As exception to liberty of contracting and unlike a number of
other industries, Turkey's petroleum industry imposes certain
obligations to petroleum right owners in contracting the conduct of
the petroleum operations. At the first glance this seems that it
aims to strengthen the management of hazards by enhancing the
safety however the liability imposed to petroleum right owners in
case of contracting the operations still remains unclear in terms
In Turkish law, petroleum right owners wishing to have the
exploration and production activities conducted through a
contractor shall apply to General Directorate of Petroleum Affairs
for approval and require to submit a commitment in which they
accepts the responsibility arising from non-competence of the
contractor with the provisions of petroleum legislation together
with the contract itself.
The General Directorate of Petroleum Affairs makes an evaluation
of the contract on the basis of contractor's technical
knowledge and capacity and informs the right owner within one week.
The authority is also authorized to evaluate the amendments and
extensions of such contracts. In essence, petroleum right owners
are not allowed to assign any of its exploration or production
operations to a contractor without approval and such contracts do
not enure benefit of either party unless approved by the General
Directorate of Petroleum Affairs.
In this regard, it is obvious that the approval from the
authority shall be deemed as condition precedent in contracts
between petroleum right owners and contractors and assuming that
the approval has been granted the limits of liability in commitment
letter provided by the petroleum right owner still remains as a
question mark in minds.
In letter of the relevant clause it is understood that the
commitment letter refers to the acceptance of responsibility of the
contractor arising from non-compliance with only the Petroleum Law
and Petroleum Law Implementing Regulation. This type of liability
associates with the differences of suretyship and guarantorship but
to which extent and in which scope? Are petroleum right owners not
responsible for the acts of contractors that are not subject to
Basically the answer is "Yes".
Pursuant to the article 581 of the Turkish Code of Obligations
the surety agreements require the existence of a valid main
obligation and are not valid unless in writing and specifies the
maximum limit of surety's responsibility and the period of
suretyship. In other words the agreements in which the surety
undertakes to be personally liable against the creditor for the
consequences of which the obligor's non-performance of the
obligation or failure to fulfill the contractual duties are called
Pursuant to the article 128 of the Turkish Code of Obligations
having the heading of "Third party undertaking", those
who undertake a third party's obligation in favor of the other
party, is liable to indemnify the damages arising out of the
non-performance of this obligation.
It is obvious that the consistency in letter and spirit of laws
helps the practitioners to enforce them easily. In consideration of
the purpose and scope of the Petroleum Law and Petroleum Law
Implementing Regulation and in the light of above definitions of
those two institutions set forth in Turkish Code of Obligations, it
can indisputably asserted that the petroleum right owners are only
responsible for the contractor's unlawful act under Petroleum
Law and Petroleum Law Implementing Regulation in a form of third
party undertaking for an indefinite period of time rather than
In that case the questions about the "time period of
undertaking" arises; are petroleum right owners responsible
for contractors' acts for an indefinite period of time or is
that limited with the effectiveness date of the licenses? If yes,
will petroleum right owner remain responsible even he terminated
the contract and entered to a new one with any other contractor?
Which part and to which extent of the work will be on contractor if
there are more than one contractors involved to the exploration and
That is for sure that the authority has optional rights to apply
to the petroleum right owner and to the contractor due to the
rights granted to it by law however mitigation of risk in more than
one contractor involved projects is only possible with a well
articulated contracts while contracting the petroleum
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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