According to its legal classification, import of natural gas is a “natural gas market activity”. Activities conducted within Turkish natural gas market are regulated by the Natural Gas Market Act numbered 4646 (“NGMA”) and several regulations and communiques. As one might expect, this is a highly regulated market.

Like other natural gas market activities, import is an activity which can only be conducted after obtaining a license from Energy Market Regulation Authority (“EMRA”). 

According to section 4(4) – (a) of NGMA, the following criteria are to be taken into consideration for those who are willing to obtain a license to import natural gas into Turkey:

1. That the applicant has technical and economic strength for conducting import activities,
2. That there is precise information and guarantee regarding the source, reserves, production plants and transmission system of the natural gas to be imported,
3. Undertakings and warranties have been secured, from those persons who will conduct storage activities, as to the existence of the capability of subsoil storage of natural gas within national territories in the percentage, to be determined by EMRA, of natural gas to be imported annually for five years,
4. That the applicant has the eligibility to contribute to the improvement and security of the national transmission system, for this purpose that it will be able to provide economic support to the investors who will be improving the system.

According to NGMA, import companies should obtain separate licenses for each of their import connections. Therefore, each natural gas import connection will be evaluated by EMRA pursuant to NGMA and other regulations.

NGMA also puts a limitation as to the amount of natural gas that can be imported by an import company. This limit is 20% of the national gas consumption of the relevant year which will be determined by EMRA. Therefore, NGMA aims to ensure that there are at least five import companies operating in the market.

The procedure of obtaining the required license is regulated under the Natural Gas Market License Regulation (“NGMLR”). NGMLR specifies additional criteria for license applications—including license applications for import activities. These are as follows:

1. Compliance with the purposes set out in the relevant laws,
2. Impact on protection of consumer rights and development of competition and market,
3. The judicial persons’ and/or its shareholders’ financial strength and resources,

Following documents need to be presented to EMRA for import license application:

1. The “License Application Petition” contained in the first appendix of NGMLR,
2. The “Undertaking” contained in the second appendix of NGMLR,
3. Originals or notarised copies of signature circulars of those persons who are authorised to represent the judicial person applying for the license,
4. Original or a copy approved by EMRA of the registry record document obtained from the Commerce and/or Industry Chamber within one month prior to the application date
5. A copy approved by the Trade Registry Office or EMRA of the articles of association bearing all amendments made to it or the originals or copies approved by the Trade Registry Office or EMRA of the Trade Registry Journal issues in which article of association and amendments that have been made to it were announced,
6. For determining share ratios and amounts of the natural or judicial persons who are directly or indirectly subscribed to the applicant judicial person; the applicant’s, those judicial persons’ who are, directly or indirectly subscribed to the applicant for at least ten percent and, in the event that the shares determining the judicial person shareholder’s management or audit are possessed by a different judicial person, such judicial person’s,
7. Chart demonstrating its shareholding ratios and amounts and lists setting out privileged shares (if any)—if there are not any privileged shares, a statement shall be submitted to that effect,
8. Original or a copy approved by the Trade Registry Office or EMRA of the Trade Registry Journal issue containing its capital shares and latest shareholding structure or registration document approved by the Trade Registry Office or shareholding confirmation document obtained from the Trade Registry Office or its copy approved by EMRA or its share ledger approved by notary public or the Trade Registry Office. 

• Year-end statement of income belonging to the previous year, interim statement of income and balance sheet belonging to the year in which the license application is made, approved by Sworn Public Accountant, Independent Accountant and Financial Advisor or a Tax Office, demonstrating financial standing of the applicant and judicial person shareholders directly holding more than 10% (in publicly traded companies 5%) of the shareholding in the applicant,
• Market experience in Turkey or abroad (if any) of the applicant and/or its shareholders,
• Information regarding the applicants’ affiliates and such affiliates’ activities (if there are no affiliates, a notification should be submitted to that effect),
• For ensuring the supply security of natural gas; precise information and guarantee regarding resource, reserve, generation plant and transmission facilities of the natural gas to be imported,
• During the period for the license is requested, the annual amount of natural gas to be imported and the identity of the person from whom the gas will be purchased,
• Lease agreements to secure the storage capacity for domestic storage of natural gas in the percentage to be determined by EMRA of the annual natural gas to be imported or preliminary contracts entered into by relevant judicial persons who will be conducting storage activity for ensuring that domestic subsoil storage capabilities will be reached within five years or undertakings obtained from such judicial persons,
• The applicant’s declaration that it has the capability to contribute to the national transmission system’s development and security, for this purpose, within its financial capabilities, it will provide reasonable financial support to the judicial persons who will carry out the development of the system, and
• Contract terms of and extensions of time on the import contracts that the applicant has executed or is to execute, properties of the natural gas (chemical composition, gross calorific value etc) threshold values and information and documents on annual or seasonal import volumes.

It is important to note that EMRA has the authority to request additional documents and/or information other than those which are stated in NGMA, NGMLR or other pieces of legal instruments. Furthermore, EMRA may invite those who are authorised to represent the judicial person who applied for the license.

EMRA will evaluate whether the documents required have been submitted in compliance with the applicable laws within ten business days as from the date on which they are accepted to EMRA’s central document department. The result of this evaluation will be notified to the applicant in writing. The deficiencies or mistakes notified to the applicant with respect to the content of its application should be remedied within ten business days as from the date on which such notification is made. Otherwise, it will be deemed that the applicant has not been made and the documents submitted will be returned to the applicant.

After it is determined that the application is duly made, the applicant will be notified to deposit one percent of the license fee to EMRA’s account within ten business days. Otherwise, it will be deemed that the applicant has not been made and the documents submitted will be returned to the applicant. After the required amount is deposited, EMRA will begin to consider the application and the decision will be notified to the applicant. If the decision is in the affirmative, the applicant will be asked to submit;

1. Relevant documents demonstrating that its articles of association is amended in such a manner that is compliant with appendix – 4 of NGMLR—for instance, it should increase its capital to the minimum threshold which is, at the time of writing of this update, 9.392.552,00 Turkish Liras for import licenses.
2. Document demonstrating that the remainder of the license fee has been paid, and
3. If the project is covered by Environmental Impact Assessment Regulation, the decision that has been rendered in the context of the said regulation with respect to the project or plant about which the license application has been made.

If these documents have been submitted to EMRA within 90 days (for Environmental Impact Assessment Affirmative Decision the period is 300 days), EMRA will issue the license and the applicant will be able to conduct natural gas import activities pursuant to its license and in accordance with the applicable legislation in the Republic of Turkey. The date on which the license becomes valid will be stated on the license.

It is noteworthy that import companies do not need a separate license for conducting wholesale natural gas activities according to NGMA s.4(4) – (e). Therefore, an import company will be able to sell natural gas to natural gas distribution companies and eligible consumers. 

During its operation pursuant to the license, the license holder will have a number of obligations under the applicable legal instruments. Most importantly, it will keep its plants, legal ledgers and records ready for EMRA’s inspection, present them to EMRA when requested and timely provide, to EMRA, all information and documents that EMRA may need for fulfilling its tasks. For more information on the regulatory framework of importing natural gas, please fee free to contact us at info@kesikli.com.  

@Kesikli Law Firm