“PETROLEUM MARKET LAW” NO 5015 OF TURKEY Refik TİRYAKİ, LLM Energy Expert

1. “PETROLEUM MARKET LAW” NO 5015 OF TURKEY Refik TİRYAKİ, LLM Energy Expert Energy Market Regulatory Aurthority Subcommittee N°. 6Transport, Environment, Energy and Trans-European Networks Agenda, Brussels; Centre Borschette Room 0C, 18-19 July 2005 1

2. For the purpose of Providing harmonization to general economic policies, Establishing stable and secure environment for investors and enterprises, as well as for consumers, Providing transparent and competitive environment, Meeting its international obligations, TURKEY has re-structured its petroleum market with the Law, numbered 5015, in December 2003. At first step Petroleum Market Law differentiated market activities (downstream activities) from petroleum operations (upstream activities). REASONS OF RESTRUCTURING

3. AIM & SCOPE • According to Petroleum Market Law, • Legal separation of market activities are achieved, • Market operations are bounded to license holding, • Fuel supply chain, limitations on market shares and classification of users by volume limits are being realised, • National petroleum stock system is established. • On those grounds the objective of the Law shall be stated as ; • to regulate; guidance, surveillance and supervision of market activities, • for reliable, cost-effective and competitive supply of petroleum from domestic or foreign sources to consumers, • in a transparent, non-discriminatory and stable manner.

4. LICENSES • According to the law ; • Refining, • Fuel Distribution, • Transmission, • Processing, • Storage, • Transportation, • Lube oilproduction, • Eligible consumption, • Bunkering activities and • Vendor (retailing) activities, shall only be performed by license holders.

5. LIQUID FUEL DISTRIBUTION-1 • Some of the parties taking place in the fuel supply chain as follows; 1) Refineries; those will be entitled; to purchase and processcrude oil or import finished products and deliver them to • İts fuel distribution undertaking, • eligible consumers, • bunker delivery companies or to buyers abroad for transformation of crude oil delivered by third parties into a finished product. 2) Distribution undertakings are to be entitled; to receive fuel from; • refineries, • abroad, • or another distribution undertakings (within framework of prior Board decision), for supplying; • to its vendors, • to eligible consumers, • to another distribution undertakings (within framework of prior Board decision), 3) Vendors are to be entitled to supply, of fuel received from a distribution undertaking with whom an exclusive purchase contract has been made, to users.

6. LIQUID FUEL DISTRIBUTION-2 4) Licensed storage undertakings are to be authorized ; to store petroleum under the ownership of third parties for; • Storage and • operational requirements of those, performing market activities. 5) Transmission undertakings are authorized to transport petroleum products through pipelines, 6) Lube Oil Producers are to be entitled; to produce lube oil from ; • Natural or , • Artificial materials , • and import those classified as lube oil by the Board without any prior administrative procedure,

7. CURRENT STATUS-1 A. Regulations; • Petroleum Market Licensing Regulation, Published in June 2004, • Petroleum Market Tariffs Regulation, Published in July 2004, • Regulation Regarding The Technical Criterion Implemented in Petroleum Market,Publishedin September 2004, • Regulation regarding implementation of national marker system, published in October 2004. • Regulation Regarding Supervisions Carried out in Petroleum Market and the Procedures and Principles to be Followed in Preliminary Investigations and Investigations published in January 2005, • Communique regarding import procedures of petroleum products other than liquid fuel, published in March 2005.

8. CURRENT STATUS-2 B. Application ; • According to Licensing Regulation; applications are being accepted first in June 2004 and the process is still ongoing, • The Law is ruled that 20th of December, 2004, is the deadline for persons acting in market to keep their legal rights bounded, • Parties acting in the market widely followed their obligations to apply for licenses, • Energy Market Regulatory Board is granted more than 12 000 persons to perform market activities with licenses. Those can be detailed as follows; • 4 Refinery, • 36 Fuel Distribution, • 6 Transmission undertakings, • 57 Licensed storage, • 24 Bunkering undertakings • 756 Transportation, • 48 Lube Oil Production, • 11723 Vendors, • 80 Eligible Consumers,

9. OTHER ISSUES-1 • Pricing: • The pricing for the purchase and sales of petroleum shall be constituted according to the free market conditions. • Activities will be performed under the tariffs. These are; • Tariffs to be approved by the Authority; for transmission and storage (natural monopoly), • Tariffs to be submitted to the authority as ceiling prices, • Tariffs to be declared (visible for consumers). • National marker: • The Authority; • Shall determine conditions and quality of national marker, • Set forth the procedures and principles for addition of national marker and submission of projections, • Shall establish an audit system by national marker, • Shall apply provisions of sanctions when marker is not sufficient.

10. OTHER ISSUES-2 • The National Petroleum Stock Commission is established and chaired by the Undersecretary of the Ministry of Energy and Natural Resources.

11. RESULTS and EXPECTATIONS • For properly functioning petroleum market, required rules and regulations are prepared and put into force with enforcement of the Law, • The rights and responsibilities of market participants clearly stated and protected by the decisions of Board, • The guaranteed structure are being supported by the licenses, norm contracts and standards, • State involvement and interventions to the market are being minimized. There will be confidence and stability for all the parties involved in petroleum activities. This will create a competitive environment, allowing free trade and movement of petroleum products from different sources, • Harmonization with European Union targets, barriers to free movement of capital and goods are being eliminated, • Greater private sector involvement is occurring progressively for the development of facilities needed in market.