles 6, 7 and 22 of the Law, petroleum right holders shall be obliged to submit the letter of guarantee indicating the amount of the bond, issued by the banks and complies with the form in annex-51 to the General Directorate. It is essential that the letters of guarantee is given for an indefinite period of time.

Loss and damage bond

ARTICLE 26 - (1) The applicants who have been found suitable and decided to be granted a license shall be obliged to submit the amount of the bond corresponding to the loss and damage that may emerge during the petroleum operation, before obtaining each investigation permit, exploration license and production lease. If the Council of Ministers changes the below-given ratios, petroleum right holders shall adapt the bonds given previously to the new amounts within two months. Based on the total amount determined within the framework of the headings of "I. Registration Process for Petroleum" and "II. Licenses" under the Chapter (IV) "Petroleum Operations" of the Tariff No.8, which is re-determined each year by the Ministry of Finance according to Law No. 492 bonds corresponding to the below-specified amounts shall be taken

  1. a) For investigation permits, five ten thousandths per hectare of the investigation permit registration fee,
  2. b) For exploration licenses, one thousandth per hectare of the exploration license registration fee,
  3. c) For production leases, five thousandths per hectare of the production lease registration fee.

(2) When it is determined that the damage cannot be covered with the bond previously taken from petroleum right holder, the holder shall be asked to compensate the damage petroleum right holder shall take the necessary action immediately as required by the notice. If the petroleum right holder does not obey this, its investigation permit, exploration license or production lease shall be cancelled.

(3) General Directorate shall intervene in the matter as soon as it is informed that a dangerous act has emerged, and when necessary, on-site surveys and inspections shall be carried out and accordingly a report shall be written. As a result of the inspection carried out, petroleum right holder may be asked to immediately halt the petroleum operations or to take some precautions in line with the act. Depending on the act, petroleum right holder may be allowed to a period of ninety days to prevent the dangerous act. ıf the dangerous act cannot be prevented within the given period, an additional forty five days may be allowed by the General Directorate after an examination made. Moreover, whether the necessary operations to prevent the act have been made or not shall be controlled. Following this control, if it is determined that the necessary precautions have not been taken and the damage has not been covered, General Directorate shall ensure the recovery and compensation of the damage by imposing the cost to the petroleum right holder. To this end, firstly petroleum right holder shall be asked to recover the damage. If the petroleum right holder does not recover the damage directly, the letter of guarantee previously given to the General Directorate shall be utilised. When the amount of this bond is not sufficient, other resources of the petroleum right holder, determined by the General Directorate shall be used accordingly..

(4) Upon the termination of the petroleum right, this shall be announced in the Official Gazette. If the General Directorate does not determine any loss or damage occurred during the petroleum operation or ıf third parties do not claim any right with the decision of an authorized court within a year following the announcement, the bond shall be returned to the right holder at the end of one year.

(5) When and loss and damage occurred, remaining part of the bond shall be returned after the compensation of the damage.

(6) Loss and damage bond shall not be returned if the petroleum right holder does not submit the information and documents regarding its work on the abandoned field, in compliance with the forms described in the notices and in due time.

Investment Bond

ARTICLE 27 - (1) Exploration license applicant shall be obliged to present a bond corresponding to the investment amount committed for the work program mentioned in the Article 7 of the Law. Work and investment program shall be prepared annually in detail. The bond covering the total amount of the annual work program shall be taken totally at once.

(2) Petroleum right holder shall separately present a bond corresponding to the amount of the work program to be given regarding the additions to the exploration field stated in the Article 11 of the Law, and the time extensions of the exploration license stated in the Article 6 of the Law.

Returning the bonds

ARTICLE 28 - (1) In returning the bonds taken for the work and investment programs, actual realization rates of the work programs shall be taken into account;

  1. a) realization of the work and investment program shall primarily be evaluated through the notices of the petroleum right holder.
  2. b) when the notices presented to the General Directorate are not found sufficient for the evaluation, additional information and documents shall be required from the petroleum right holder. Accordingly, the petroleum right holder shall be obliged to present the required information and documents immediately.
  3. c) If a conclusion is not reached based on the above mentioned notices, additional information and documents, on-site surveys and inspections shall be carried out.

(2) Except the conditions of force majeure stated in the Law, when the explorer realizes the work and investment program for each year fully, the corresponding bond shall be returned.

(3) When the annual work program is realized partially, the amount of the bond corresponding to the not-realized part of the program shall be notified to the right holder in writing and shall be recorded as revenue by the General Directorate. The remaining part shall be returned. However, if the right holder deposits the mentioned amount to the account to be opened before the accounting department by Ministry in fifteen days, following the receipt of the notification about the amount of the bond corresponding to the not realized part of the program, the bond of that year shall be returned to the petroleum right holder.

(4) The bond given fort the time extension of an exploration license shall be returned on the condition that the work program is totally realized at the end of the time extended. If the work program cannot be realized, partially realized, or abandoned or cancelled before the realization, if any, the remaining part of the bond shall be recorded as revenue.

(5) When the exploration license terminates, is abandoned or cancelled, the part of the amount of the work program corresponding to the not-realized part shall be recorded as revenue and the remaining shall be returned.

PART TEN

Procedures and Principles related with Royalty

Procedures and Principles related with Royalty

ARTICLE 29 - (1) A royalty shall be collected from petroleum that is produced by a petroleum right holder according to the percentages and principles set out in Article 9 of the Law. Royalty shall be paid in cash.

(2) Petroleum subject to royalty payment shall be calculated in accordance with the procedures prevailing in the petroleum industry; in barrel for crude oil and in cubic meter units for the natural gas.

(3) If the petroleum subject to royalty has not been or cannot be measured for reasons beyond the control of the right holder as approved by the General Directorate, the quantity shall be estimated on the basis of pressure decline, production decline, or oil-gas-water equilibrium or one of the other sound and acceptable methods or combination of such methods.

(4) – No royalty shall be paid for the petroleum which is injected underground into the same or another reservoir, required to be released into the air by evaporation or burnt and for the petroleum which is lost and for the petroleum used in the petroleum activities so that more petroleum can be produced in a faster and more efficient manner during the exploration, development and production activities carried out by the petroleum right holder for the exploration and production areas. The amount of the lost petroleum which is not subject to royalty payment shall not exceed the five per thousand of the production. However, the petroleum right holder shall be liable to take the necessary measures for the use of the natural resources in the petroleum industry in good faith and in the most efficient manner during the production. If the General Directorate concludes that a loss has been incurred since these measures have not been taken, royalty shall become payable for this lost petroleum.

(5) The assessment period for royalty is one month. Royalty shall be assessed for each license or lease area separately.

(6) The amount of royalty to be assessed shall be calculated by multiplying one eighth of the total petroleum produced during the assessment period from the exploration or production area by the market price.

(7) The petroleum right holder shall submit the royalty declaration to the General Directorate, within the first twenty days of the month following the month when the petroleum is produced. The declarations shall be accrued by the General Directorate until the end of the related month at the latest. If the statement that should be given by the petroleum right holder is given after twentieth of the month that the royalty accrued, the Law of sub paragraph (f) of the paragraph 2 of the Article 23 of the Law shall be applied; however, if the statement is given after the accrual period, paragraph 7 of the Article 9 of the Law shall apply.

(8) Following the royalty assessment realized upon declaration, a royalty shall be levied by the General Directorate for the differences found on the basis of legal measures or material evidence. Objections against the notification of this additional assessment may be made to the Minister. The objection shall cease the collection of the amount in dispute. If the Minister finds the objection justified within thirty days, he/she shall have the action corrected.

(9) The royalty shall be paid in one lump to the tax office to which the petroleum right holder is attached in terms of income or corporation tax. An original receipt evidencing the payment shall be delivered to the General Directorate within five working days following the payment.

(10) Upon the request of the Ministry, the royalty may be paid in kind. The crude oil to be delivered to the credit of the Government in the producer's tankage shall be stored in these tanks free of charge for a period of 60 days. Accordingly, the costs of delivery from the well to the storage location shall be borne by the company of petroleum right holder. For petroleum stored longer than this period, the producer shall pay the market price and use the petroleum for his own purposes. The 60-day period for free storage shall commence from the date of receipt by the General Directorate of the notice from the petroleum right holder that the petroleum is available for the delivery.

(11) In the collection of the royalty, the provisions of the Law on the Procedure for the Collection of Public Receivables No. 6183 shall be applied.

(12) Within the scope of the underground storage activities for natural gas:

  1. a) An operator shall get the permission of the General Directorate for the storage of the gas produced or supplied outside in its petroleum reservoirs.
  2. b) An operator shall notify the General Directorate the storage capacity of the relevant area, the pressure of the reservoir, the gas which cannot be produced in the reservoir, cushion gas to be utilized, the amount of the gas injected and recovered.
  3. c) The area permitted for the underground storage of the natural gas shall be closed to the research, exploration and production activities.

ç) Royalty shall be payable over the increase rate in the production of the potential gas in the reservoirs following the injection and recovery of the natural gas supplied for the underground storage and over the crude oil produced after the treatment of the gas.

  1. d) The drilling wells to be dig up by the operator within the scope of the activities related with the underground storage of the natural gas as well as the materials and equipment to be utilized for these activities shall be excluded from the petroleum operations.

13)Petroleum right holder shall be obliged to establish and operate the automation system which General Directorate can instantaneously follow the information about gross and net production of the field in an electronic platform.

14) Measurement devices should be placed on the lines to wellhead, compressors and generators and on the flare line separately, and the data received should be submitted to the General Directorate on a monthly basis.

PART ELEVEN

Taxation, Deductions and Valuation

Procedures and Principles related with Taxation

ARTICLE 30 – (1) Provided that the provisions of the Law relating to taxation are reserved, the provisions of the Law on Income Tax No. 193 and dated 31/12/1960, Corporation Tax Law No. 5520 and dated 13/6/2006, other Laws relating to taxes, duties and fees, the Tax Procedure Law No. 213 as well as the Law on the Procedure for the Collection of Public Receivables No. 6183, attachments and modifications thereof shall also be apply for the petroleum right holders.

(2) General provisions of this Regulation relating to taxation shall be applied only to the the activities and consequences related with the petroleum operation of the petroleum right holder. General provisions shall be applied to activities of the petroleum right holder, which remain outside of its petroleum operations. If the petroleum right holder conducts the petroleum operations together with the other remaining activities, the holder shall keep separate records of accounting on the basis of sub-accounts and they shall be subject to taxes.

(3) Income earned by saving the revenue of the petroleum operations in banks and financial institutions as well as the income earned from the sale and lease of the machines and devices and from the exchange difference shall be deemed to have been realized from the petroleum operations. However, these incomes should be used for petroleum operations in order to be considered as capital assets.

(4) If two or more petroleum right holders merge their petroleum operation with the approval of the General Directorate, they shall be subject to taxation separately as if they are conducting operations independently and in their own name and behalf.

(5) Income earned from the petroleum operations shall be subject to Corporation Tax. Moreover, the petroleum right holder shall be obliged to withhold and declare the taxes stipulated by the Income Tax Law No. 193 and the Corporation Tax Law No. 5520.

(6) Net income subject to taxation shall be calculated in accordance with the Corporation Tax Law No. 5520, taking also account the deductions under Article 12 of the Law and the principles set forth in this Regulation.

(7) The sum, which the petroleum right holder is obliged to pay, of the corporation tax and the tax to be withheld under the Income Tax Law No 193 and Corporation Tax Law No. 5520 shall not exceed 55 % of the net income.

(8) Except for Royalty, a petroleum right holder's revenues derived from production in return for the capital that corresponds to its investment in the petroleum operations shall be exempt from the income and corporation taxes:

  1. a) For the foreign corporations axed on the basis of limited obligation, until the recovery of the capital calculated on the current exchange rate and
  2. b) until the investment amount is converted to expenditure through amortization will considered as redemption under the Tax Procedure Law No. 213 for national companies that are taxed on the basis of full obligation.

(9) The provisions laid down in the paragraph 7 above shall also apply to the amounts remaining from capital that a petroleum right holder has imported in foreign currency in the past years pursuant to repealed Petroleum Law No. 6326, but has not yet been remitted.

Deductions

ARTICLE 31 - (1) Petroleum right holder may deduct from its gross income the expenses allowed under the Petroleum Law and the Income Tax Law No. 193 and Corporation Tax Law No 5520, provided that such expenses are related to the taxation period and have been incurred.

(3) Activation of the exploration costs drilling costs, and costs of drilling and abandonment of wells not productive for the national economy, which have been approved by the Ministry shall be arbitrary. In this context, exploration costs of the petroleum right holder, drilling costs and economic value except for the drilling and abandonment costs of wells which are not economic in terms of production, acquisition of this economic value and other costs regarding installation of the materials shall be reimbursed by recording these costs as expense in line with the preference of the petroleum right holder or by activating them through amortisation. The amortisation rates to be applied for these expenses that have been capitalized and activated shall be determined jointly by the Ministry and the Ministry of Finance, by taking into account reserve status for each petroleum field separately pursuant to the provisions of Article 316 of Law No. 213. However, the cost and the value of the part of the petroleum field assigned for a purpose other than petroleum production, as well as, the residual value to the petroleum right holder of petroleum field, on the date of termination of the operation shall be deducted in proportion to amortisation.

PART TWELVE

Determination of the Value of Capital Assets and the Capital

Capital

ARTICLE 32 - (1) The General Directorate shall "decide to appraise the value" of imported cash funds which are used in the petroleum operations by the petroleum right holder, the rights thereto and the value of the materials which form a part of the capital assets and of other assets.

(2) Except for materials having a economic life of less than one year, the transfer and export of other materials shall be made and declared on the basis of their current value. If required, the General Directorate shall be authorized to appraise the current value of the material.

(3) The amount obtained as a result of deducting the transfers made abroad and the sales income retained abroad from the sum of all cash funds, the materials and other assets detected by the General Directorate shall constitute the capital of the petroleum right holder.

(4) Petroleum right holders shall prepare the declaration of cash funds used for the petroleum operations and the declaration indicating the features and values of the materials and other assets

  1. a) for the cash funds, within thirty days as of receiving the foreign currency purchase voucher
  2. b) for materials, within 6 months at the latest as of entry date to the customs c) for the other assets, within six months at the latest following the payment, in accordance with the form laid down in annex- 38 and shall submit these to the General Directorate

(5) The originals of foreign currency purchase vouchers issued by the bank which converted the money into Turkish liras and required to be attached to the import declarations submitted to the General Directorate for the registration of the cash funds imported to Turkey and their rights thereto should bear the expression as "the foreign currency imported to be used in petroleum operations in Turkey" and be approved by the bank.

(6) A petroleum right holder shall prepare the documents and the declaration in accordance with annex-38 in order to ensure the determination and assignment of the materials and other assets which are the parts of capital assets other than the cash funds imported to be used on its behalf in petroleum operations in Turkey by itself or by its representative or a contractor agreed by the General Directorate and.

(7) Registration of the bills provided with regard to import declarations but whose scope has not been not stated clearly.

(8) As regards the transfers and exports of the materials whose value has decided to be appraised;

  1. a) in case of the export and transfer of the materials declared as imported capitals, the lists of transfer and export shall be attached to the "deduction" declaration which includes the date of imports by the petroleum right holder.
  2. b) The import declaration shall be submitted to the General Directorate within thirty days as of the transfer operations in the customs so that the petroleum right holder can register the transferred material as the imported capital and this declaration shall include the permission, lists and payment vouchers of the transfers.
  3. c) The transferee and transferring companies should submit their deduction and registration declarations to the General Directorate within the same period; the registration shall not be made without submitting the deduction declaration.

ç) Foreign currency purchase rate of the Turkish Central Bank at the time of the transfers of customs shall be based on for the registration operations.

(9) No transfer or deduction may be made for the registration operations regarding the imported cash funds and other assets.

(10) As regards the registration of other assets;

  1. a) The expenses of the Head Office:

1) The expenses paid by the head office of the foreign capital company and listed in annex-39 shall be subject to the registration of the capital.

2) Accredited independent supervisory organizations shall examine and prepare a report on the expenditures of the head office regarding the petroleum operation of the company in Turkey. The report shall be approved by the Turkish Consulate of the country where the head office is located in and submitted to the General Directorate. However, the expenditures declared and incurred for the work of the head office which exceed fifty per cent of the expenditures incurred for the office work in Turkey shall not be taken into consideration.

3) Petroleum right holder companies shall submit their service contracts to be concluded so as to detect that the service which will be paid by the head offices is related with petroleum operations and to check the costs to the General Directorate. The service contracts to be concluded between the petroleum right holder company and the companies affiliated to the same head office and established in other countries shall be considered as the expenses of the head office.

4) "Import dates" of the expenses considered as incurred by the head office shall be the invoice date issued by the head office on behalf of its branch in Turkey.

  1. b) Payments made to the contracting companies;

1) Petroleum right holder companies shall submit the contractor agreements with the contracting companies as well as the contracts on some services carried out abroad or within the country such as counselling, laboratory, consultation, evaluation of the seismic data to the General Directorate. Petroleum right holder companies may request to register the expenses related with these services as imported capital. The receipt which details the service realized and its net price as well as the payment voucher shall be attached to the import declaration.

2) "Import date" of the service charge is the date of the ex officio payment.

3) The originals of payment vouchers issued and approved by the bank which made the payment should bear the invoice of the payment and the expression as "paid by the foreign currency imported to be used in petroleum operations in Turkey".

4) The services to be carried out for the registration of the charges of the services mentioned in other assets apart from the capital assets imported to Turkey in order to be used in petroleum operations should be based on a contract, approved by the General Directorate and the service charges requested to be registered should incur within the periods specified in the contract.

(11) The services received for the petroleum operations (expenses made for books, magazines, mails and transfer of the materials etc.) may be registered as imported capital. "Import date" is the date of the ex officio payment.

(12) In case of payments of the service charges in advance or in cash, "import date" is the invoice date of the relevant service.

(13) In order to register the transportation, accommodation and daily expenses of the personnel assigned for a temporary duty in Turkey by the head office as imported capital, the information that the visit is directly related with the petroleum operations, the date of arrival in and departure of the personnel from Turkey, the location, period and the kind of the job shall be defined in the import declaration separately.

(14) Other documents required during the evaluation process shall be submitted to the General Directorate within thirty days as of the date of the request.

(15) The General Directorate shall examine the declarations submitted by the petroleum right holder and give its decision within ninety days following the delivery of the documents.

(16) If the scrap materials whose economic lives have terminated are transferred to the public organizations free of charge, the tax and duty exception on the material shall remain. No revision can be made on the imported capital assets of the petroleum right holder in terms of this free transfer. This provision shall also prevail for materials which are ten years old, as of its import date.

PART THIRTEEN

Revenues from the Sales of Petroleum

Revenues from the exported petroleum

ARTICLE 33 - (1) In the event that petroleum right holder companies save their revenues derived from the exported petroleum abroad, this revenue shall be set off from the capital that corresponds to its investment in the petroleum operations or if any, from the net assets exceeding this capital.

(2) Petroleum right holder shall quarterly communicate the amount of its exported petroleum and the revenues thereof in currencies as well as its equivalent in Turkish liras, details of the customs operations and other related documents to the General Directorate.

3) The amount of export revenue savings obtained by the petroleum right holder shall be subject to the Decree No 32 on the Protection of the Value of the Turkish Currency attached to the Decision of the Council of Ministers No. 89/14391 and dated 08.07.1989, and the provisions of the legislation issued on the basis of this Decree.

PART FOURTEEN

Capital Transfers

Transfers

ARTICLE 34 - (1) A petroleum right holder shall submit the transfer declaration prepared in accordance with the sample form specified in annex-40 for the transfer of its revenues abroad derived from the petroleum operations, to the General Directorate.

(2) Any taxes, duties, fees and royalties not paid despite being payable shall be deducted from the cash funds to be transferred abroad by a petroleum right holder. If this sum exceeds the cash funds, no transfer shall be made in cash.

(3) The transfers of a petroleum right holder in return for the registered capital shall be based on the type of currency imported.

(4) A petroleum right holder may, upon application to the General Directorate, quarterly transfer abroad its transferable net assets exceeding its capital within the current year. The requests for transfers not submitted within the due time may be made in the forthcoming period of declaration. A final transfer declaration made following the submission of the corporate tax declaration shall be examined by the General Directorate and the quarterly transfers within the current year shall be set-off. The amounts which have not been set off shall be set off from the transfers in the forthcoming periods. In the absence of settlement, the extra amounts transferred shall be returned. The set-off date is the one month period following the last date of the final transfer declaration. A petroleum right holder shall submit the declaration regarding the set-off of the transferable net assets exceeding its capital to the General Directorate during the first transfer application.

(5) The details of requests for transfers by a petroleum right holder shall be examined by the General Directorate and a decision shall be given within sixty days at the latest. Following the examination, the General Directorate may approve the transfer of available cash funds and the rights thereof and the required order shall be given in writing to the bank specified or to be specified by a petroleum right holder in its declaration, and a copy of this document shall also be communicated to the petroleum right holder. The sums approved by the General Directorate for transfers may be transferred abroad free of any taxes and without a permission of any other institution.

(6) The transfer operations shall be realized in accordance with provisions laid down in the legislation of Turkish Central Bank, the Decree No. 32 on the Protection of the Value of Turkish Currency and the Regulation, Notification and Circulars issued on the basis of the mentioned Decree.

(7) A petroleum right holder may freely transfer its revenues derived from the activities and operations in Turkey as well as its registered capital abroad over the current exchange rate by banks or private financial institutions with the approval of the General Directorate and within the framework of the provisions set forth in the relevant legislation. Within ten days following the transfer, the detailed documents on the transfer shall be submitted to the General Directorate.

(8) The revenues derived from some operations apart from the ones on petroleum such as investing the cash funds, sales of materials, hiring personnel and contractor agreements shall be included in the capital assets provided that they are utilized for petroleum operations. The revenues derived and expenditures shall be communicated to the General Directorate within the first ten working days of each month in compliance with annex-41. Upon a request of the company, the revenues derived from the operations apart from the ones on petroleum shall be registered and be subject to the transfer in accordance with the same principles for cash funds.

PART FIFTEEN

Import, Sale, and Transfer, Export of the Materials and Subcontracting of Petroleum Operations, Import of Operatorship Agreement Materials,

Import

ARTICLE 35 - (1) A petroleum right holder shall apply to the General Directorate by submitting the form shown in annex-42 for the import of the materials to be used in petroleum operations. It shall be clearly explained in the form that the material to be imported will be used for exploration or production purposes.

(2) If a petroleum right holder has a contractor carry out petroleum operations, a copy of the contract signed with the contractor as well as the relevant documents shall be submitted to the General Directorate. The petroleum right holder shall be informed following the examination of the written contract and the documents.

(3) For materials to be imported by the contractor on behalf of the petroleum right holder and to be used for petroleum operations, the application form shown in annex- 43 including a certification by the petroleum right holder shall be submitted to the General Directorate.

(4) In addition to the application forms specified in paragraphs 1 and 3 above, one original and four copies of the invoice related to the material intended to be imported as well as the five copies of certified translations shall be submitted. Following the evaluation of the application, the General Directorate shall notify the related Customs Directorate in writing that the importation is free of any tariffs and custom taxes, fees and duties as well as any domestic taxes, duties and fees.

(5) The import of the material which is not found necessary for the petroleum operations by the General Directorate shall be realized in accordance with the general provisions.

(6) It is at the discretion of the General Directorate to approve the import of the material used or renewed and which may be requested for the petroleum operations. Import process for such materials cannot be initiated without a prior permission of the General Directorate.

(7) The permissions given by the General Directorate for import, export and transfer shall be valid for sixty days as of their issue date.

(8) A petroleum right holder shall be liable to notify the General Directorate about the imported materials used for petroleum operations on the following basis;

  1. a) for the materials used, within the sixty days following the end of the year,
  2. b) when their ownership of right or title of contractor ends,
  3. c) by keeping every device and construction equipment imported without any fees or duties in a parking area when the work has been completed.

ç) by keeping the other materials at any place.

(9) A petroleum right holder shall be obliged to notify the General Directorate about where and how the drilling rig, seismic equipment and materials in particular have been used until the fifteenth day of the forthcoming month on a regular basis.

10) For the purpose of the modernization of the drilling rigs, seismic equipment and construction vehicles, the imported materials except consumable materials, cannot be used in any other activities rather than petroleum operations for a period of ten years as of import date.

(11) Petroleum right holders shall notify the General Directorate in writing if they use the materials which are imported free of any tariffs, taxes and duties as per the paragraph 1 of Article 13 of the Law and which have been in use for more than ten years besides the land vehicles for operations rather than the petroleum ones..

(12) If drilling rigs and equipment are used for geothermal activities without the permission from the Ministry, administrative measures shall apply as per the first sub-paragraph of Article 13 of the Law.

(13) The list which will be submitted to the Council of Ministers regarding the materials produced in Turkey in sufficient amounts and comparable to the imported materials mentioned in the first paragraph of Article 13 of the Law shall be determined by a commission consisting of the representatives from the Ministry, the Ministry of Science, Industry and Technology, the Ministry of Economy, the Ministry of Customs and Trade and other relevant public organizations and institutions if required. The Ministry shall notify the above mentioned organizations and institutions in writing about the work program for the purpose of preparing the list at least two months before and shall ask them to inform their representatives for the commission. The list to be prepared by this commission shall be submitted to the Council of Ministers by the Ministry. Following its approval by the Ministry, the list shall be effective as of its publication date in the Official Gazette.

Transfer and Sale of the Material

ARTICLE 36 - (1) By informing the General Directorate, materials imported under exemption or supplied within the country may be transferred to another petroleum right holder entitled to exemption, to its contractor approved by the General Directorate, free of tariffs, other import taxes and duties as well as any domestic taxes, duties and fees.

(2) Applications for transfer shall be made to the General Directorate, with the transferor and the transferee, including the list of transfers issued according to the form shown in annex-44. The General Directorate shall inform the Customs Directorate that the transferee is a petroleum right holder, his representative or contractor entitled to exemption. Under these conditions, the exemption for the materials transferred shall continue.

(3) If the export surplus materials, and scarp which have been imported with exemption to be used in petroleum operations by the petroleum right holder or its contractor and which have completed 10 years from the import date are wanted to be transferred or sold to real or legal entities not entitled to exemption within the scope of this law or if they are required to be used thereof in an activity not considered as a petroleum operation i by the petroleum right holder, the General Directorate shall approve this transfer or use pursuant to the provisions set forth in the paragraph 3 of the Article 13 of the Law. The General Directorate shall inform the relevant Customs Directorate with a letter.

(4) Following the finalization of the transfer operations by the relevant customs offices, the parties shall inform the General Directorate about the mentioned operation within fifteen days.

Export of the materials

ARTICLE 37- (1) For the export of the imported materials, Petroleum right holder and a contractor shall apply to the General Directorate by submitting the list which includes the details prepared according to the form shown in annex-45. Upon approval of this list by the General Directorate, it shall be forwarded to the Customs Directorate concerned for the exportation proceedings.

(2) All samples of petroleum and rocks, drilling cuttings, cores or longitudinal sections of these, tapes and other data related with geophysics and such methods shall be kept in Turkey to be kept available for the inspection and control. Provided that tapes and other data related with geophysics and such methods are converted and a copy of analysis and examination reports on cores, cuttings and longitudinal sections is submitted to the General Directorate for their return to Turkey, these materials may be sent abroad temporarily for analysis or examinations.

(3) The customs declaration forms stating that the export of the materials has been finalized shall be notified to the General Directorate by the requiring party within fifteen days.

Conduct of Petroleum Operations through Contractor

ARTICLE 38 - (1) Petroleum right holder who wishes to have the exploration and production activities which is one of its petroleum operations conducted through a contractor shall submit the following to the General Directorate:

  1. a) Document relating to the identity and address of the contractor, authorized signatories the date to commence the operations and the scope of the work,
  2. b) The original or notarized copy of the contract signed with the contractor, and if the agreements are made in a foreign language, the original agreement and the translation thereof which it certifies as confirming to the original,

c)Commitment letter proving the acceptance of responsibility arising from non-compliance of the contractor with the provisions of the Law and this Regulation.

(2) The contract with an explicit effective and termination date shall be submitted to the General Directorate for approval within twenty days at the latest as of the date of signature. The General Directorate shall consider in its evaluation whether the contractor has technical knowledge and capacity for the service. The petroleum right holder shall be informed about the result of this evaluation within one week. If the work under the contract begins within thirty days at the latest before the application to the General Directorate, the expenditures within this period shall be taken into consideration. Otherwise, the payments paid to the contractor for a longer period shall not be taken into consideration.

(3) If the contract necessitates the prevention of a dangerous act or implementation of an emergent operation, additional thirty days plus the time limits mentioned in the paragraph 2 of this Article shall be available for the submission of the revised contract to the General Directorate.

(4) Requests of amendments to and extension of the applicable agreement shall be submitted to the General Directorate at least five days prior to its termination. This request shall be realized provided that the petroleum right holder and the contractor submit their certified declarations that the amendments are favourable. Otherwise, these requests shall not be taken into consideration by the General Directorate.

(5) Petroleum right holder cannot assign any petroleum operation to a contractor without the approval of the General Directorate.

Operator Contracts

ARTICLE 39 - (1) For the petroleum operations to be carried out by the petroleum right holder companies regarding the licences owned jointly:

  1. a) The operator contracts signed among themselves should be notified to the General Directorate within thirteen working days at the latest as of its issue date.
  2. b) The changes of operators during the petroleum operations should be notified to the General Directorate within three working days,
  3. c) The share and the role of the petroleum right holder companies in the expenses incurred by the operator should be defined in the operator contract,

ç) The method of registration and distribution of the imported assets related with the petroleum operations should be specified in the operator contract, among the joint petroleum right holders,

2) Agreements which are approved by General Directorate shall be recorded in petroleum registry.

PART SIXTEEN

Monitoring of Petroleum Operations, Supervision, Conflict among the Right Holders and Objections to the Ministry

Inspection, Supervision and Inquiry

ARTICLE 40– (1) Petroleum operations carried out by the petroleum right holder and its contractors, shall be subjected to monitoring and on-site inspection at every stage, by the personnel of the General Directorate.

(2) During the supervisions, petroleum right holder and its contractors shall be obliged to present the personal appointed the originals of all documents taken as basis for the preparation of the technical and financial documents submitted to the General Directorate and the calculations thereof

(3) Denunciations and complaints concerning the petroleum right holder, that may be put forward by the third parties in unfavourable conditions which may arise during the realization of the petroleum operations shall be concluded by the General Direct

(4) When deemed necessary, the Ministry may assign personnel from other institutions and organizations, and university with sufficient professional experience required for inspection and supervision of petroleum operations.

(5) A petroleum right holder and its contractor or their facility manager shall not abstain from providing any information or document on the grounds of confidentiality.

(6) When deemed necessary and without any delays in the routine work flow related with petroleum operations, the personnel assigned for supervisions shall be authorized to take samples, perform measurements and tests on site and have these samples examined by the professional organizations and institutions, provided that the relevant costs are borne by the petroleum right holder.

(7) The minute issued during the supervision and showing the present situation shall be prepared in two copies and be signed by the personnel of the General Directorate, and petroleum right holder or its legal representative or the facility manager, present at the site of supervision. One copy of the minute shall be given to the concerned person.

(8) If any, the decisions accepted by the General Directorate regarding the inspections and supervisions carried out for the petroleum operations shall be notified to petroleum right holder separately.

(9) Petroleum right holder or if any, its contractors shall be obliged to ensure and maintain suitable conditions, and support the personnel in carrying out their duties in an efficient, fast, effective and safe manner during the supervision..

PART SEVENTEEN

Principles regarding Disputes and Objections, Examinations and Supervisions

and Inquiries and Supervisions

Negotiation procedure for disputes and objections

ARTICLE 41 - (1) With respect to all rights obtained or to be obtained in compliance with the provisions of the Turkish Petroleum Law No. 6491, the Ministry shall try to settle the disputes between the petroleum right holders or on the applications through negotiation and amicable settlement. As of the submission of the petition to the Ministry by the petroleum right holder which includes the subject of the application or the petroleum rights, the reasons of the dispute and the request to settle the disputes through negotiation and amicable settlement, the mentioned request shall be notified to the opposite party within seven days. If the opposite party agrees to settle the dispute through negotiation and amicable settlement within seven days, negotiations shall start within ten days. The parties shall be heard during the negotiations and when necessary, a written statement or a commitment may be requested. The Ministry may inform the relevant parties about decisions. A case can be filed before the Council of State regarding the decision of the Minister.

(2) With respect to the notices or complaints submitted directly to its discretion, the Ministry shall decide on a preliminary inspection to determine whether or not an inquiry is required to be launched due to the activities and operations of the petroleum right holders or third persons which do not comply with the provisions of the Law, this Regulation and the other legislation and shall conduct an inquiry.

(3) If the Minister or the Director General detects a non-compliance with the provisions of the Law and this Regulation as well as the other legislation on the basis of the findings obtained during any phase of the ex-officio or on-going preliminary inspection and supervision, the relevant party may resort to the judiciary. Moreover, objections may be raised before the civil or administrative authorities with respect to the implementation of the legislation and sanctions may be requested.

PART EIGHTEEN

Delivery of the Data on Petroleum Operations to the General Directorate, its Storage, Accessibility and Publicizing Data to the Users

Delivery of the Data on Petroleum Operations

ARTICLE 42 – (1) The petroleum right holders shall be obliged to prepare and submit to the General Directorate the field and well data obtained from the petroleum operations, evaluation reports thereof and the results of the laboratory analysis in compliance with the additional forms and within the scope of the procedures and principles laid down in Article 20 of this Regulation.

(2) No payment can be requested from the General Directorate regarding the costs incurred during the delivery of the data.

(3) Cores, clasts and samples as well as the other data shall be delivered to the General Directorate according to the criteria set forth in annex-49.

Storage of Data

ARTICLE 43 – (1) The data obtained from the petroleum operations and submitted to the General Directorate in compliance with the procedures and principles defined in the regulation shall be stored in the archives of the General Directorate.

(2) The data shall be classified as accessible and confidential considering the time periods specified in the paragraph 4 of Article 19 of the Law. Necessary measures shall be taken to avoid any disfigurement, damages or harms to the data on the basis of their features and the data shall be stored under the appropriate physical conditions required by the petroleum industry and the service.

(3) The General Directorate may work in collaboration with the public institutions and organizations and the universities for the storage of the data obtained from the petroleum operations, its submissions to the relevant people, its promotion and marketing and a service procurement may be relied on when necessary.

(4) The data to be stored in the archives of the General Directorate consists of the information and documents set out in in annex- 46.

Accessibility of the Data

ARTICLE 44 - (1) The following data shall become accessible on the following basis:

  1. a) at the end of the time limits of the licenses with respect to the information and data concerning drilling wells dug up in the exploration license field as well as the information and data concerning geophysics, detailed geology and laboratory
  2. b) at the end of the fifth year as of the effective date of the leases with respect to the information and date concerning the drilling wells dug up in the production lease field,
  3. c) at the end of the eighth year with respect to the data obtained within the scope of the exploration licence.

(2) Technical, financial and geological information in general as well as the location of the wells, drilling sections, the records of the protection pipes, the details of the drilling fluid, general production and sales figures shall not be regarded as secret. However, the provisions of the Law on the Procedure for the Collection of Public Receivables No. 6183 are reserved.

Publicizing the Data to the Users

ARTICLE 45 - (1) The information and data stored in the archives of the General Directorate and become accessible shall be requested in compliance with annex-46.

(2) The petroleum right holders shall have priority for the assessment of the requests. Other requests shall be met in a way that the operations of the petroleum sector are not delayed.

(3) The General Directorate shall carry out the operations related with the marketing of the data and sales on a certain schedule by assessing the request in terms of its quality, quantity, scope and size.

(4) The General Directorate shall determine the way of publicizing data to the users by considering the features, type of storage and technical qualifications of the data.

(5) Data may be marketed by copying the original or in electronic environment.

(6) The General Directorate shall determine a fee in return for the publicity to the users considering the cost and sustainability of the services carried out to provide data. This fee shall be recalculated on annual basis by the General Directorate in parallel with the type and amount of the data, the operations related with the data, the consumption of the data and the generation period of the service. The determined fee list shall be announced on the web-site of the General Directorate.

(7) The fees related to the access permission for the preparation and duplication of the requested data shall be accrued by the General Directorate. This fee shall be deposited in the bank account of the accounting unit under the Ministry and the delivery of the data shall be finalized following the submission of the payment receipt to the general Directorate.

(8) Those who obtained data from the General Directorate shall not give, duplicate or market this data to the third persons as it is supplied.

PART NINETEEN

Protective Measures, neighbourhood relations for licenses, Discharge of Waste Water, Well Completion and AbandonmentCriteria, Coordination and Sub-regulatory Operations

Protective Measures

ARTICLE 46 - (1) The petroleum right holders shall be obliged to take the necessary measures and precautions to preserve the presence of petroleum, prevent extravagancy, operate petroleum fields based on good will, supervise and control the precautions taken within the framework of legislation for occupational health and safety, and for the protection of the environment and cultural assets. The petroleum right holders cannot carry out activities which may jeopardize the human health or give harm to the nature, the environment and the cultural assets.

(2) Petroleum right holders: Petroleum right holders shall be obliged to take all precautions to prevent flow of fluids from the well to the surface or from the surface into the well and from one formation into another and the over- production in the well which negatively affects the dynamic of the reservoirs during the drilling, completion, production and development operations at the wells.

(3) Those who carry out petroleum exploration and production activities including the unconventional methods shall be obliged to prevent, reduce the possible damages to and negative effects on the ground and underground water, air and soil in order to protect the human health and the environment; to prepare the action plans on the future petroleum operations in compliance with the annex -50 before starting exploration and drilling activities and submit these to the General Directorate.

Petroleum right holder shall inform the local people about the operations to be conducted following the approval of the General Directorate. If there is a change in programs, new operation plans shall be prepared in accordance with Article 20 and be submitted to the General Directorate.

(4) Before starting the exploration and drilling activities, activity programs regarding

  1. a) the supply and usage of the water, maintenance of its quality and the discharge of the waste water,
  2. b) Protection of the air quality,
  3. c) Protection of the soil quality;

shall be prepared in accordance with annex-50 and submitted to the General Directorate.

(5)The wastes discharged during and after the petroleum operations;

  1. a) cannot be drained into drinking and portable water basins, rivers, dams, drainage systems and pits, dry and flowing creek beds, rivers, lakes and other surface waters, roads and roadsides.
  2. b) cannot be evaporated on the surface systems and injected to underground unless permitted by the General Directorate.

6) A petroleum right holder shall be obliged to comply with the form in annex- 10 in terms of the safety distances of the location where the petroleum operations are carried out to the residential areas, wetlands and other environmental areas.

(7) Petroleum right holders shall take the necessary measures to prevent the environmental pollution which may be observed near the location of the production wells and in the pipelines of the crude oil and during its transportation.

(8) No petroleum operation can be carried out in the following locations without a special permission of the Minister:

  1. a) Within one kilometre distance to the national borders
  2. b) In forbidden military zones and security zones,
  3. c) Within 60 metres distance from the locations and facilities such as historical places, houses of worships allocated for public service or for the benefit of the people, schools, hospitals, libraries, highways, railways.

(9) Operations shall be carried out in accordance with the provisions of the Law No. 2565 on Military Forbidden Zones and Security Zones.

Neighbourhood relations for licenses

ARTICLE 47 - (1) As regards neighbourhood relations for licenses;

  1. a) Upon the assent of the General Directorate and on the condition that the license holder cannot receive a written consent of the neighbouring license holder, the licence holder may collect data from the field of his neighbour up to the length of the layout or half of the field effected by the operation for the collection of seismic data, provided that none of the operations under the neighbouring license is prevented.
  2. b) Projection of the target level coordinates of an exploration well drilled in a licensed area to the surface may be 300 metres to the border of neighbouring licenced area for the crude oil and at least 1,000 metres away for the natural gas. Drilling a well with a less distance shall be subject to the permission of the General Directorate. In terms of the open seas, the distances shall be determined by the General Directorate later, depending on the construction
  3. c) The license holders for the neighbouring lands may request the details on the coordinates on the targeted levels of the wells drilled up closer to the border of the licenced area from the General Directorate.

ç) In the event that the land and sea licenses are for neighbouring areas, the explorer holding the sea license may establish the drilling location within the borders of the licensed neighbouring land with the approval of the General Directorate provided that the target levels of the drilling are covered by its license. In this case, the relevant licence holder should not hinder the activities of the neighbouring land license holder and should comply with the limits envisaged in the relevant legislation on Coastal Law.

Discharge of the waste water resulting from the petroleum operations

ARTICLE 48- (1) Applications for permission regarding the discharge of waste water resulting from the petroleum operations to the underground by injection, evaporation, processing and other methods shall be prepared in accordance with the form in annex-47 and shall be submitted to the General Directorate together with an discharge program. Following the examinations and evaluations, discharge shall be initiated upon the assent of the General Directorate.

(2) The discharge of waste water shall be conducted in compliance with the technical criteria laid down in annex-37 and annex-48.

Well Completion and Abandonment Criteria

ARTICLE 49 - (1) Petroleum right holders shall carry out their operations concerning the location of the wells to be drilled, construction and use of mud pit, drilling and testing, discharge of salt water emerged at drilling and abandonment of the wells in accordance with the criteria laid down in annex-37.

Coordination

ARTICLE 50-(1) Upon the request of the petroleum rights holders, operations regarding the matters under the authorization of the relevant institutions and organizations according to the legislation in force shall be carried out through the General Directorate as per the Article 1 and 17 of the Law.

Sub-regulatory Operations

ARTICLE 51-(1) The Ministry shall be authorized to carry out sub-regulatory operations for the implementation of this Regulation.

PART TWENTY

Various and Final Provisions

Term of the Present Licenses

TEMPORARY ARTICLE (1)- (1) Rights and obligations regarding the exploration licenses and production leases given before the effective date of the Law shall prevail until the end of the licence term.

(2) Terms of the exploration licenses shall be the time periods for the relevant license as specified in the "Decision Concerning the Petroleum Right" published in the Official Gazette.

(3) In case of the lapse of the first 20 years and the first extension for ten years considering the time limits as of its issue date, the terms of the present production licences may be extended so that this period will not exceed the maximum time limits including the extensions set forth in the paragraph 3 of Article 8 of the Law provided that the necessary information and documents on the amount of the producible petroleum and on the availability for the economic production by years for the production licenses are submitted to the General Directorate.

Adjustment of the Present Licenses

TEMPORARY ARTICLE 2 - (1) As regards the applications to adjust the exploration licences in accordance with the provisions set forth in the paragraph 2 of the Temporary Article 1 of the Law, the following shall be taken into consideration:

  1. a) Except for the exploration licences for exclusive economic zones outside the territorial waters, the licence requested to be adjusted should run out a 4 year period for the first issue period and a 6 year period for the first extension.
  2. b) The condition related with the seismic activity and drilling of wells required by the General Directorate for the issue of the license in accordance with the Article 50 of the Repealed Petroleum Law No. 6326 and the extended obligation related with the drilling on guarantee by the Decision of the Council of Ministers as per Article 58/1 of the Law herein should be realized. As regards the licenses for inner territorial waters, the periods mentioned above shall apply 50% more. However, this condition shall not apply for the areas whose exclusive economic zone boundaries have not been agreed on with neighbouring countries.

(2) With respect to the licenses requested to be adjusted, a petroleum right holder shall be obliged to submit information and reports evidencing that it realized at least 50 % of the activity committed in the licenced area on annual basis and until the application date.

(3) It is essential that the new borders and maximum size of the licensed area which is requested to be adjusted comply exactly with the map sections and degrees defined in Article 6 of this Law.

(4) In the event that there are more than one exploration license owned by different petroleum right holders within the same map sections or one degree of latitude and longitude, no adjustment can be allowed for these licenses. However, if the licence holders agree to apply for a joint licence adjustment within the same map section, the General Directorate shall carry out the adjustment operations following its reviews.

(5) If the licenced area requested to be adjusted is larger than the map section with scales of 1/50 000 and 1/25 000: or if the map section is empty:

  1. a) Provided that the areas are in the same map section with a scale of 1/50 000 and if the each map section with a scale of 1/25 000 exceeds 50% of the relevant map section and the remaining area is not licensed, the whole area may be covered by the present exploration license.
  2. b) Provided that the areas are in the same map section with a scale of 1/50 000 and if the each map section with a scale of 1/25 000 is less than 50% of the relevant map section, an adjustment may be available so as to cover the complete map section with a scale of 1/25 000 and considering the present size of the licensed area.
  3. c) Provided that the areas are in the same map section with scale of 1/50 000 and if the complete map sections with scale of 1/25 000 within this map section is not licensed, without considering the size of the area covered, an arrangement may be made so as to cover the complete map section with a scale of 1/25 000 and to maintain the present size of the licensed area.

ç) If the licenced area expands to the neighbouring map section with a scale of 1/50 000, the provisions laid down in points (a) and (b) above shall apply and the General Directorate may make arrangements on the size of license area considering the regulations in the paragraph 2 of Article 6 of the Law.

(6) It is obligatory to submit a new work and investment program for the licence requested to be adjusted as attached to the application form and in compliance with the form in annex-8. A commitment to drill at least one exploration well should be included in the work and investment program for the licenses with a term of four years or more as of their adjustment date. However, if the required license has been certified for an area within the land and territorial waters for more than one map section of 1/50.000 and for an area outside the land and territorial waters for more than one one-degree area, a commitment to at least one drilling shall be regarded as sufficient . The condition of drilling within the first three years shall not apply to the licenses for outer territorial waters whose adjustment has been made and which have a water depth of more than 1000 meters

(7) Bonds required to be presented in accordance with the paragraph 3 of Article 7 and the paragraph 8 of Article 22 of the Law shall be deposited within 30 days at the latest as of the notification by the General Directorate to the petroleum right holder or to its legal representative stating that the adjustment of the licence is agreed on. If the bonds are not deposited, no adjustment shall be carried out.

(8) The period of sixty days specified in the paragraph 2 of Article 7 of the Law shall not apply to the finalization of the adjustment operations for a licence which are under review in the General Directorate.

(9) The provision as "being a complete map section" set forth in the paragraph 2 of Article 6 of the Law shall not apply to the map sections of exploration lands excluded from the scope of the present production leases and to the map sections in which the national borders as well as the land and sea borders intersect.

(10) Adjustments of the licences for the outer territorial waters shall be made in accordance with the procedures and principles in the afore mentioned paragraphs, except for the previous delays.

The exploration licenses extended by bonds

TEMPORARY ARTICLE 3 - (1) If the discovery phase is attained at the end of the extension period of the exploration licences extended in return for a bond by a Decision of Council of Ministers as per the paragraph 2 of Article 55 of the Repealed Petroleum Law No.6326, and the remaining period is not sufficient for the commercial review of the discovery, the provision set forth in the paragraph 8 of Article 6 of the relevant Law shall apply.

Time Extensions for the Present Licenses

TEMPORARY ARTICLE 4 - (1) The General Directorate shall be authorized to extend the terms of the licenses up to two years in the onshore and three years in the offshores for once provided that the obligations regarding the exploration licences which are not adjusted based on the provision in the paragraph 4 of Temporary Article 2 of the Regulation have completely been fulfilled.

Effectiveness

ARTICLE 52 - (1) If requested, the petroleum right holders may carry out their operations which are covered under the authority of the relevant organizations and institutions in accordance with the effective legislations, through the General Directorate as per Article 1 and Article 17 of the Law.

This Regulation shall enter into to force upon its publication to be effective as of 12/11/2013

Execution

ARTICLE 53 - (1) The provisions of this Regulation shall be executed by the Minister.