Natural gas is gaseous natural hydrocarbons extracted or extractable from underground. Natural gas, which is the main raw material of various chemical products, meets a significant part of energy consumption. Therefore, natural gas is an important place for countries.
Regulations on natural gas in Turkish law are made by the Natural Gas Market Law. The objective of this Law is to establish a financially sound, stable and transparent natural gas market through liberalization in order to ensure the supply of natural gas to consumers in a good quality, sustainable, low cost, competitive and environment-friendly manner and to ensure an independent regulation and audit in the market.
It is obligatory for the legal persons to obtain necessary licenses to engage in natural gas market activities. If private legal persons to get involved in the market are to be established as joint stock or limited liability companies, all the shares must be registered.
Natural gas market activities:
Import: Procurement of the natural gas through import shall be realized under an import license. The following conditions are stipulated for the legal persons applying for an import license;
-Technical and economical capability to import,
-Availability of definite information and guarantee regarding the source, reserves, production facilities and transmission system of the natural gas to be imported,
-Obtaining the commitments and guarantees to be determined by the Authority from the legal persons to get engaged in the storage activity concerning their capability for the underground storage of an amount, of natural gas to be imported every year, corresponding to the rate determined by the Board, on national territories within five years.
The import companies must obtain separate licenses for each one of the import contracts. In addition to the fact that the import companies are entitled to transfer natural gas they supply by importing, to the wholesale companies or export companies through a sale contract within the country, they are also entitled to market natural gas to the eligible consumers and abroad on the condition that they obtain an export license. However, the transfer to the export companies shall not abolish the commitments of the import company under the license.
Annual imported natural gas amount of any import company cannot exceed 20% of the national gas consumption forecast to be determined by the EMRA for the current year.
Export: Legal persons intending to export natural gas imported or produced within the country shall obtain an export license. The companies asking for a license should fulfill the conditions determined in the regulations to be issued and the following;
-To prove that it has technical and economic sufficiency,
-To inform about the country where it will export natural gas and the transportation vehicles it will use for the export.
-To guarantee that the export process will not interrupt the system functioning and satisfaction of the natural gas demand of the country, and the recovery of any loss or damage which may occur in case it violates the system security, and to provide compulsory insurance coverage for the loss and damage defined.
Production: Natural gas exploration and production activities shall be carried out in accordance with Petroleum Law No. 6326. The exploration and operation licenses shall be granted by the General Directorate of Petroleum Affairs. Production activities are not regarded as market activities.
Production companies shall have the right to market natural gas they produce, on the condition that they obtain a wholesale license, to the wholesale companies, import companies, distribution companies or eligible consumers. Production companies are entitled to directly offer to the eligible consumers this sale amount provided that it does not exceed 20% of national consumption forecast to be determined by the EMRA for the current year and offer the rest of the natural gas to the market through import companies, distribution companies or wholesale companies. Production companies have the right to export natural gas they produce on the condition that they obtain an export license.
The domestic and foreign companies producing natural gas and having the petroleum right and the foreign companies’ branches in Turkey shall be granted a wholesale license to market and export natural gas they produce to the wholesale companies, export companies, distribution companies or eligible consumers without any storage obligation.
Transmission: Transmission is the transmission activity of natural gas carried out via natural gas pipeline networks or liquefied natural gas (LNG) transportation vehicles. Legal persons to get engaged in transmission activities are obliged to provide that the system allows, the transmission companies are obliged to connect the users upon request to the most appropriate network within 12 months in pursuant to the criteria determined by the EMRA.
Transmission companies enter into transportation contracts with the generation company, importer company, wholesale company and export companies. The transmission companies also enter into delivery contracts with the generation company, eligible consumer, storage company and other transmission companies. In the contracts made or to be made, there are no provisions that prevent or hinder the operation of the system.
The EMRA shall examine and approve the national transmission network investment programms prepared by the transmission companies considering the transit natural gas transmission. The national transmission network or any part thereof which is already existing or planned or under construction shall belong to BOTAŞ. New pipelines to be constructed by the transmission companies which will together establish a connected system with the existing lines for the purpose of transmission shall be operated by the other investing transmission companies provided that they shall have their ownership.
Storage of the natural gas: Storage is the storage of natural gas as liquefied natural gas (LNG) or gas in order to meet daily or seasonal fluctuations and the shortfall occurring in case of an insufficiency or interruption in the natural gas supply. The conditions to be satisfied by the legal persons applying for a storage license are as follows;
-To have technical and economical capability to carry out storing,
-To commit to managing all the storage capacities under their ownership in a manner to contribute to the safe and coordinated operation of the system,
-To commit that the storage capacities to be under their ownership shall be put into service in an unbiased and equal way so long as the system is available.
According to the Law no. 6326, in case the companies holding an operation license apply to the EMRA following the General Directorate of Petroleum Affairs‘ approval for the consumption of the underground natural gas field as a gas storage where natural gas is produced, the relevant part of the operation license shall be converted to a storage license, if it is found appropriate by the EMRA. However, the production company should document with its application to the EMRA that it is eligible for the storage license. If the company starts storage activities, it shall carry out the same as a separate activity by separating the accounts.
Wholesale: The wholesale companies must obtain a license from the Board to get engaged in the wholesale activities for the eligible consumers. It is not obligatory for the legal persons holding an import license to obtain a wholesale license. They are entitled to carry out natural gas wholesale activities with the import license. Wholesale companies must obtain an importer license in order to import natural gas.
The legal persons intending to get engaged in wholesale activity must prove where they buy natural gas and in which transportation conditions it shall sell natural gas, and prove that it has sufficient technical and economic power and required storage capacity for the purpose of supporting the safe operation of the system and further provide other guarantees and undertakings stated in the regulations in order to obtain a license.
Wholesale companies conclude sales agreements with the importing company or exporting company or eligible consumer or distribution company and determine prices freely.
In-city natural gas distribution: In-city natural gas distribution service shall be granted to the company which wins the tender to be announced by the EMRA for a license term to be determined by the EMRA including the ownership of the local natural gas distribution network taking into consideration some issues such as the development level of the city, the consumption capacity and the number of users. Tender to be initiated by the EMRA for a specific city shall be announced in the Official Gazette. The bids of the companies for the tender shall be evaluated under the procedures and principles referred in the regulations to be issued and the distribution license shall be granted to the winner company and this company shall be authorized to engage in distribution activities of that city as the distribution company.
If no bidder appears at the end of the distribution license tender held for the third time in the cities where the natural gas transmission lines were built by BOTAŞ, the EMRA shall grant the distribution license to the joint stock company to be established by the special provincial administration or the municipality in case of its application and the said company shall be granted the title of distribution company authorized to carry out the distribution activities in that city. In case the distribution company the license term of which expires, requests from the EMRA to renew its in-city distribution license one year before the expiry of the license term, the Board may grant a second distribution license by taking into consideration the technical and economic power, service quality of the company.
Sanctions
EMRA imposes administrative sanctions or penalties on persons operating in the natural gas market if they violate the legislation. EMRA first makes a written warning. Nevertheless, as a result of continuing to violate the legislation;
a) After the EMRA requests information or examination on-site, if it is determined that the information provided upon request is incorrect, incomplete or misleading or if no information is submitted or an examination on-site is not rendered possible, administrative fine shall be imposed and a notification shall be issued for the submission of the correct information and/or rendering the examination on-site possible within seven days.
b) If it is found out that a failure to comply with the provisions of this Law or enacted regulations, instructions, and communiqués occurs, administrative fine shall be imposed and a notification shall be issued related to the payment of the said fine within thirty days.
c) If it is found out that a failure to fulfill any of the general principles and obligations under a license or certificate occurs, administrative fine shall be imposed and a notification shall be issued on the correction of the situation within thirty days.
d) With respect to the conditions for the license or certificate application or obtainment, if it is found out that misleading document or information is submitted or the Board is not notified of any change regarding the conditions having impact on the conditions stipulated in the license or certificate, administrative fine shall be imposed and a notification shall be issued for the correction of such incompliance within thirty days.
e) If the information regarding the participation relation given during the license application is misleading or it is a matter of a failure to take into consider the prohibition of the participation relation during the activities, administrative fine shall be imposed and a notification shall be issued for the correction of such a participation relation within thirty days.
f) If it is determined that the performance of the activity in the market is out of the license scope, administrative fine shall be imposed and a notification shall be issued to discontinue the said activity out of the scope or any other disadvantageous activity within fifteen days.
g) If it is determined that the conditions constituting a basis to grant a license or certificate cease to exist during the performance of the activities, the license or certificate shall be aned. However, if it is determined that those conditions never existed from the beginning, a fine of administrative fine shall be imposed apart from the annulment of the license or certificate.
A legal action against the administrative sanctions may be filed in Ankara administrative courts.
Relevant Council of State Decision
“Plaintiff company, "... A. Ş." was established as a subsidiary of... under its commercial title, and later it was included in the privatization scope and program with the decision of the High Council of Privatization, ... date and number ..., and with the decision of the Board dated ... and numbered ..., the company has license for carrying out natural gas distribution activities in the city of ...for 30 years.
While determining the base asset base, it is based on Article 11 of Law No. 4646 that the companies that are tendered by the Authority and other existing companies are subject to different tariff methodologies. The Board decision (Methodology) dated ... and numbered ... was adopted in order to bring the tariff calculations to be made for companies with tenders and existing companies that are subject to different regulations as per the legislation on the same basis and to gather distribution companies with different statuses under a common methodology. It is clear that the tariff calculation should have integrity and consistency within itself; While determining the base asset base of distribution companies, there is no contradiction to the principle of equality in adopting different rules and tariff methodology for companies with different status as required by the legislation.
In this case, it has not been seen that it is illegal to subject the companies and the existing companies that are tendered by the Authority to different tariff methodologies while determining the base asset base.” (Council of State 13th Department Case No:2018/1317, Decision No:2020/2670)