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Turkey: Game-Changing Oil & Gas Legislation Afoot

We’ve noted recently that Turkey is a hot venue for both the majors and the juniors, but that there still hasn’t been that one big find to put the country on the fossil fuels map in terms of exploration and production. For now it’s all about exploration potential, analog geology, good governance and plenty of infrastructure to get product to market.

But now there’s another potential game-changer that could make this venue even more attractive for E&P companies … and the mainstream media hasn’t picked up on it, so here’s your chance. The significance of this should not be underestimated.

Turkish Parliament is debating new hydrocarbons legislation right now that would significantly weaken the state-run oil company’s (TPAO) exploration and licensing authority and force it to compete on equal footing with foreign companies. This is game-changing legislation for potential new entrants into this market and it will usher in a new group of power brokers and gatekeepers.

The Turkish Parliament began debating the bill last week and while there is strong opposition to this bill, it also has the full support of the ruling Justice and Development Party (AKP), so stands a good chance of passing.

Overall, the bill is aimed at liberalizing Turkey’s oil and gas industry to attract more foreign investment at the expense of the state-run oil company’s (TPAO) position. Turkey has its sights set on a much more ambitious oil and gas drive and the impetus to speed up exploration has never been greater.

The forces seeking to turn Turkey into a major energy hub have gained much influence in this game. Because there hasn’t been that one big find yet in Turkey, Ankara understands the need to raise the stakes here to lure in more explorers and investment by removing some of the risk. 

If passed, the bill will:

•    Allow foreign explorers to compete with TPAO on equal footing
•    Strip TPAO of its status being in charge of exploration and drilling
•    Remove the requirement for foreign companies to partner with TPAO
•    Makes the Turkish Cabinet responsible for deciding who gets offshore licenses
•    Extend license periods
•    Cut profit taxes from 55% to 40%
•    Make it easier to hire foreign workers
•    Allow TPAO to continue to receive licenses without auctions when existing terms expire
•    Lay the foundation for privatizing TPAO, which now holds over 60% of all licenses and has 100% rights for offshore development
•    Tax losses will not be retroactive, though, so no carrying this forward

What this means for potential explorers …

For those considering entering the Turkish market at this time, it would be best to wait a couple of months as this bill makes its way through parliament. If the bill passes, the most significant aspect will be that new foreign market entrants will not be required to partner with TPAO, which means that more licenses will be opened up. In addition, because the power brokers will shift in this game, it is ill-advised to enter the market during the transition.

For those of you who have already been trying to tap into and haven’t been getting anywhere, this is probably why. For the junior companies who don’t have access to the power brokers and gatekeepers, there is a protocol that must be followed to get the necessary geological information, which TPAO keeps a tight grip on. This has long been a complaint for would-be explorers in Turkey.

Right now, with TPAO’s status under threat and a tricky competitive transition looming, it will be even more reticent to part with valuable geological data.

Turkish Oil Blocs

Prospects and Potential

Officially, Turkey only got about 270 million barrels of proven oil reserves and 218 billion cubic feet of natural gas reserves. But it’s about the potential, not the proven here.

For the majors right now, it’s pretty much all about the offshore prospects, spurred on by significant discoveries in the Mediterranean—which comes along with some hefty geopolitical baggage—and potential in the Black Sea. Israel’s recent discovery in the Levant Basin (the Leviathan and Tamar fields) and a total of some 122 trillion cubic feet of natural gas in Israeli, Cypriot, Lebanese and Syrian waters has everyone convinced that THE BIG FIND for Turkey will come any day.

Then there is the Black Sea, which is what Turkey is really banking on. Here, TPAO estimates up to 10 billion barrels of oil. Overall, we’re looking at some 400,000 square kilometers of largely unexplored offshore territory in Turkey.

Onshore is where the juniors are mostly looking, with more and more opportunities creeping up as the bigger players shift offshore. 

It’s also about shale. Specifically, it’s about an estimated 1 Tcm of shale in central Anatolia, 1.5 Tcm in southeastern Anatolia, and 3.5 Tcm in the Thrace Basin.

Asset Snapshot

TPAO has been exploring and drilling in Turkey since 1955, but exploration extends back to 1935. Since then, more than 3,000 wells have been drilled, 77% in SE Turkey, 15% in the Thrace Basin, and 7% in other internal basins (1% offshore). A total of 103 oil fields and 28 gas fields have been discovered. 

Oil production largely takes place in the Southeast Anatolia Basin, while gas production is primarily undertaken in the Thrace Basin. All other internal basins are largely unexplored, though the source rocks in these basins have very high hydrocarbon generation potential.
There are a total of seven onshore (and four offshore basins) in Turkey. The onshore basins include:

•    SE Turkey (Anatolia) Basin
•    Thrace Basin, Adana Basin
•    Tuz Gölü Basin (East/Central Turkey)
•    Onshore Black Sea Basin (Zonguldak and Sinop)
•    Sivas Basin (Central Turkey)

The offshore basins include:

•    Black Sea Basin
•    Marmara Sea Basin
•    Aegean Sea Basin
•    Mediterranean Sea Basin

The Dadas Shale is one of the hottest new prospects picking up momentum. Situated in the Southeast Anatolia Basin, this is a Devonian-Silurian-age shale that is the focus of most of attention of the bigger players who are still dabbling onshore. It is estimated to have more than 100 million barrels of original oil in place and the game is being led by Canadian companies TransAtlantic first and foremost, and Valeura and Anatolia Energy secondarily. 

The JVs have found several new oil plays by drilling in other formations (Mardin, Bedinian) that are sourced from Dadas. All three companies are insistent that THIS is where Turkey’s biggest potential lies and they compare it to major US shale plays (Bakken and Eagle Ford). Shell has also returned to the Dadas Shale, and other majors have expressed interest.

Turkish Oil

Bottom Line: You will like this venue even more if parliament passes this new legislation which will open up the playing field significantly by removing that one last hurdle to a competitive arena—TPAO. Stay with us as we continue to monitor the bill as it goes through parliament.

Want to know more? Order the full report on Turkish Oil & Gas from Oilprice.com




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