Article 1. The petroleum resources of Turkey are subject to the possession and disposal, and are under rule of the State.

Article 2. The objective of this law is to enable the expedient, continuous and effective exploration, development and appraisal of the petroleum resources of the Republic of Turkey in accordance with the national interest. (xxx).

Section 2

DEFINITIONS

“Petroleum” means (a) all natural hydrocarbons, liquid or gaseous, produced or producible from the ground, (b) all asphalt and other solid hydrocarbons suitable for production with or dissolved in liquid petroleum or gas (x), and (c) all hydrocarbon products derived from the substances mentioned in the foregoing sub-subarticles;

a) ”Geological Investigation” means ground and serial topographical, geological, geophysical, geochemical, and like surveys, investigation and tests, and drilling, in connection with the search for petroleum;

b) “Exploratory Drilling” means the drilling of test wells for the purpose of finding petroleum or ascertaining the extent of a petroleum field;

“Production” means the production of petroleum from a petroleum field and the handling and treatment of petroleum prouced and conveyance thereof to tankage, to a pipeline, or to a rafinery located in or in the vicinity of the petroleum field;

a) Exploration, discovery, development, production, refining as well as storage, transportation and sale of petroleum and petroleum products: (excluding the sale, storage and transportation required for sale of petroleum products to consumers either directly in retail or through distribution organizations). (xxx)

b) Construction, establishment, and operation of power, water, housing, camp, and all other installations and equipment necessary for any of the foregoing purposes;

c) Administrative activities pertaining to the operations mentioned in Sub-subarticles (a) and (b). (x).

“Due Diligence” means the diligence, skill, efficiency, prudence, and foresight in the conduct of a petroleum operation that might be expected from aperson experienced in an operation under the same conditions and circumstances;

“Waste” means an act or omission in the conduct of a petroleum operation that causes loss, contamination, deterioration, or misuse of petroleum, petroleum products, reservoir energy, water, or other minerals that would not normally occur if the operation were conducted with due diligence;

“Unsafe Act” means an act or omission in the conduct of a petroleum operation that endangers or is likely to endanger the life, limb, or health of a person lawfully in or near the place where such act or omission occurs that would not normally occur if the operation were conducted with the diligince; (xx).

“Field” means the territory of Turkey including those under territorial waters and also the territories outside the Turkish territorial waters which are either intermittently or permanently submerged and which may be used by Turkey for petroleum operation purposes under the international agreements and practises. (xxx).

a)” Market Price” means the sale price applied at the point of delivery in Turkey by the petroleum right holder, in the absence of an accessible world market, or it means the free compettitive price determined normally by the usual adjustments of quality and specific gravity of crude within Turkey or in the nearest accessible world market plus all the expenses incurred for the transportation of the same quality of crude from world markets to the point of delivery in Turkey and this price shall not include the corporation Tax and its withholdings and the Income Tax which should be withheld on behalf of the shareholders which he petroleum right holder is under obligation to pay in Turkey; but it shall include all the indirect taxes directly related to the petroleum as well as the Customs taxes and Custom duties. (the free competative price as provided under this Sub-Article shall not exceed the price actually provided by a market which is suitable to satisfy continuously the requirements).(xxx).

b) ”Wellhead price” means the market price less all expenses including the direct and indirect taxes apart from the income and corporation taxes and withholding taxes deductible on account of the aforesaid taxes involved in bringing petroleum other than refined products from the well head to the place of delivery. (xxx).

“Exploration Expenses” means all expenditures for exploration except expenditures for installations or materials having a physical life of more than one year as well as those for general administrative activities. (xxx).

a) “Intangible drilling costs” means all expenditures for labour, fuel, repairs and maintenance, haulage, supply and materials which are for and incidental to drilling, cleaning, deeping or completing wells or preparation therefor, except expenditures for installations of materials with a physical life of morethan one year which are not installed or used, or which have a useful life or salvage value at the end of one year after being installed or put in use. (xxx).

b) “Cost of drilling wells which are unproductive for the national economy” means the expenses made for any physical economic value used or required for the drilling of wells which are unproductive of petroleum in economical quantities including the intangible drilling costs but excluding the drilling equipments and the similar tools. (xxx).

b) “Capital asset base” means the value computed in accordance with Tax Procedures Law of the holder of petroleum right allocated by him for use in connection with his petroleum operations in Turkey. (xxx).

c) “Capital assets” means the values included within the economic operations specified under the evaluation measures provided under the Tax Procedures Law as well as the exploration expenses, intangible drilling costs and the expenses for drilling wells which are unproductive for the national economy as the holder of petroleum right has elected to charge to a capital account as an asset in line with the aforesaid Law. (xxx).

“Material” means all goods, including petroleum, either raw, in process, or finished, equipment, instruments, tools, machinery, means of transport and all other means, and the spare parts thereof. (xx).

“Individual area” means each petroleum field included in a licence or lease; (x).
“Petroleum Unit” means 158,984 litres of liquid petroleum (one barrel of 42 gallons) or 500 cubic metres of gaseous petroleum calculated at 15.50˚C. and at a pressure of 1.03 kgs. Per square centimetre; (x).

“Petroleum in economical quantities” means the recovery in 24 hours to be accepted and determined as economical by the General Directorate of Petroleum Affairs by taking into consideration the requirements of the national economy, the protection of the petroleum resources, and the productivity of the field. (xxxx).

“Needs of the country” means the petroleum used by the Turkish Armed Forces and other public enterprises and organizations, and real and juridical persons of Turkey and refineries in Turkey for refining petroleum, and the entire quantity of petroleum upplied to all kinds of land, sea and air transportation means within Turkish borders and territorial waters. (xxxxx).

Article 4. The grant or rejection of an application for a petroleum right shall take into consideration :

Section 4

PROHIBITIONS AND SPECIAL REQUIREMENTS

Article 5. a ) No petroleum operation may be conducted except under a permit, licence, lease, or certificate granted under this Law.

b) No right granted under any other law to a deposit of asphalt or other solid hydrocarbons shall authorize the holder thereof to conduct or interfere with apetroleum operation. (x)

Article 6. The right bto acquire permits, licences and leases in connection with petroleum is held by Türkiye Petrolleri Anonim Ortaklýðý on behalf of the State.

The said incorporation may exercise this right on its own initiative or through the intermediary of the specialized organizations it predominates in terms of capital and administration or it may transfer the right to such organizations under the provisions of this Law. However, the licences and leases so acquired shall not surpass the limitation specified in the Law.

To the extent that is in line with the purpose of establishment, public organizations and incorporations, more than half of the capital of which is held directly by the State, may be granted a certificate on behalf of the State by resolution of the Council of Ministers.

To the extent that is in line with the principlrs specified in this Law, stock companies or private juridical persons which, according to the legislations of foreign states, are in the capacity of stock companies, may be granted a permit, licence, lease and, by resolution of the Council of Ministers, a certificate under the terms specified in Article 60 of this Law. (xxxxxx) .

Article 7. Except with appropriate authorization by the Minister, no petroleum operation may be conducted :

Article 8. No permit, licence, lease or certificate shall entitle the holder to enter or be in place which he is prohibited from entering or being in by any other law.

Article 9. 1. No permit, licence, lease or certificate shall be granted unless the appplicant therefor has given a reasonable guaranty fixed by the General Directorate of Petroleum Affairs, for compensation for damage that may be caused by his operation and for sums that may become payable by him under this Law.

2. The Minister may, on the recommendation of the General Directorate of Petroleum Affairs, require the holder of a petroleum right to alter or reasonably to increase the guarantee given by him. If the holder fails the comply with such a requirement within a reasonable time prescribed by the minister, he may be notified that unless he complies within 90 days after such notice his permit, licence, lease or certificate will expire.

Article 10. No holder of a petroleum right shall commit or permit waste or an unsafe act in or in connection with his petroleum operation.

Article 11. If a condition arises that threatens a petroleum operation, the holder of the petroleum right whose operation is so threatened shall forthwith notify the General Directorate of a Petroleum Affairs and other holders of petroleum rights whose operations might be adversely affected, giving the nature of the threat and the measures being taken to overcome it.

PROTECTION OF NATIONAL INTEREST

Article 12. 1. No person existing by virtue of law in which a foreign state holds a financial or beneficial interst of such extent or in such form as directly or indirectly to influence his actions, and no person acting for or on behalf of a foreign state may (a) hold a petroleum right or conduct a petroleum operation, or (c) establish or operate instatallations incidental or to forming part of a petroleum operation. (x) .

2. By a decision of the Council of Ministers, an exception to this article may be provided. Such a decision may not be appealed by those persons mentioned in (1) above, to the judical or administrative courts. (xxx).

Article 13. 1. The petroleum right holders are entitled to export, both in the form of crude and products, 35% of the entire crude and natural gas which they have produced from onshore fields and 45% from offshore fields discovered after 1 st January 1980. The remaining part and the entire crude and natural gas produced from fields discovered before 1 st January 1980 and the products obtained therfrom shall be allocated for the NEEDS OF THE COUNTRY.

MARKET PRICE shall be applied to that part of the crude and natural gas produced by petroleum right holders, which is allocate for the NEEDS OF THE COUNTRY. The council of Ministers is authorized to establish the elements and the grounds of implementation specified in Sub-Article 25 of Article 3 of this Law, which the market price based on. The council of Ministers may, if required, assign the right to the Minister.

The free competitive price forming the basis of the market price which the petroleum right holder has requested for its own petroleum shall be evaulated and approved by the Minister according to these principles. This transaction shall be repeatedwhenever the world free competitive prices are changed.

The council of Ministers is authorized to establish the elements and grounds of implementation which prices of petroleum products in Turkey is based on.

2. The Minister may require holders of petroleum right to produce petroleum from their existing wells at a sufficient rate. But no holder shall be required :

By decision of the council of Ministers, deviation from this rule may be made to extent necessary to prevent waste or to meet the exigencies of national security or equity. (xxxxxx).

Second Part

ADMINISTRATION

Section 1

REGULATIONS

Article 14. Regulations will be promulgated setting forth the mode of application of this Law. The Regulations may also prescribe the following :

Matters to be published in the Official Gazette and the time within which and the procedures by which such publication shall be done;
What shall be recorded in the Petroleum Register and how such recordation shall be done, corrected, amended, or cancelled;
Other matters relating to application, appeals, recordations and publication.

Article 15. Applications, appeals, reports and documents that do not conform to the Regulations shall not be validf, but i,f the inconformity, is due to minor and inadvertert errors the General Directorate of Petroleum Affairs may permit the corrections thereof.

ORGANIZATION

Article 17. A General Directorate of Petroleum Affairs attached to the Ministry of Energy and Natural Resources has been established which shall be a person existing by virtue by Law and function under an annexed budget and charged with the administration of this Law and other Laws or regulations governing the petroleum products. (xxx).

Article 18. The General Directorate of Petroleum Affairs under the direction of a General Director is composed of a Central Organization and Regional Directorates outside the Central Organisation.

Central Organisation, under the direction of the General Director will consist of Head Assistant and Assistant to General Director, Chairman of Inspection Committee and Inspectors, Technical Legal and Economical Advisors in sufficient numbers, Chief Engineers and Engineers, Geologists, Geophysicists, Specialists, Economists, Directors, Controllers and other employees.

Regional Directorates will be attached to the central Organisation and will be established in appropriate places upon the request of the General Director and the approval of the Minister. Each Regional Directorate under the direction of a Director will consist of Assistants and Technical and Administrative employees.

It is permissible to employ personnel on contractual basis at the General Directorate of Petroleum Affairs. However, the services which shall be performed on contractual basis shall be fixed by the council of the Ministers upon the proposal of Ministry of Energy and Natural Resources and after receiving the recommendation of the State Personnel Department. (xxx).

Article 19.1. The Genaeral Director of Petroleum Affairs shall upon the recommendation of the Minister be appointed by the decision of Council of Ministers. (xxx).

2. The Vice-General Directors, advisers, and directors shall be appointed by the Minister upon recommendation of the General Director; the director of accounts and his personnel shall be appointed by the Minister of Finance, all other personnel shall be appointed by the General Director.

3. The Committee of Discipline of the General Directorate of Petroleum Affairs will consist of the Vice-General Directors, Heads of departments and the Legal Advisor, under the chairmanship of the General Director. This Committee shall deal with the problems of discipline concerning employees appointed by the General Directorate of Petroleum Affairs. The problems of discipline of the employees appointed by the Minister shall be handled by the committee of Discipline of the Ministry. (x).

Article 20. The General Director, in accordance with the provisions of this Law, has authority to grant all permits, licences, leases, and certificates, and shall be responsible for all notification, publication, and registry required by this Law, except that decisions under Sub-article (1) of Article 4 shall be made by the Minister.

Article 23. 1. The revenueof the General Directorate of Petroleum Affairs consists of the following :

2. Revenue as mentioned in (a) and (b) above, shall be indicated on schedule “B” of the General Directorate of Petroleum Affairs attached to the Budget Law each year. (xxx).

Article 24. 1. Prior to taking a decision on an application affecting also a matter within the authorization of another agency, the Ministry shall obtain the consent of such agency, The agencies concerned shall be under the obligation to study with priority and urgency and conclude within two months such application made by the Ministry under the provisions of this Article. Applications not concluded within this period shall be regarded to have been consented to.(xxxxxx).

2. The representatives of the Ministries concerned with the administration of this Law shall meet under the chairmanship of the General Director at the dates to be fixed by the Minister, for determining and establishing the measures to be taken to fulfil the objective of Article 2 of the Law. (x).

3.Türkiye Petrolleri Anonim Ortaklýðý as petroleum right holder shall upon the request of the Minister be obliged to assits the General Directorate of Petroleum Affairs in the investigations related to petroleum and in the control of petroleum operations. (xxxx).

Article 25. An applicant or holder of a petroleum right may appeal to the Minister under this Law within twenty days following the date of notification of the decision taken by the General Directorate of Petroleum Affairs affecting his rights arising from an application, permit, licence, lease or certificate. (xxxxxx).

Article 26. The General Directorate of Petroleum Affairs shall attempt by negotiation and peaceful means to settle conflicts on all rights to be acquired or already acquired under this Law among applicants for or holders of said rights. The subject shall be refererred to the Minister if such attempts fail to settle the conflict. (xxx)

Article 27.1. The Minister and the General Director in discharging their duties under this Law, may make all necessary investigations, take and record evidences, and study all transactions, accounts and records and inspect the petroleum operations and installations of the petroleum firms involved in the investigation. (xxx).

2. The procedure to be followed in investigations shall be prescribed in the Regulations.

3. The Minister or the General Director may, if he dems proper, conduct investigations in public.

Article 30. The Minister shall reach a decision within a maximum period of twenty days on conflicts referred to him through an objection and the Minister’s decision shall be notified to the parties concerned within a maximum period of ten days. (xxxxxx)

Article 31. The period within which to object or bring a lawsuit before the Council of the State shall resolve such cases with priority and urgency.(xxxxxx)

Article 32. 1. It is an obligatory to publish in the Official Gazette within fifteen days the final decision of the General Directorate of Petroleum Affairs concerning a petroleum right. All kinds of obligations shall commence upon such publishing. (xxxxxx) .

2. If an appeal to the Council of State from a decision of the Minister is accompanied by a request of the holder of the petroleum right to suspend the execution of the decision pending the Council’s decision, the Council of State shall approve or reject the request within a week.

3. The General Directorate of Petroleum Affairs shall grant to the holder of a petroleum right adversely affected by a final decision a reasonable time within which to comply therewith if compliance with the decision requires such time.

WAIVERS AND EXTENSIONS OF REQUIREMENTS

Article 33. Upon application by the holder of a petroleum right, the General Directorate may extend for 6 months the performance of a petroleum operation required to be performed under the Law or under his permit, licence, lease or certificate in the event that fair and reasonable grounds occur. Should reasons for extension dissappear or if it is understood that they partly or in whole are no more valid the Directorate General may shorten or repeal the extension

granted. Such extensions shall not exceed the total term of the licence, lease or certificate beyond the maximum term therefore fixed under this Law. (xxx).

REGISTRATION AND PUBLICATION

Article 34. 1. The General Directorate of Petroleum Affairs shall keep a Petroleum Register. This register shall be open to the public.

2. In the Petroleum Register shall be recorded, in accordance with the Regulations :

All applications for licences, leases and certificates which are in accordance with this Law.
Licences, leases and certificates and modifications thereof; the termination thereof and of permits by any means.
Rights established on licences, leases and certificates and on the petroleum rights arising therefrom.(xx).
Transfers of licences, leases and certificates and the petroleum rights arising therefrom or the rights thereon and every type of charges thereon. (xx).
Such other matters as the Regulations may prescribe for entry in the Petroleum Register.

3. The provisions of other laws relating to a Register and to registration shall not apply to such transactions as must be registered in the Petroleum Register in conformity with this article.

Article 35. The General Directorate of Petroleum Affairs shall promptly deal with an application for recognition and recording of matters described in Sub-sub-articles (c) and (d) of Subarticle (2) of Article 34. If the application is for the purpose of furthering more rapid or effective conduct of petroleum operations or of assuring adequate or additional financing by the holder of a petroleum right, the General Directorate of Petroleum Affairs shall give a decision within a period of 60 days commencing with the date of the application.

Article 36. 1. Licences, laeses and certificates, and petroleum rights arising therefrom, and any one of those petroleum rights which are related to any portion of a licence or lease area, when registered in the Petroleum Register, may be subject of a sale, mortgage, and such other aggrements relevant to immovables, subject to the conditions provided by this Law.

2. a ) The owner of a right, which is duly registered and entails the use of a petroleum right, shall in proportion to the etent of his right enjoy the rights and be subject to the obligations of the holder of the petroleum right.

b) The holders of an interest in a licence or lease or certificate or in any of the petroleum rights granted by this Law and be subject to the obligation thereof. (xx).

3. Except for seizures and precautionary measures, no right or restriction referred to in Sub-sub-articles (c) and (d) of Sub-article (2) of Article 34 shall be valid for the General Directorate of Petroleum Affairs or for the third parties unless and until recognized and registered in the Petroleum Register by the General Directorate of Petroleum Affairs.

The Petroleum Rights to which the provisions of Sub-articles (1) and (2) shall be applied;
The provisions concerning the representative who shall represent the right holders mentioned in Sub-Article (2) and the consequences, as they affect the other right holders or interest holders to observe this obligations and liabilities. (xxxx).

Article 37. 1. A refinery or pipeline cannot be the subject of any transaction apart from a certificate.

2. Refineries and pipelines shall be registered in the Petroleum Register and in the Tittle Deed Register. A Title Deed Registry official shall register a refinery or pipeline in the Tittle Deed register upon application of the owner or the General Directorate of Petroleum Affairs accompanied by the appropriate documents. The Tittle Deed register will additionally indicate that no transaction can be registered without the permission of the General Directorate of Petroleum Affairs.

3. No fee well be charged for registering a refinery or a pipeline to the Petroleum register that has been registered to the Tittle Deed Register.

Article 38. 1. The General Directorate of Petroleum Affairs shall publish in the Official Gazette

all Regulations and amendments thereto,
the determination and modification of petroleum districts,
the declaration modification and closing of open areas,
This Sub-sub-article has been rescinded by Law No. 1702.
appointment of the General Director,
This Sub-sub-article has been rescinded by Law No. 1702.
Decisions affecting applications except those relating to permits. (xxx).
The expiration of a permit and the granting, modification, or expiration of a licence, lease or certificate or any right therein or change thereon.
This Sub-sub-article has been descinded by Law No.1702.
Any other matter that this Law or the Regulations require to be published.

2. Publication in the Official Gazette shall constitute public notice of the matters covered thereby, but shall not take the place of any special notice required by this Law or the Regulations.

3. The dater of publication of any matter published in the Official Gazette, unless otherwise specified therein, shall be deemed to be the effective date of that matter. The commencement, extension, or termination of licences or leases shall be effective on the date of publication of the decisions effecting them, unless special notice has been served.

Section 7

PERSONAL REGISTRATION AND SERVICE

Article 39. 1. Every applicant for a right under this Law shall give his address in Turkey, and no permit, licence, lease or certificate shall be granted to a person who has not done so.

2. Every permitte, licence, lessee or certificate holder shall notify the General Directorate Of Petroleum Affairs of :

the name and legal residence of his resident agent in Turkey within 30 days of the receipt of a permit, licence, lease, or certificate :
a change of legal residence or agent within 30 days of such change.

3. Matters of which notification is given under Sub-article (2) shall be registered in the Petroleum Register.

4. a ) A societe anonyme and a company having a foreign nationality, whether or not its capital is divided into shares, that is the holder of a petroleum right under this Law shall be subject to Articles 1,3,4,5,6,7,10,11 and 13, and to Article 12 insofar as it relates to Articles 1 and 4, of the prosional law of November 30,1914 relating to foreign joint stock companies having their capitals divided into shares and foreign insurance companies.

Copies of certified documents required under Article 1 of said provisional law shall be filed with the Ministry of Economy and Commerce through the General Directorate of Petroleum Affairs within 6 months after the petroleum rights of the holder become effective.

5. The agent under Sub-sub-article a) of Sub-article 2) and under Sub-article 4) shall be the same person.

Article 40. 1. A notice served under Article 39 upon an agent at an address registered in the Petroleum Register shall be considered to have been duly served on the holder of the petroleum right.

2. In case any change in the address is not advised promptly, or in case the new address had not been established by the officer serving the notice, one copy of the document to be served shall be posted on the door of the building at the previous address and another copy in a part of The General Directorate of Petroleum Affairs’ office accesible to the public, and the notice shall thus be considered to have been duly served on the date of affixing thereof on the door of the previous address.

So long as a new address is not advised any further notice shall be served by posting it on the bulletin board placed in a part of The General Directorate’s office, accesible to the public.

3. If no address or resident has been shown, any document shall be considered to have been duly served if it has been posted for 96 hours in a part of The General Directorate’s office accesible to the public.

4. Except the circumstances mentioned above, the provisions of Law on Notifications shall apply to all kinds of notices to be served by the The General Directorate under this Law. (xxx).

Article 41. Every holder of a petroleum right shall (1) maintain records and accounts as prescribed by the Regulations, (2) keep samples in such circumstances and in such form as may be prescribe with information, including samples, as to the nature, extent and results of his operation.

Article 42. 1. Any person engaged in the administration of this Law or his agent is authorized to inspect any petroleum operation, and all data obtained and samples taken in the course thereof, and all documents and accounting records with respect thereto, and such person may copy any record, account, report, or other document, and may take data anda samples and make reasonable examinations and tests without hindering the normal course of petroleum operations. (xxx).

2. Every holder of a petroleum right shall assist such person in the exercise of his powers under Sub-article (1).

Article 43. 1. Secret information relating to petroleum operations secured by authorities concerned by reason of their functions in accordance with the provisions of this Law, as well as financial, technical and operational secret information pertaining to petroleum operations may not be divulged without the consent of the holder throughoutb the duration of the petroleum right.

All kinds of technical, commercial and financial information relating to the experience which the holder of a petroleum right may have gained at any stage of petroleum operations and to the established which are known only to him and to those working with him but unknown to the public or, most probably, to a great majority of other persons engaged in the petroleum industry, shall constitute secret information. Special provisions of Tax Procedure Law are preserved.

2. Technical, financial and geological information of a general nature, as well as well locations, drilling logs, casing records and general production and sales figures are not considered secret information. (xxx).

DISTRICTS AND OPEN AREAS

Article 45. 1. For the purposes of this Law Turkey may be divided by decision of the Council of Ministers into several districts. Such districts may be modified and redetermined. A district may not comprisev less than 3.000.000 hectares.

2. By decision of the Council of Ministers the whole or any part of a District may be declared open to licence or lease, or an open area may be modified or may be closed in whole or in part.

Closing a District to licence or lease in whole or in part shall not hinder the granting of licence or lease in that District outside the territorial waters but forming an extension of said District.

The legal regime of granting licences or leases in the seas beyond the territorial waters, and the terms and conditions relevant to the tenure and obligations of such licences and leases shall be determined by the Council of Ministers. (xxx).

3. No decision under the foregoing sub-articles shall adversely affect acquired rights.

4. By permission of the Council of Ministers Türkiye Petrolleri Anonim Ortaklýðý may carry out petroleum operations in Closed Districts as well. Before permission may be granted for exploration in Military Restricted Zones the permission of the General Staff must be obtained. (xxxx).

Third Part

EXPLORATION AND PRODUCTION

Article 46. 1. The General Directorate of Petrolem Affairs, if it considers an application for geogolical investigation to be, in confomity with this Law, may grant bthe required non-exclusive permit for a specified period covering all or part of the land described in the application.

2. The General Directorate of Petroleum Affairs may refuse an application for a permit, or may grant it for a specified period and subject to such limitations and conditions as it may determine.

3. The General Directorate of Petroleum Affairs is obliged to reach a decision on an application for a permit, within sixty days following the date of application. (xxxxxx).

Article 47. 1. A permittee shall not, without the consent of another petroleum right holder who is carrying out petroleum operations enter to drilling sites or to places where geophysical work is being carried out, shall not engage in an activity that interferes with the operation of another petroleum right holder.

2. A permittee may, within the limitations and conditions of his permit and of Sub-article (1), carry on any geological investigation in the area covered by the permit.

Article 48. When a permittee has terminated his operartions in a particular place, he shall, unless the General Directorate of Petroleum Affairs otherwise directs, as far and as speedliy as possible restore the land and everything thereon to the condition prevailing prior to the commmencement of suchg operations; if he fails so to do, the General Directorate of Petroleum Affairs may do so at the expense of the permittee.

Article 49. A permittee is liable to a person who is the owner or the possesser of the land on which permittee work is being carried out for any damage to the land and forloss caused by the prevention of such person’s reasonable profit.

Article 50. Subject to the provisions of this Law, a licence confers on its holder the following rights in the licence area :

2. to do geological investigation for the purpose of determining his own petroleum prospects, as though a permittee, outside the licence area; (x)

3. to conduct exploratory or development drilling and to produce petroleum fro the area, exclusive of others;

Provided, however, that restrictions and conditions relating to operations and compatible with the objective of this Law may be included inthe licence to be granted. (xxxx).

Article 51. 1. a person existing by virtue of law who desires to obtain a licence shall file an application therefor with the provisions of the Regulations. A receipt showing paymentb of the licence fee shall be attached to the application.

2. If an application for a licence is made by a permittee it shall be granted or rejected according to whether it complies withn this Law and the Regulations.

3. If an application for a licence is made by one who is not a permittee it may be refused, eventhough it complies with this Law and the Regulations.

Article 52. 1. The contents of licence applications for field which is open for petroleum exploration shall be kept confidential for four work days following the date of application.

a) In the event another or more than one application is made within this period for the same plot of land either partly or wholely, these applications shall be considered to have been made on the same day and shall be evaulated by the General Directorate in the scope of Articles 4 and 51 of this Law.

b) In the event no other licence application is made, within four work days following the first application for the same plot of land either partly or wholely, the request shall be resolved by the General Directorate, taking into consideration the provisions specified in Articles 4 and 51.

c) Licence applications made after four work days following the date of the first application, for a plot of land either partly or wholely, shall not be subject to evaluation.

2. The above provisions shall be applicable also to applications to be lodged foe a rejected licence application area or relinguished licence area, which are made after the rejection or relinguishment has been finalized and published in the Official Gazette.

3. Applications made in compliance with the procedures shall be finalized by the General Directorate and submitted to the Minister at the latest within three months. The Minister shall execute his discretion as per Sub-article 1 of Article 4 and Article 20 of this Law and shall reach a final decision accordingly at the latest within 20 days. (xxxxxx).

2. A person existing by virtue of law may, at the same time, hold at most 8 licences in one district. However, Türkiye Petrolleri Anonim Ortaklýðý may acquire up to 12 licences in each district provided that the total number of licences does not exceed ten times the number of Petroleum Districts. (xxxxxx).

3. No person existing by virtue of law is not agreement with another person existing by virtue of law to avoid directly or indirectly the limitations described in Sub-articles (1) and (2).

4. The same person existing by virtue of law is not entitled to make a re-application within a period of one year for an area covered under an expired or relinguished licence. (xxxxxx).

Article 54. A licence area shall be bounded by north-south and east-west straight lines. The ratio of length to width these areas, their contiguity to other areas, and their compactness shall conform to the provisions of the Regulations.

2. Provided a licence continues exploration with due diligence and in compliance with the Law, in any one of the licences in a district, the term of his licences in that district may be extended for a period not exceeding two years depending on the requirements.

However, in case the licencee’s operations at the end of the second year are in a state which may possibly give rise to a discovery, the Council of Ministers may further extend the period for up to two years, against guaranty, provided that an application to that effect is made with an appropriate programme. The kind and amount of the guaranty shall be established by the Council of Ministers. In the event of failure to comply with the terms specified in the programme, the guaranty shall be retained by the Treasury as a revenue.

3. Extensions under this article, except under the provisions of Sub-article 4 shall not result in an extension of the term of a licence for more than eight years from its original effective date. (xxxxxx).

4. When a licence makes a discovery on his licence area, The General Directorate can extend the term of his licence for a period, not exceeding 3 years, sufficient for the licencee to define the petroleum field. (xxx).

5. Terms as indicated above may be increased by 50 percent in the case of offshore explorations. (xxxx).

Article 56. A licencee shall bear the obligation to pay Rental for each licence area, The Rental payable yearly per hectare of the licence area is :

Geological and drilling expenditures actually incurred by the licencee in any year shall be subtracted from the total rental he is required to pay for that year. However, the amount so subtracted shall not exceed fifty percent of the total rental.

In offshore exploration, rentals as above may be decreased fifty percent by the Ministry depending on the water depths and working conditions. (xxxxxx).

Article 57. The licencee shall commence exploration on his licence or geological investigation outside of the same bearing on the petroleum prospects thereof within one year of the effective date of his licence and continue exploration with due diligence so long as the licence is in effect.(x).

Article 58. 1. A licencee is obliged to commence explaory drilling on any one of his licences in a District at the latest within three years commending from the date of his oldest licence in that District. This period may be futher extended, against guaranty, for a maximum period of one year, by the Council of Ministers which shall establish the kind and amount of the guaranty.

In the event the licencee fails to fulfil his obligation the guaranty shall be retained by the Treasury as a revenue. (xxxxxx).

2. Within 1 year after a licencee has made a discovery on one of his licences he shall commence exploratory drilling on another licence area in the same district, and within 3 years of such discovery he shall commence exploratory drilling on the rest of his licences in that district. (xxx).

A licencee who has commended exploratory drillings under any of the provisions of the foregoing sub-articles shall continue such drilling with due diligence, with not more than 6 months between the completion of one well and the starting of another.

Article 59. Following a discovery on a licence area, the licencee shall, unless there be justifiable cause to the contrary, define and develop the petroleum field and produce petroleum found thereon as if he were a lessee. As to such petroleum operations and the petroleum so produced the licencee shall be subject to all the obligations of lessee.

Article 60. Subject to the provisions of this Law, a lease confers on the lessee the right to explore for, develop, produce petroleum and to transport the petrolum he has produced in the area concerned and sell it in every phase so long as his right is in force.

Upon application, the lessee may, by the decision of the Council of Ministers, be granted certificate either individually or with other lessees, provided that the reserve and production conditions of the fields are favourable and economically accepable and that the application complies with economical requirements, the object of this Law and with provisions concerning he certificate. (xxxxxx).

2. A person existing by virtue of law may hold lease areas totalling not more than 150.000 hectares an one district at once.

3. No person existing by virtue of law make an agreement with another person existing by virtue of law to avoid directly the limitations described in Sub-articles (1) and (2).

Article 62. A lease area shall be bounded by north-south and east-west straight lines. The ratio of length to width of these areas, their contiguity to other areas, and their compactness shall conform to the provisions of the Regulations.

Article 63. 1. A licencee who has made a discovery in his licence area, and who while his licence is in effect applies for a lease in accordance with the Regulations, shall be granted a lease on terms prevailing at the time the related licence was granted, for any area or areas chosen by him from the licence , not exceeding one-half thereof, subject to the limitations of Articles 61 and 62. The licencee shall attach to his application a receipt showing payment of the lease fee. (x).

2. Upon the grant of the lease the licence shall expire. However, in the event the right holder re-applies for licence for the remaining part of the licence area, such application may be evaluated by the General Directorate outside the scope of Sub-article 4 OF Article 53 of the Law. (xxxxxx).

3. The principles and methods to be complied with in determining and delimiting lease areas, aech not exceeding one half of the licence area, shall be prescribed by the Regulations.

A licencee when applying for a lease shall attach to his production from the lease area under application. Directorate General may request modifictions in this programme appropriate to the requirements of petroleum industry and the needs of Turkey. (xxxx).

Article 64. 1. By decision of the Council of Ministers, an area as to which no licence or lease is in effect may be declared subject to lease by competitive bidding. All or part of an area previously declared subject to lease by competitive bidding may be declared no longer subject to such bidding.

2. No licence or lease may be granted except by competitive bidding on an area previously declared subject to lease by competitive bidding without revocation of such declaration.

3. Competitive bidding mentioned in Sub-article (1) shall be conducted by the General Directorate of Petroleum Affairs in accordance with the Regulations.

4. An offer of an area for competitive bidding shall not involve obligation to accept the highest or any bid.

5. However, Directorate General of Petroleum Affairs before declaring competitive bidding shall ask Türkiye Petrolleri Anonim Ortaklýðý in writing by specifying a period whether the latter requires this area subject to lease or not. In the event that Türkiye Petrolleri Anonim Ortaklýðý requires, the area shall not be declared for competitive bidding and be granted to Türkiye Petrolleri Anonim Ortaklýðý subject to lease. (xxxx).

Article 65. 1. The term of a lease shall be 20 years from is effective date. (xxx).

2. If a licence has been extended for development under Sub-article 4 of Article 55 after a discovery on the licence area, the time of such extension shall be credited as part of the term of the lease.

3.Upon application by a lessee who has commplied fully with his obligations, his lease may be renewed twice by decision of the Council of Ministers for a total additional term not exceeding 10 years each time if found in appropriate with the National interest, technical and economical terms and so proposed by The General Directorate. (xxx).

Within one year of the effective date of his right, mark the boundaries of the lease area, with an appropriate number of boundry markers and in the manner prescribed by the Regulations.
In case of an alteration of the lease area, wihin 4 months of the effective date of such alteration, mark with an appropriate number of boundry markers the changed boundries of the lease area as provided in Sub-article (1).
Maintain the boundry markers of lease area.

Article 67. If his lease is not already adequately developed lessee shall commence a development well thereon within 6 months of the effective date of the lease, and therafter he shall with due diligence, and to a greater extent than already done, define and develop each petroleum field therin, produce petroleum therefrom, seek markets for the petroleum so produced and market it.

Article 68. 1. If a lessee has, by the end of the first year of his lease, not produced petroleum therefrom in economical quantites, The General Directorate shall, by taking also economic production conditions into account, grant a period of 90 days. Should within this period the lessee still not have produced petroleum in economical quntities, the lease shall lapse. (xxx).

2. If a lessee has produced petroleum in economical quantities from his lease area and production has thereafter ceased, the General Directorate may, after the expiration of the first year of the lease, serve upon him a notice requiring production in economical quantities to be resumed within a period of at least 90 days. If in spite of the notice and due to non existence of force majeure the lessee does not resume production in economical quantities, the lease shall expire at the end of the stated period.

However, no notice shall be given before the expiration of 3 months from the cessation of production, or before the expiration of 1 year from the cessation of production if exploratory or development drilling on the lease area are being carried out with due diligence. (xxx).

Article 69. 1. The Lessees are obliged to pay rental for each lease area. The rental payable yearly per hectare of the lease area is :

The Council of Ministers is entitled to increase these amounts up to ten times. (xxxxxx).

2. The rental payable by a licencee, who by reason of a discovery on his licence area is subject to the obligations of a lessee shall not be greater than the rental payable by him over half of his licence area as a licencee. (xxx).

Article 70. Lessees whose leae areas are situated in whole or in part in the sae petroleum field, and unitization of whose operations is likely to prevent waste, to increase production and efficiency, or to lower production costs, may unitize their operations with the approval of the General Directorate of Petroleum Affairs if the lessees accept reasonable conditions that may be set forth by the General Directorate of Petroleum Affairs. Such applications made by lessees shall be acted on promptly.

Article 71. Subject to the conditions set forth by the General Directorate of Petroleum Affairs, the lessees who unitize their operations may resort to all necessary measures for the efficient operation of the unitized petroleum field and may pay a single royalty for the aggregate prodction. Lessees thus united shall pay rentals for the unitized petroleum field on the basis of proportions which they shall jointly determine and establish, in addition to the rentals normaly payable for these areas remaining outside of unitization.

Article 73. Except as to conditions set forth by the General Directorate of Petroleum Affairs and matters mentioned in the foregoing articles, unitization shall not involve changing the areas held by the lessees or thir rights and obligations with respect thereto.

Article 74. The number of licences or the total area thereunder held in the same district by a person existing by virtue of law and other persons existing by virtue of law who directly or indirectly hold more than 25% of the shares or are entitled to the principal part of the profit or have the power of making administrative decisions or of control or of naming directors of such person shall not together be more than 8 licences and 150.000 hectares under lease.

Article 75. 1. If the number or total area of licences or leases held by a person existing by virtue of law exceeds the maximum fixed by this Law, the General Directorate of Petroleum Affairs may require of him the surrender of the excess areas, specifying a reasonable time for such surrender.

2. If the licencee or lessee fails to comply with a notice under Sub-article (1), the General Directorate of Petroleum Affairs may diminish the areas by reduction to the maximum amounts.

Article 76. A licencee or lessee may construct fuel lines or gathering lines leading to tankage on or in the vicinity of his licence area or lease area.

Article 77. A licence or lessee shall notify the General Directorate of Petroleum Affairs of any discovery made by him. The time and manner of such notification shall be prescribed by the Regulations.

Article 78. 1. A licencee or lessee shall be liable for a royalty of one-eight of the petroleum produced and stored from the licence or lease. However, petroleum shall not be subject to the payment of royalty if used by him (a) in exploration, development or productionin connection with the licence or lease, or (b) for injection into the same or another resevoir stratum in the interest of more rapid, more efficient, or greater ultimate production.

2. Royalty payable by a petroleum producer may be paid either in cash or-as foreseen in Sub-article (3) of this Article –in kind, and the amount of these payments shall be calculated at the wellhead price. Quantities of petroleum required to be made available by the holder of a petroleum right for the needs of the country under Article 13 (1) shall be reduced by the quantities paid by him as royalty or part thereof in kind.

3. a ) In the first month of a payment period the General Directorate of Petroleum Affairs may notify the producer that in the next following payment period it wishes to receive the royalty or part thereof in kind.

b) In such case the producer shall deliver to the Government organization the specified petroleum in tankage utilized by the producer for storage of his own petroleum.

c) Where facilities therefor are available, the General Directorate of Petroleum Affairs may require the producer to deliver all or part of the specified petroleum elsewhere than to the producer’s tankage, but if such delivery is more costly than delivery to the producer’s tankage the Government shall pay the producer for the added cost.

4. A producer shall not be required, as to royalty taken in kind, to store (a) gas under any circumstance or (b) liquid petroleum for more than 30 days.

Article 79. 1. Following the assessment of rentals and royalties upon the declaration by licencees and lessees who are liable to pay therefor the General Directorate is authorized to and in charge of assessing additional rentals and royalties in the event differences are ascertained on the amount assessed, according to material evidences and legal basis.

Any appeal against such additional assessments to be filed with the Minister by the party concerned shall defer the collection of the disputed portion of the amount assessed.

After the Minister’s decision has been served on the parties involved, The General Directorate shall, on basis of the Minister’s said decision, advise the party concerned of the amount to be collected.

Such additonaly assessed rentals and royalties shall be collected with a 100% increase.

2. Rentals and royalties that are not assessed and notified within 5 years following the relevant Calendar year for which the assessment should have been made, shall be time barred.

3. Rentals and royalties payable in cash shall be paid to the fiscal office of the area where The General Directorate is located. The procedure, manner and time ffor the declaration, determination, assessment and payment of rentals and royalties as welö as matters related to te supplementary assessment shall be prescribed in the Regulations.

Article 80. A certificate confers upon its holder the right under the provisions of this Law to conduct only the operations stated in the certificate, except operations which are dependent upon the issuance of a permit, licence or lease.

The term of a certificate is maximum 30 years. This term may be extended up to 10 years by the decision of the Council of Ministers. (xxx).

Article 81. The General Directorate of Petroleum Affairs shall grant the requested certificate, within 90 days from the receipt of an application for a certificate, and subject to such conditions as it shall fix in accordance with the objective of this Law, unless :

Article 82. 1. Two or more applications, or an application and a certificate or a licence or a lease shall be deemed to be in conflict and may either be dealt with under the provisions of this Law for the settlement of conflicts, or if necessary wiyhout resort to these provisions a decision may be issued on the basis of the criteria that should be taken into consideration for granting or rejecting a certificate application, if :

2. An application by the holder of a petroleum right resulting from the failure of the holder of a pipeline certificate to assure the applicant adequate transportation for his petroleum shall be deemed to be in conflict and shall likewise be dealt with under the provisions of Sub-article (1).

Article 83. 1. The legal regime applicable to a petroleum operation the principal purpose of which is the movement by pipeline through Turkey of petroleum produced or refined abroad and destined to other countries without refining or other processing within Turkey (except such purification or other treatment as is normally incident to pipeline operations) shall be determined by the Council of Ministers. (xxxxxx).

2. A transporter who has constructed a pipeline for the movement of his own petroleum, and does not need to operate the pipeline to its full capacity therefor shall accept the petroleum tendered for transportation by another holder of a petroleum right to the extent of the capacity of the pipeline and in proportion to the quantities tendered by other applicants for transportation if it conforms to the following conditions :

The petroleum tendered is compatible in quality and other phycical characteristics with the transporter’s petroleum;
The quantity tendered is a reasonable minimum tender;
A fair and reasonable transportation rate is offered for movement of the petroleum tendered;
The tenderer agrees to accept such other limitation as the Regulations may prescribe.

Article 84. 1. A transporter of petroleum by pipeline or other means, shall, before commencing transportation, file with the General Directorate of Petroleum Affairs a tariff fixing the rate and setting forth other conditions for transportation in accordance with the provisions of the Regulations.

2. The General Directorate of Petroleum Affairs shall approve or reject the tariff within 60 days of its receipt.

3. A tariff may not be approved unless the proposed rate is fair and reasonable to the shipper and to the transporter of petroleum. The tariff shall provide the transporter, in addition to the transportation expenses, including depreciation, interest and amortization allowances, a reasonable profit on the values included in his capital asset has required for the carrying out of the transportation operations and the cash funds and rights thereto actually used in such operations. (x).

4. Except in an emergency or with the approval or at the direction of the General Directorate of Petroleum Affairs no transportation of petroleum for others may be undertaken until a tariff therefor has been approved.

Article 85. The holder of a petroleum right who has a certificate necessary for his activities shall conduct the operation with due diligence.

Article 86. 1 A permit, licence, leae or certificate does not by itself affect the rights of a person who is the owner or has the right of enjoyment of the land to which it relates, or rights relating to minerals other than petroleum contained therein, and other rights that have been or may be established in such rights.

2. A holder of a petroleum right shall be liable for full compensation of any loss or damage to be caused to the immovable or the installations thereon under his surface lease in connection with his petroleum operations, as well as those regardless of whether or not the losses involved have been caused because of any fault of his or whether or not they could be foreseen beforehand.

Debts arising from these damages shall be subject to time barring applicable to cases of “tort”. (xxxx).

Article 87. 1. A holder of a petroleum right is entitled to acquire a surface lease of such land in or in the vicinity of his licence, lease or certificate area as required for his operation, by agreement or by expropriation if the land is privately owned or by recording it on his licence, lease or certificate if the land is not owned by anybody.

Shoul the surface lease acquired by agreement run for a period of more than 3 years, then the owner of the privately owned land may also ask the holder of the petroleum right to have the land in qustion expropriated.

However, provided no provision to the contrary exists in other laws, the title to privately owned land may also be acquired by the holder of a petroleum right through agreement with the owner. (xxx).

2. a ) A decision to expropriate shall be made by the General Directorate on application therefor. Such a decision being in effect a decision of public interest , subsequent transactions shall take place in accordance with the Law of Expropriation. (xxx).

b) The expropriated land shall be owned by the Treasury and a surface lease thereon by the holder of apetroleum right, who shall have paid the cost of expropriation.

3. A surface lease obtained under the provisions of this article shall be a part of, and shall run as long as, the licence, lease or certificate in connection with which it is issued.

Article 88. Subject to his compliance with the provisions of other relevant laws and to his acquisition of a surface lease thereon, a licencee, lessee, or certificate holder has the right and authority on land in or in the vicinity of his licence, lease, or certificate area :

to search for water, by drilling or otherwise, and to use the water found;
to use other existing water, to the extent needed in his operations, without adversely affecting the rights of others in and to such water.

Article 89. 1. A holder a petroleum right may surrender a licence on one month’s notice, other rights on three months’ notice, to the General Directorate of Petroleum Affairs. In such a case, the rights arising from the licence, lease or certificate shall expire at the time stated in the notice. After the holder of a petroleum right has discharged his obligations to that date, all his obligations shall be at the end.

2. The holder of a petroleum right may surrender part of his licence, lease or certificate area. In such case, the foregoing provisions shall be applied in proportion to the surrended area.

Article 90. Subject to the limitations specified in this Law on number and extent of areas, The General Directorate of Petroleum Affairs, on application therefor by the holder of a petroleum right, may add to a licence or lease area.

Article 91. 1. A holder of a petroleum right whose surface lease on land has terminated, by surrenderor cancellation of a permit, licence, lease or certificate, or by expiration or otherwise, shall leave the land and everything thereon in such condition as the Regulations prescribe.

Article 92. Except as provided in the subsequent articles hereof the holder of a petroleum right may at any time remove any or all of his installations and supplementary parts thereof and other movable property, regardless whether they are considered to be the components of these installations or not, installed or placed by him on the land within his licence, lease or certificate area or on the land covered by his surface lease. (xxx).

Article 93. The ownership of any property mentioned in Article 92 not removed by the holder of a petroleum right from the land covered by a surface lease within 90 days after the termination of such lease shall pass to enter the owner of the land.

Buildings and other fixed assets set up by the holder of a petroleum right on land covered by a surface lease which has terminated.
The casing in any drilling or water well drilled by the holder of a petroleum right, or tanks, gathering line, fuel lines, or petroleum pipelines installed by such a holder, which are not being used in place or wanted by the holder, which are not being used in place or wanted by the holder for use in Turkey.

2. Installations and property described in the foregoing sub-sub-articles may be removed by the holder of a petroleum right if a notice has been given to the General Directorate of Petroleum Affairs not less than 30 days in advance in order for it to notify the holder whether it intends to purchase the installations or property and if the General Directorate of Petroleum Affairs within the notice period has not notified the holder of the petroleum right that it will purchase.

3. If the price of any installation or property that the General Directorate of Petroleum Affairs wants to purchase is not determined by agreement, it shall be determined by the local court or first instance upon application.

Article 95. 1. A petroleum right holder shall be subject to the provisions of all an every Law on taxes, dues and fees and of the Tax Procedure Laws to be enforced in place thereof. Provided that the total tax he is obliged to pay on his net profits and the income tax which he is obliged to withhold on behalf of his share holders shall not exceed 55%.

2. Two or more holders of petroleum rights whose principal business activity is the conduct of petroleum operations under this Law shall seperately be subject to taxation even if a share holding participation existed between them.

3. Holders of petroleum rights engaged in other activities, subject to general provisions, together with petroleum operations mentioned in this Law, shall allocate a seperate capital for their activities pertaining to their petroleum operations, maintain seperate registers and accounts to differentiate their transactions of this nature, and without pooling the final accounts of their petroleum operations with those of their activities declare the former by means of seperate declaration. Results arising from petroleum operations shall be subject to tax independently. (xxx).

Article 96. The exceptions provided under Sub-article 1 of Article 12 of Corporation Tax Law, do not apply to profit and income derived from petroleum products .(xxx).

Article 97. 1. Apart from those expenses permissible to be deducted from earnings of the tax payer in order to determine the Corporate earnings under Article 14 of Corporation Tax Law No. 5422, the holder of a petroleum right shall be allowed to make the following deductions :

Any amount left following the offsetting as provided for in Article 25 of this Law which amends Article 56 of Petroleum Law the Rental and Royalty paid by Corporate holder of a petroleum right,
The residual values of unamortised economic values relinguished as a result of surrender of an area by Corporate holder of petroleum right,
The non capialized exploration expenses, the intangible drilling expenses, and the expenses for drilling wells not productive in economical quantities by the corporate holder of a petroleum right,
Depletion allowance.

2. The depletion allowance represnts the total of capitalized exploration expenses, intangible drilling costs and the expenses for drilling wells not productive in economical quantities, depleted at rates to be jointly determined by the Ministry of Finance and the General Directorate of Petroleum Affairs; for each area individually in anology with Article 316 of Tax Procedure Law. However, either the cost or the value of a part the area assigned to a purpose other than petroleum production and the residual value representedto the petroleum right holder at the end of the petroleum operation, shall be deducted from the depletion allowance. (xxx).

Article 98. The economic values of the petroleum right holding companies shall be evaluated as per evaluation stipulations of Tax Procedures Law, and in the same time, the exploration expenses, the intangible drilling costs and the expenses for drilling wells not productive in economical quantities as defined and the basis of which are set forth under this Law and capitalized by the corporate holder shall be evaluated according to their book values.

The capitalization of these expenses is optional. The option right is to be exercised on the tax declaration relevant to the initial period when expenses of such a category have been made. (xxx).

Article 99. Excluding the capitalized exploration expenses, the intangible drilling costs and expenses for the drilling wells not productive in economical quantities, the petroleum right holders expenditure covering the cost of economic value as well as the cost for the acquisition of this value and for the erection of installations thereon, shall be depreciated by way of amortization. Amortization rates applicable on these shall be set up Ministry of Finance by taking into account the reservoir conditions. (xxx).

Article 112. 1. The holder of a petroleum right itself, its agent or its contractor recognized by the General Directorate can on its name import free of customs and other import taxes and dues into Turkey, all the materials, fuels and land, sea and air transport vehicles required for its petroleum operations in Turkey that are considered to be necessary by the General Directorate, excluding the materials related with the construction, erection and operation of its buildings or installation and equipment and its administrative activities, provided that said materials are used exclusively for its petroleum operations. However, the Council of Ministers can decide and indicate which of the materials shall be subject to customs and other import taxes and dues, by issuing a detailed itemized list of articles produced or manufactured in Turkey, the quality, the quantity and availability of which are comparable to similar imported articles. This list may be amended in line with Turkey’s development in industry. The list shall become effective as of the date of their publication. However, materials the importation of which are requested by application submitted to the General Directorate prior to the date the lists have been published, shall enjoy duty exemption in case they are imported within one year following the date of enforcement of the list, provided that the necessity of their importation is approved by the General Directorate.

The period for enjoying the immunities and exemptions specified under this Sub-article shall be up to the end of the calender year 2020. (xxxxxx).

2. The holder of a petroleum right may, as long as its right is in effect, import at market price free of customs and other import taxes and dues crude oil into Turkey which can not be procured from local sources and which is necessary for its petroleum operation.

The Council of Ministers is authorized to establish the market price of imported crude by taking into consideration the precedented free competitive prices. (xxx).

3. The exemption from customs and other import taxes and dues provided for in the foregoing paragraphs shall continue in case of the transfer of such materials by the permission of the General Directorate from the holder of the petroleum right to another petroleum right holder to be used in its petroleum operations. (xxx)

4. With the exception of petroleum products manufactured from petroleum imported pursuant to paragraph (2) and materials trasferred to another holder of a petroleum right to be used in petroleum operations, materials imported free of customs and other import taxes and dues, when transferred for use or sale within Turkey either directly or through any activity which is not considered a petroleum operation, shall be subject to customs and other import taxes and dues, in accordance with the provisions and conditions of the Customs Law, and Tariff in force on the date of transfer. However, the materials which are found as not useful for the petroleum operations may be exempted from the aforesaid provision upon acceptance of the General Directorate’s proposal to this effect by the Ministry of Finance and the Ministry of Customs and Monopolies. (xxx).

Article 113. Except in case of the purchase of material by the General Directorate of Petroleum Affairs as provided in Article 94, a holder of a petroleum right may export the material that he has importd free of export taxes and dues. (xx).

Article 114. A holder of a petroleum right may report, free of all kins of export taxes and dues, the petroleum and petroleum products obtained therefrom, for which he holds the right to export in accordance with Sub-article 1 of Article 13. The export prices of crude oil, natural gas and petroleum products exported shall be established by the General Directorate of Petroleum Affairs, by taking into account their prevailing free competitive prices. These prices shall be effective upon Ministers approval. The General Directorate of Petroleum Affairs, in its assessment, shall take as basis the relativity of natural gas to crude oil export price in terms of equivalent caloric value and nearness to the buyer’s market. (xxxxxx).

Article 115. 1. A holder of a petroleum right may, on application to the Ministry of Finance and the General Directorate, transfer abroad, tax free, either in cash or in kind, excepting the sum required for the payment of any taxes, dues, fees, rentals and royalties owing but unpaid to the State;

His cash funds and rights thereto, except the portion derived from sources within Turkey, other than his petroleum operations, to the extent that such funds and rights thereto exceed the value of his capital assets base as established according to this Law and Tax Procedure Law,
The other values contained in the capital asset base, except the portion derived from sources within Turkey other than the holder’s petroleum operations.

However, capital imported into Turkey in kind shall be re-exported in kind, if it is at such state that can be re-exported in kind. The differences arising in favour, on account of sale or transfer of economic values in Turkey shall be blocked. If the value of the item is collected in abroad thhe amount representating the difference shall be brought into Turkey in foreign exchange and credit to the blocked account. The Ministry of Finance and the General Directorate of Petroleum Affairs experts will be entitled to supervise, if necessary, those items imported or re-exported from Turkey whether they conform with quality and whether they are the original items under the permission in question.

2. By permission of the Minister of Finance, the holder of a petroleum right may import from abroad cash, sevices, materials, or other properties, for use in his petroleum operations, by transferring abroad economical values derived from sources within Turkey other than petroleum operations.

The cash, services, materials or other properties secured in this manner, in return for the economical values permitted to be transferred abroad, shall be considered as have been obtained by the holder of a petroleum right from sources other than his petroleum operations in Turkey.

3. Against their imported registered capital the holders of petroleum right may at all times make application for transfer. The transfer of net values transferrable in excess of their imported capital can be applied for transfer only during the period of submission of Corporation Tax Declaration and only after the submission of each such declaration.

If a transfer application is not made within the prescribed period it can be made during the period of next Corporate Tax Declaration period. (xxx).

a) The holder of a petroleum right may retain abroad the foreign currency obtained from the petroleum permitted to be exported in accordance with Sub-article 1 of Article 13 of this Law.

The foreign currency retained abroad by the holdr of petroleum right :

Shall be offset against remittances for recorded capital which the holder of petroleum right has brought to Turkey, and the remittable net valuesexceeding the imported capital.
May be used by the hplder of a petroleum right in all kinds of payments in foreign currency required for his own petroleum operations in Turkey in accordance with the Petroleum Law. However, such payments shall not be regarded as capital imported to Turkey.
The Turkish Lira equivalent of the foreign currency retained abroad shall be regarded as cash fund in the implementation of remittance provisions of this Law.

The principles specified in Sub-article 3 of Article 116 of this Law concerning the rates of exchange shall be implemented in offsetting foreign currency retained abroad against both the imported capital and the remittable net values exceeding the imported capital.

c) The holder of petroleum right shall, following a reconciliation as at end June every year, deposit to a special foreign currency account with the Central Bank of the Turkish Republic, the balance of the amount of foreign currency remaining after the offset and payment transactions specified in paragraph (b).

The holder of petroleum right may request to use for purposes as specified in paragraph (b) and in accordance with the principles stated therein the foreign currency accumulated in this account.

These provisions shall also be applicable to that portion corresponding to the foreign partner’s share of the petroleum to be produced from the fields discovered during explorations which Turkish stock companies carry out with foreign partners under joint venture.
The amount of foreign currency which Turkish stoc companies arec entitled to retain abroad in accordance with the provisions of this Sub-article, and the relevant principles shall be specified by the Council of Ministers. (xxxxx).

Article 116. 1. The value of cash funds and rights thereto, and materials or other property forming a part of the capital asset base imported into Turkey for use in petroleum operations shall be established at the official rate of exchange of the Turkish Currency, according to the kind of foreign currency utilized for each importation, prevailing at the date importation.

The Ministry of Finance and the General Directorate shall be jointly authorized to determine and establish such value.

2. When application for transfer abroad is made as property, including cash funds and rights thereto, mentioned in Sub-article 115 (1), including previously imported material or other assets forming a part of the capital asset base, certification of the right to transfer, and the identity, if applicable of the material or other assets forming a part of the capital asset base with imported items shall be made by the General Directorate of Petroleum Affairs in colloboration with the Ministry of Finance.

3. In making such certification, the Ministry of Finance and the General Directorate shall specify, in their decisio as to the kind of foreign currency, the national identity of the holder and of the value of properties to be transferred and other relevant factors of this nature.

In the absence of evidence to the contrary, the value of properties to be transferred, including cash funds and other rights thereto, shall be transferred according to the sequence of dates of importation into the country of the properties against which they were secured.

The transfer of the cash funds and other rights related thereto, values of which have ben established pursuant to the above principles, and other properties forming a part of the capital asset base, shall be effected at the official rate of exchange prevailing on the date of importation.

Those falling outside the scope of the above will be transferred at the rate of exchange prevailing at the date of transfer. (xxx).

Article 117. 1. The Ministry of Finance, upon examination jointly with the General Directorate of Petroleum Affairs of applications for transfers in accordance with Article 115 (1) and, independently, of applications for transfers in accordance with Sub-article (2) of the same article, shall issue the necessary permit, as regards application’s compliance with Article 115 and shall allocate the necessary foreign currency in accordance with the foregoing articles. (x).

Article 118. Provided that the provisions of this Law be preserved, the provisions of the Law on the Protection of the Value of the Turkish Currency, supplements thereto and amentments thereof, as well as the provisions of the decisions and notices based there-upon, shall also apply to the holders of petroleum right. (xxx).

Article 119. The alien executive and professional personnel and skilled labourers of a holder of a petroleum right, who may be required for the execution of his petroleum operations, may with the favorable view of the Ministry of Energy and Natural Resources and the permission of the Ministry of the Interior, be employed in Turkey, under exemption from the provisions of Law No. 2007 on Crafts and Services Appropriated in Turkey for Turkish Citizes. (xxxxxx).

Article 120. 1. Leases and certificate holders shall undertake at their own expense to provide education and training in educational or professional institutions and in operations in foreign countries, or to the extent approved by the General Directorate in Turkey, in order that Turkish citizens (excluding civil servants) not less than 25% of the alien personnel employed by them, may gain proficiency in all phases of petroleum operations. (xxx).

2. The persons to be sent and the places to which they are to be sent shall be determined by the holder of the petroleum right together with the General Directorate of Petroleum Affairs.

3. The persons thus being educated and trained shall not be liable to the petroleum right holders, who assume their expenses, as regards obligatory service or employment. (xxx).

Article 121. Petroleum right holder Türkiye Petrollleri Anonim Ortaklýðý shall not be subject to the obligation provided for in Article 56 of this Law. (xxxxxx).

Section 3

FORCE MAJEURE

Article 122. Acts of God, war, insurrections, and other force majeure occurrences shall suspend the rights and obligations of the holder of a petroleum right to the extent that they affect his bpetroleum opeartions, and the time to which he is subject as equal to the period of force majeure.

Ninth Part

PENALTIES

Article 123. 1. If an offense under this Law does not legally entail a heavier penalty it shall be punished under the provisions of this Part.

2. Application of the provisions of this Part shall not exclude the application of the other provisions of this Law to the holder of a petroleum right.

Article 124. 1. A person who conducts geological investigation without obtaining a permit is liable to a minor fine of from 5000 to 10000 liras. (xxx).

2. A person who conducts petroleum operations other than geological investigations without obtaining a licence, lease or certificate is liable to major fine of from 5000 to 25000 liras or to imprisonment for one month to six months or both such penalties. (xxx).

3. The provisions of this article shall not apply to persons authorized to do geological work by Turkish scientific and research institutions.

Article 125. 1. To persons who commit waste or unsafe act as defined in this Law, an order shall be given by the General Directorate to cease such waste or unsafe act within a specified time. If such waste or unsafe act continues after the end of such specified time, the offender shall be liable to a major fine of 5000 lira for each day that it continues. (xxx).

2. If serious and irreparable damage results from acts mentioned above, the offender shall be liable to a major fine not less than 5000 lira for each day that the offence continýes or to imprisinment from one to six months, or to both such penalties. (xxx).

Article 126. A person who wilfully and without lwful excuse impedes or interferes with the exercise of a right or the performance of a duty under this Law is liable to a minor fine or not more than 500 lira or to light imprisonment for not more than one month or to both suv-ch penalties.

Article 127. A person who in an application or proceeding under the provisions of this Law makes a material statement that he knows to be false is liable to a major fine of from 500 to 2000 lira or to imprisonment for one month to 6 months or to both such penalties.

Article 128. Where it appears to the General Directorate of Petroleum Affairs that waste or an unsafe act is taking place in or in connection with a petroleum operation, it shall direct the person committing such waste or unsafe act to cease so doing, and to repair and rectify the damage that has resulted, within a reasonable time. If such directive has not been complied with within the specified time, the General Directorate of Petroleum Affairs shall have the damage repaired and rectified at the cost of the petroleum right holder and take the precautionary measures to stop waste or unsafe act.

Article 129. Where it appears to the General Directorate of Petroleum Affairs that waste or an unsafe act, either of which causes or is likely to cause serious and irreparable damage, is taking place in or in connection with a petroleum operation, it may seize wells and all installations and take all measures it deems necessary to stop such damage, including the suspension of operations, at the expense of the person committing such waste or unsafe act.

Article 130. Upon conviction of a person in a competent court for making a material statement that he knows to be false in an application or proceeding under the provisions of this Law, the Minister may cancel any right granted by the General Directorate of Petroleum Affairs to such person on the basis of such statement.

Article 131. If the holder of a petroleum right fails to perform any of his financial obligations to the State, the provisions of the Law relating to Collection Procedures of Public Claims shall be applied to him.

Article 132. 1. If the holder of a petroleum right fails to comply with this Law, the Regulations and with Decrees and orders given on the basis of such or with one of the written conditions of his permit, licence, lease and certificate The General Directorate of Petroleum Affairs shall request compliance within 90 days, operations covered by his permit, licence or leaseor certificate or the direct implementation of the cancellation sanction. If despite such warning the failure continues after the 90 days period, the operations may be temporarily suspended for a period of not less than 90 days not more than 180 days or the General Directorate of Petroleum Affairs may suggest to the Minister for the direct cancellation of the permit, licence, lease or the certificate. (xxx).

2. a) Resuming of the operations shall be permitted during the temporary suspension period, if an acceptable assurance to the effect that the failure will be removed is provided to the General Directorate of Petroleum Affairs by the holder of a permit, licence, lease of certificate.

b) In case acceptable assurance is not provided and the failure is not removed or the failure is not removed although an acceptable assurance has been provided, the holder of a permit, licence, lease or certificate shall be given another 45 days of grace. If the failure has not been removed at the end of this grace, the permit, licence, lease or certificate may be cancelled.

3. In case the holder of a licence, lease, or a certificate does not comply with the provisions of Articles 13, 57, 58, 59, 67 and 85 of the Law, the cancellation sanction shall be directly applied after granting the 90 day period, without resource to the temporary suspension remedy. (xxx).

4. The decision for cancellation shall be taken by the Minister upon the proposal of the General Director and the decision for temporary suspension by the General Director. (xxx).

5. If a decision for cancellation has been taken, the rights arising from permit, licence, lease or certificate shall be terminated on the date of cancellation.

6. If a decision for temporary suspension has been taken none of the operations shall be performed except for the operations related to the sale of petroleum, for the prevention of an unsafe act or waste and for the removal of the incident leading to the temporary suspension of operations. (xx).

FINAL PROVISIONS

Temporary Article. 1. A petroleum operation being conducted on the effective date of this Law under a legal right previously obtained may continue for 150 days after such date. Continuation of such petroleum operation beyond such period is subject to the grant of authority under this Law.

2. In order to be granted authority to continue such an operation under this Law it is necessary (a) to make an application therefor to the General Directorate of Petroleum Affairs within 90 days of the effective date of this Law, and (b) that the person conducting the operation be not prohibited by the provisions of this Law from conducting such operation.

Section 2

SCOPE, EFFECTIVE DATE, AND EXECUTION

Article 133. 1. The Petroleum Law No. 792 of March 24, 1926, is hereby repealed.

2. The provisions of the Mining Law No. 6309 and of Article 5 Law No. 2805are not applicable to petroleum.

Article 134. The provisions of this Law relating to organization, permits and certificates shall be effective on the date of its publication, and the other provisions shall be effective on the date of enforcement of the Regulations called for by Article 14.

SUPPLEMENTARY ARTICLES ADDED BY LAW NO. 1702 TO PETROLEUM LAW

Supplementary Article 1. The following terms, Council of Ministers, Minister, Ministry, Petroleum Administration and President as used in Petroleum law No.6326 as amended by Law No. 6558 and Law No.6987 have been amended as follows :

and the caption of Part Eight, Section 1 has been amended as “Personnel Training” and caption of Section 2 of the same Part has been amended as “Petroleum Operations carried out by Public Economic Enterprises”.

Supplementary Article 2. The provisions of Article 112 Sub-article 5 shall not applicable in the event of transfer purpose of using or selling in Turkey, directly or through operations not considered a petroleum operation, of a raw material, auxilary chemicals, operational materials and petrochemicals manufactured by additives imported into Turkey in accordance with Article 112 of the petrochemical installations under a certificate.

Supplementary Article 3. Field comprising producible solid hydrocarbons such as asphaltite, bituminous shales, which can be suitable for the production of petroleum products, may upon th proposal of the Minister be included in the scope of Petroleum Law, by the resolution of the Council of Ministers. (xxxxx).

Temporary Article 1. The tenure of the licences granted prior to date of enforcement of this Law shall be subject to the provisions which were in force on the date of their issue. The same shall also apply in the case of transfer and assignment of licences in part or in full.

Temporary Article 2. The tenure recognized to a licencee, in accordance with article 55/4 of Petroleum Law, who made a discovery in his licence area prior to the date of enforcement of this Law, shall continue even if it exceeds at the time of the enforcement of the present Law, the tenure of 3 years, stipulatedunder the present Law.

Temporary Article 3. The tenures which became operative in accordance with Article 58 of the Law, prior to the date of enforcement of the preset Law, shall be subject to the previous provisions. If the remaining part of such terms, however, is longer than the terms specified by the new law, the aforesaid tenures shall be considered to have expired with the expiry of the new tenure as from the date of enforcement of this Law.

Temporary Article 4. The tenure of the leases granted prior to the date of enforcement of this Law shall be subject to the provisions which were in force at the time of their issue. The same shall also apply in the case of transfer and assignment of leases in part or full. (xxxx)

Temporary Article 5. The losses which have been carried forward for 5 years or more on the date of enforcement of this Law can no longer be carried forward into succeeding years. (xxxx).

Temporary Article 6. The tenures which became operative in accordance with Article 68 of the Law, prior to the date of enforcement of the present Law,shall be subject to the previous provisions. If the remaining partof such tenures, however, is no longer than the tenures specified by the new Law, aforesaid tenures shall be cosidered to have expired with the expiry of the new tenure as from the date of enforcement of this Law. (xxxx)

Temporary Article 7. The tenures of the certificates granted prior to the date of enforcement of this Law shall be subject to the provisions which were in force on the date of their issue.

Temporary Article 8. Provisions which amend or repeal the provisions of Part Six, under the heading “Taxation”, of Petroleum Law No. 6326 as amended by Law No.’s 6558 and 6987 shall be effective as from the beginning of calendar year subsequent to the date of enforcement of this Law. Old provisions regarding taxation shall continue to be validuntil the beginning of next calender year following the date of enactment of this Law. (xxxx)

Temporary Article 9. The appointment of personnel of the General Directorate of Petroleum Affairs and that of the Department of Fuels of the Ministry of Energy and Natural Resources shall be made to the positions which in accordance with the State Employee Act No. 657 shall be allocated to the General Directorate under the terms of this Law, provided that all acquired rights of these personnel are reserved. These transactions shall be completed wiyhin one month. (xxxx).

Temporary Article 10. Personnel who are presently Head of Fuels Control Department and Controllers shall be subject to proficiency examination, and those who succeed shall priorily be appointed as Auditers to the Audit Board which is foreseento be formed at the General Directorate of Petroleum Affairs.

TEMPORARY ARTICLES ADDED BY LAW NO. 2803 TO PETROLEUM LAW

Temporary Article 1. The periods for objections, investigation of objections and appeals to law courts, which have commended prior to the date this Law is put into effect, shall be subject to the provisions applicable before the publishing date of this Law.

Temporary Article 2. The number of licences acquired by Türkiye Petrolleri Anonim Ortaklýðý in each District on the date this Law has become effective shall be valid upup to the end of periods specified in this Law.

Temporary Article 3. Applications lodged by Türkiye Petrolleri Anonim Ortaklýðý, prior to the effective date of this Law, for acquiring licences and re-acquiring licences, the legal terms of which have expired, may be held subject to the provisions applicable before the publishing date of this Law, provided the total number of licences does not exceed ten times the number of petroleum districts.