Aytuna Consulting

International Petroleum Consulting

A Guide to Doing Petroleum Business in Turkey

TPAO is a prudent operator and it has exploration / production / drilling /well completion and logging departments. The company has more than 20 drilling and several works-over rigs and has highly professional people in addition to a sophisticated research laboratory in Ankara. There are three major drilling base camps in the country belonging to the company. During my times with ARCO and El Paso, we were very pleased with TPAO’s joint ventures and its operationship. Both companies had used TPAO’s Research Laboratory and we were very pleased with their quality of work and the wells’ geological reports. Also, there are several small scale domestic independent oil companies in the country that have drilling and work over rigs. In Turkey, there are enough oil facilities, infrastructure, pipe lines, refineries and distribution networks. There is no marketing problem for either oil or gas.

The General Directorate of Petroleum Affairs (GDPA) acts as the Government regulatory body for the oil industry in the country and works under the Ministry of Energy. GDPA handles all the oil industry activities; granting exploration licenses / production leases, refinery and pipe line permits etc. The oil licensing process for oil and gas concessions are in three types: 1) Reconnaissance Permit, 2) Exploration License and 3) Production Lease. The newcomers may select either a permit or an exploration license. Also a company may enter a joint venture with TPAO or others or may act along and file its application. Under a Permit, the Government grants the non-exclusive right to conduct a geological investigation over an area. The size of the area and the term of the Permit is controlled by GDPA. However, the last permit was granted to BP-TPAO joint venture for the Black Sea offshore in 1980, since then there have been no permit issued. It is possible to apply for an exploration license on the new company’s name or enter a joint venture with TPAO or others if one wants exploring in the country. Nowadays, due to higher oil & gas prices, the companies prefer to have a license on their names.

Licences and petroleum districts in Turkey (click for larger image)
(Courtesy of General Directorate of Petroleum Affairs (GDPA), Ankara, Turkey - June 2007)

An Exploration License gives an exclusive right over an area for the exploration of petroleum. By Petroleum Law, an exploration license can not be larger than 123,500 acres (50,000 hectares) and a company might be granted maximum of eight licenses in a given petroleum district. In the country, there are 18 petroleum districts. Each license has a term of four years. At the end of each year, the companies are required to turn in a written report and make an oral presentation for their past year’s activities and the programs for the coming year of their geology & geophysics work. There are no upfront set commitments or drilling obligations; during first three year a company may gather geology and geophysical data collection with a minimum work program; however, at the end of the period, the company may either elect relinquishing the license or commit drilling. The drilling should be commenced in the fourth year but this obligation may be deferred one more year by posting a letter of guarantee of $50,000. The License may be extended for two more years extensions. The same rules are applied for the domestic companies, including TPAO as well as the international companies. The companies have the same rights under the Petroleum Law and Regulations and the law is applicable to all domestic or international companies equally. However, TPAO may hold maximum of 12 licenses in the same district rather than eight as the others- this being the only difference.

Once a discovery is made and commerciality has been announced and the paperwork completed at GDPA, the license holder may apply to convert the exploration license into a Production Lease. The company may keep the ½ of the area as an exploration block and continue doing geological and geophysical works and keep the other half as a production lease. Or may take the option relinquishing the exploration part and keep the lease section. Under a lease, the lessee must produce oil and gas. The term of a lease is for 20 years and can be extended by 10 year periods. There are several examples in the country which the production leases are more than 40 years old like Kahta Field, 1958, West Raman Field 1961 and Selmo Field, 1964.

GDPA has excellent archives where the older relinquished license data / well data / logging data / well completion / test data / drilling data/ seismic data / relinquishment reports, etc.. are being stored and they are open to all oil companies who would like to explore in the country or obtaining the information. The companies are allowed to study those open reports or to make copies. However, the producing fields’ data are not made available to public. As per the Petroleum Law and Regulations all the oil companies, including TPAO, must return two copies of all the data when a license is relinquished and those become available to public. Every year, GDPA publishes “Petroleum Activities Report” and it’s open to all interested parties. The report covers; exploration / production / refinery/ transportation activities for the past year.

According to GDPA records, by February 2008, 42 companies are granted 403 exploration licenses and production licenses; 153 licenses are granted to TPAO and TPIC and 250 licenses are granted to 40 foreign and domestic private oil companies.