1. INTRODUCTION
Petroleum is the most important energy resource and industrial raw material in the world. Petroleum market develops rapidly in global market especially in the European Union as the demand of the petroleum constantly raises and the technology develops. Turkey’s position in the petroleum market has been increasing periodically since its important geographical location in transit of petroleum supplies to Europe and the Middle East has a major role in the petroleum market. Following the start of the Blue Stream, Baku-Tblisi-Ceyhan pipeline projects, Turkey has become an energy corridor. Moreover, by the customs union executed between European Union and Turkey in 1996, mutual customs tariffs associated with the European Union have come into force and in this respect, relevant laws and regulations have been issued in order to ensure and sustain the development in the petroleum and energy sector. In this regard, Petroleum Market Law numbered 5015 (“Petroleum Market Law”) was published in the Offical Gazette dated 20.12.2003 and came into force.
The objective of the Petroleum Market Law, as stated in its preamble, is to create a competitive environment in petroleum market and to ensure that the petroleum is supplied from domestic and foreign resources, directly or after processing, in a reliable, cost-effective manner within a competitive environment to consumers. Energy Market Regulatory Authority (“EMRA”) is authorized and responsible to provide aforementioned objective. EMRA protects the competitive environment of the market and grants relevant licenses which indicates the permission to operate commercial activity in the petroleum market within the boundaries of Turkish Republic.
License types are specified in Petroleum Market License Regulation (“Regulation”) which is published in the Official Gazette dated 17.06.2004. The objective of this Regulation is to determine the procedures and principles regarding the licenses to be granted to real and legal persons in order to sustain the market activities for the sales of petroleum provided by domestic and foreign resources to users directly. Pursuant to Article 3/3 of the Petroleum Market Law, the process of granting, updating and temporarily suspending or canceling the licenses shall be undertaken by EMRA.
2. DEFINITIONS, LEGAL STRUCTURE AND CHARACTERISTICS OF PETROLEUM MARKET LICENSES
Petroleum Market Law, as a general regulation, forms the procedures, principles and grounds of the licenses; on the other hand, it, regulates the licenses and its details as to be implemented.
License is “the certificate that real or legal persons obtain from EMRA indicating the permission to operate in the market”. Separate licenses are obtained for each market activity and facility. The provisions specific to the facilities shall be included in the license. EMRA has ultimately the authority to allow the activities, which normally require license, to be performed without obtaining any license. Licenses shall be issued for up to 49 years. The rights and liabilities arising from the license shall be valid for the duration of the license. Above mentioned license periods may be extended by EMRA in the circumstances which is stated under Petroleum Market Law. Another important point is that under no circumstances may the licenses be transferred. However, in case the license holding legal person is provided with limited or irrevocable project finance by the banks and/or finance institutions, the banks and/or the finance institutions may send a notification to EMRA in accordance with the provisions of the loan agreement and request EMRA within the framework of this Regulation to grant a license to another legal person, provided that the said legal person undertakes all the liabilities of the original license holder arising from the license.
3. ACTIVITIES REQUIRING A LICENSE AND EXEMPTIONS
It is obligatory to obtain license for the following petroleum activities: (i) performing refining, processing, lube oil production, storage, transmission, eligible consumer and bunker activities and to establish and/or operate facilities for the performance of aforesaid activities, (ii) performing liquid fuel distribution, transportation and vendor activities. Obtaining a license is obligatory before performing petroleum activities; otherwise, EMRA may impose certain penalty sanctions such as administrative fines. Yet, obtaining a license is not required for the exceptional circumstances stated under Article 6/3 of the Regulation. Below mentioned circumstances shall be exempt from license requirement.
i) addition processes of organic and inorganic additives intended to improve the qualities of fuel and,
ii) blending processes that are in compliance with the technical regulations and that do not bring an additional quality to the fuel.
In addition to these, transmission license is not required for activities of transportation through pipelines to the facilities/warehouses owned by the persons not providing services to third parties and/or persons purchasing petroleum directly from the refineries. Moreover, EMRA may impose exemptions for holding licenses for transmission and processing activities in line with the principles and criteria to be developed. Licenses shall not be granted based on commitments.
4. PROCEDURES THAT LICENSES SHALL BE SUBJECT TO
Considering the demand on the petroleum market and the purpose of encouraging the investors to the petroleum activities, the procedures and principles of the petroleum market licenses are regulated by law. In this manner, procedures of granting license are accelerated, compared to old regulations and the evaluation regarding license applications shall be finalized within sixty (60) days at the latest. The evaluation of license applications shall be concluded and notified in accordance with the provisions of Article 3 of Petroleum Market Law and other aspects to be decided by EMRA no later than sixty (60) days and notified to the relevant person. There is no specific procedure for the companies with foreign capital which are operating in Turkey, the procedures and principles regarding the licenses to be granted for companies with foreign capital are identical with the Turkish companies.
5. LICENSE TYPES
As stated above, separate licenses are to be obtained for each market activity and facility. In this regard, separate license types are specified under Petroleum Market Law and Regulation.
5.1 Refinery License
This license is obligatory to be obtained in order to supply crude oil and liquid fuel from foreign countries. Furthermore, the refinery license is necessary to establish and operate refinery facility, to buy and sell petroleum and to derive new products from crude fuel. In addition, this license holders may buy and sell crude petroleum within the homeland with other refinery owners and producers. Apart from these mentioned activities, refinery license holders, provided that it is registered in the license, may perform processing and storage activities within the facility or in the vicinity, and transportation activities to other facilities in the vicinity via pipelines. This license holder may perform fuel oil sales to the distributors and other refinery owners and may perform bunker sales to the other bunker delivery companies.
We must state that, the legislator impose some liabilities to the refinery license holders. Accordingly, pursuant to Article 5 of Petroleum Market Law, the production and delivery of liquid fuel and other products needed for national security shall have priority. Therefore, the refinery license holders shall be liable to supply prior the tactical fuels used by Turkish Armed Forces on having requested.
5.2 Processing License
The processing license holders may occupy with deriving new products from petroleum and other chemical substances but for oil production and/or changing the quantities or qualities of the products.
5.3 Mineral Oil License
Mineral oil license holders may occupy with producing mineral oil in their mineral oil production facilities covered by their licenses.
5.4 Storage License
Storage license holders may occupy with operating a storage facility in order to provide storage service.
5.5 Transmission License
The transmission license holders may occupy with transporting petroleum through pipelines and operating a transmission facility.
5.6 Eligible Consumer License
The procedures and principles for determining eligible customers and granting licenses shall be regulated by the regulation to be issued by EMRA. With this license, the consumers whose annual consumption of heating fuel, fuel-oil and diesel oil is below the annual consumption amount to be determined by EMRA not being less than 5000 tones may provide these oils from distributors and/ or refinery companies.
5.7 Bunker Delivery License
Bunker means fuel and lube oil supplied to sea vehicles in and/or next to territorial waters or to domestic or foreign airplanes at airports, whether taxed or not. The bunker delivery license holder may provide fuel supply to the said vehicles and operate a bunker delivery facility.
5.8 Distributor License
The distributor license holders may occupy with;
a) importation of fuels, limited to the fuels specified within the subsection included in the license,
b) domestic sales of fuel and wholesale to eligible consumers within this scope,
c) transportation of fuel to the facilities around its own storage facilities through pipelines,
d) development of a dealership network,
e) distribution of fuel oil to their own property fuel stations and dealers’ fuel stations,
f ) direct sales of fuels exempted from Special Consumption Tax to commercial vessels.
Apart from these activities, they may perform bunker delivery, storage, mineral oil and transportation activities provided that these activities are registered in their licenses. The distributor license holders may perform sales of fuel to the dealers of distributors whose activities were stopped temporarily provided to be limited with the temporary period. Distributor license holders may perform sales of fuels to other distributors together with the permission of EMRA.
5.9 Transmission License
Transportation license owners may occupy with providing transportation services with petroleum transportation vehicles except for pipeline.
5.10 Dealership License
Dealership license holders may occupy with selling fueloil or bunker fuel supplied from their distributor under the title of fuel-oil dealer or bunker fuel dealer according to the sub-title; and dealer with station and dealer without station according to the category arranged in their license. Dealership license shall not be granted to the same person and/or the same address.
6. PROVISIONS ON THE PROTECTION OF COMPETITION
Certain important provisions for the protection of competition on eligible consumer, vertical integration and price formation subjects are specified in Petroleum Market Law. Article 17 of Petroleum Market Law defines the eligible consumer as “the licensed consumer whose annual petroleum consumption is more than the amount determined by EMRA on product base, being no less than 5.000 tones in fuel oil, heating fuel and diesel.” Real or legal persons engaged in petroleum market activities should not refuse petroleum demands of eligible consumers unless performing the demand results violating duty or contractual liabilities or failure of the capacity.
As mentioned in the preamble of Petroleum Market Law; petroleum industry is an activity chain beginning from the research activity through the procurement to the last consumer and such integration provides reliable and affordable presentation of petroleum products and reduce the investment costs. Nevertheless, gathering such integrity in a single person or a group may limit or destroy the competition in the market. In this regard, Petroleum Market Law allows vertical integrity in petroleum market on a limited scale. For example, pursuant to Article 5 of Petroleum Market Law, the refinery license holders may conduct; (i) provided that it is registered in the license, process and storage activities within the facility or in the vicinity, and transportation activities to other facilities in the vicinity via pipelines and (ii) liquid fuel distribution activities via its distribution company. Notwithstanding, the refinery license holders should offer, on category basis, the same conditions in its distribution companies to the other distributors who demand liquid fuel from them.
Within the scope of Article 10 of Petroleum Market Law, EMRA shall be authorized to determine the prices concerning the agreements and activities which may restrict the competitive environment. On the other hand, Competition Authority has the general authority on the protection of competition. Unless otherwise specified, Competition Authority is liable to use its duty or authority subject to the protection of competition in all economical industries. The provision which we referred above authorizes EMRA to determine the prices and to take the necessary precautions. As is seen, duty and authority areas of EMRA and Competition Authority regarding the protection ofcompetition in petroleum market are conflicted. In spite of this, Petroleum Market Law lacks of any clear provisions concerning the distribution of duty and authority. .Thus, Petroleum Market Law has deficiencies in this direction and the legislator should clarify the distributions of duty and authority between EMRA and Competition Authority as the de lege ferenda proposal.
7. CONCLUSION
Turkey is located in the center of Middle East, North Africa and Caspian Regions where 2/3 of world’s remaining petroleum and gas reserves is located. As we stated earlier, Turkey’s geographical location has an important role in petroleum market industry. With its growing and developing economy, Turkey is one of the important and consistent consumer in this region. Forming a competition environment, institutionalizing market structure, having the petroleum reliable and affordable, forming clear, equitable and consistent market activities are the purposes of the regulations committed in petroleum market. In this regard, the need for an institution to regulate the market activities is obvious. EMRA steps in at this point and undertakes the duty of regulating market activities. The legal framework for Petroleum market is formed by Petroleum Market Law and the Regulation which define every and each licence that allow to perform a particular activity of the market and determine the principles and procedures about how to issue a license in a given area of market activities Companies conducting petroleum market activities shall consider relevant laws and especially the provisions of competitions, otherwise they shall incur penalty sanctions.
