POSSIBLE PROBLEMS AND NEW REGULATIONS IN ENERGY SECTOR

  1. INTRODUCTION

Despite the fact that the Russian government, who decided to place economic sanctions after the crash of Russian warplane due to the border breach, did not decide for a sanction on energy, Turkey tries to find a way to reduce its energy dependence and to tip the scales in his favour.

The LNG agreement with Qatar, the negotiations with the government of Azerbaijan for speeding up TANAP, in consequence of Egypt’s natural gas discovery Israel’s starting to search for a buyer and offering Turkey the sale of natural gas and negotiating with key companies of the sector, the negotiations between some of the Turkish private companies and the public corporation of Iran, all demonstrate that Turkish natural gas sector will be full of action and have importance for the security of natural gas supply.

Whereas the Turkish natural gas market is getting ready for new import agreements, the legislation on the natural gas sector becomes more of an issue. Considering the developments in global natural gas market, the draft of Natural Gas Market Law being delivered to TBMM by the Council of Ministers, is aimed to stabilize the supply demand equilibrium, to liberalize the sector within the scope of the principles on being qualified, low-priced, constant and competitive and to restructure it in compliance with today’s conditions in order to ensure internal dynamic, competition, transparency and efficiency required by international market conditions. This draft law is planned to bring fundamental changes on the basis of the existing law.

  1. NATURAL GAS REGULATIONS IN TURKEY
    1. Decree Law 397 on Natural Gas Usage

The Decree Law No. 397 is the first legal regulation in Turkey on the natural gas market. The Article 1 of the Decree Law No.397 on the Natural Gas Usage dated 09.01.1990, has set forth that BOTAS has the monopoly right of natural gas import including liquefied natural gas.

Although the Decree Law No.397 gave the distribution authority to BOTAS, it also stated that: “the Council of Ministers may permit the corporations’ establishment in order to provide distribution service and engaging in distribution activity.1

1 ASLAN, İ. Y., “Enerji Hukuku” Cilt III, Bursa 2009, s. 154-155.
2- Natural Gas Market Law 4646

The Natural Gas Market Law No. 4646 is adopted on 18.04.2001. Following this enactment, BOTAS’s monopoly rights provided by Decreed Law No.397, regarding natural gas import and transportation and trade of imported natal gas, are abolished. The regulations set forth by the Law No.4646 are such as follows:

  • The Energy Market Regulatory Authority’s issuing license for the companies engaged in the market activity,
  • Decomposing and restructuring of the activities of BOTAS,
  • BOTAS’s transferring existing purchase and sale agreement until the import rate drops to 20% of the national
  • Privatizing the activities of BOTAS (storage and trade) besides of transmission, privatizing of the existing distribution companies,
  • Conducting activity of the private companies to be determined by tender in the distribution field to be newly created,
  • Reducing eligible consumer limits,
  • The Energy Market Regulation Authority’s regulating tariffs in the uncompetitive fields2

Pursuant to this Law, the private enterprises who have focused on distribution, wanted to take a part in import field after the amendment in 2007 and in consequence of the tender on the transfer of the gas contracts, Shell Enerji A.Ş., Bosphorus Gaz Corporation A.Ş., Enerco Enerji San ve Tic. A.Ş. and Avrasya Gaz A.Ş. took over natural gas sale agreement on the purchase of 4 billions m3 between the Russian company Gazprom and BOTAS between the years of 2007 and 2009. After that, the agreement expired on 2011 concerning purchase of 6 billions m3 between Russian company Gazprom and BOTAS, is took over by the winner bidders Akfel Gaz San. ve Tic. A.Ş, Bosphorus Gaz Corporation A.Ş, Batı Hattı Doğalgaz Ticaret A.Ş. and Kibar Enerji A.Ş. and the share of private enterprises in natural gas import sector rised to 20% with the amount of 10  billions m3.

  1. INNOVATIONS OF THE DRAFT LAW

In the amendments in the Article 1 of the draft law, the effort is made in order to regulate strictly the law and to leave no room for comment. In the article 2, the market activities stated in the Law No. 4646 are arranged in detail and it is aimed to provide legal security. The innovations in this article are such as follows:

  • According to the existing law, the seller was obliged to submit the information and guarantee concerning the source, reserve, production facilities, and transmission system of the natural gas

2ALİYEVA, Sera, ‘Karşılaştırılmalı Hukukta Doğal Gaz Sözleşmelerine Uygulanan ‘Al yada Öde’ Klozu’ konulu Y.Lisans Tezi, Ankara Üni. SBE Özel Hukuk A.B.D. 2014, s. 21

to be imported for the export license and the sale agreement shall be signed and submitted during the license application before obtaining license. Additionally, after the exporting company submitted the guarantee and information and obtained the permit of the Ministry, it was joining to the tender and than the wining bidder companies were taking over the expired agreements of BOTAS at the end of the tender. However, according to new law, the seller shall submit the agreement with the commitment and guarantee and than obtain the permit of the Ministry and finally join the tender.

  • For the LNG export license, the information on source, reserve, production facility and transmission system, the undertaking of storage or the permit of the Ministry is not
  • Wholesale licensee legal entities are obliged to guarantee to provide natural gas supply during their sale agreements with the distribution companies. In case of selling to the eligible consumers, it is obliged to provide the gas entry within the seasonal, daily or hourly flexibility limits.
  • In the same article, it is also aimed to increase the investments of the private sector concerning transmission with the rule stating that the property and operating rights of transmission lines to be constructed will belong to the investing Besides, it aims to provide BOTAS’s creating the infrastructure of the information and communication system of all transmission lines, to provide the security with early warning systems and to easily intervene to the technical defects.

The purpose of the Article 12 of the draft law is to separate the vertically integrated structure of BOTAS and to create competition in every field of natural gas market. The vertically integrated legal entity of BOTAS will continue for one year after the effective date of this Law. At the end of this term, BOTAS will be active as follows:

  • Until its import lows to 20% of the national consumption, BOTAS can not sign a natural gas purchase agreement except for LNG import and is obliged to transfer its expired natural gas purchase However, it can be a party of a natural gas agreement in order to provide the security of natural gas supply or to export provided that Council of Ministers permits.
  • It cannot sign a sale agreement other than existing domestic sale
  • BOTAS will be reconstructed separately to conduct transmission activity, operation of LNG facilities, storage activities and the other The company continues to represent BOTAS for the activities excluding operation of transmission and LNG facilities and storage activities.

The reconstruction in the market demonstrates the purpose of leaving the monopolist system of the law No. 4646 by proceeding to transparent structure, which includes the institutions of private sector and the competition. The strategic goal of competitive natural gas market is defined such as follows: “Taking more economic advantage of reliable natural gas supply in domestic wholesale market, maximizing the transit job opportunities of Turkey, directing properly the medium excess supply and minimizing the possible obligations of the government by passing the risk to the private sector.”

The speedup in the liberalization process beginning from the Law 4646, the construction of a more transparent and efficient market, providing cheaper natural gas to the ultimate consumers, proving the security of natural gas supply, resolving the problems in practice are targeted by these innovations and an important step is took for the integration with global natural gas market. Following these amendments and the signature of natural gas import agreements whose negotiations are continuing, the security of natural gas supply will be provided, the energy prices will be determined by the market conditions but not by the supplier countries and the dependency of the energy sector into a single country will be removed.

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