May 2021 - The Turkish Energy Regulatory Authority, EMRA, has amended the Petroleum Market License Regulation ("Regulation") with its regulation regarding the Amendment on the Petroleum Market License Regulation published in the Official Gazette dated 24 April 2021 (the "Amendment").

Below we provide a summary of the main changes introduced by the Amendment.

The main changes introduced by the Amendment

  • The amendment to Article 7(5) of the Regulation extends the scope of the previous provision, which stipulates that companies will not be granted a petroleum market license if their indirect or direct shareholders were shareholders (with more than 10% of the shares), board members or authorized signatories ("Related Persons") of a company whose license was cancelled due to the sale of petroleum without a special consumption tax. The same will newly apply not only in case of cancellation due to the sale of petroleum without the said tax, but also in case of license cancellation due to fraud against law or misleading declaration, and not only when the Related Persons are direct or indirect shareholders but also when they are board members or authorized signatories of the applicant company. It is also worth noting that, as per the said provision, in case of such a license cancellation, Related Persons will also not be granted a license if they personally make a petroleum market license application.
  • Following the amendment to Article 7(7)(b) of the Regulation, during the mineral oil license application process, companies with a mineral oil production capacity over 50,000 tons or base mineral oil recycling capacity over 25,000 tons are exempt from the obligation to submit a capacity report indicating that the product competence score of the license-related facility is at least 55% for base mineral oil producers and at least 50% for other mineral oil license applicants.
  • The amendment to Article 24 of the Regulation introduces the obligation to use the base oil produced from waste mineral oil as raw material for mineral oil production carried out at the same facility; however, mineral oil license holders with an annual base oil production capacity over 5,000 tons are exempt from this obligation.
  • The amendment to Article 34/A of the Regulation, which regulates the obligation to establish a dealer network for distribution license holders, decreases the number of dealers that distribution license holders are obliged to establish by half for distribution license holders with storage capacity of 4,000 cubic metres (under the distribution license or a storage license owned by the same license holder).

Accordingly, the above-described distribution license owners are only obliged to establish a network of five dealers in first three months, 13 dealers in first six months and 25 dealers in the first year following the date that their distribution license came into force.

  • The Regulation obliges companies that obtained a license prior to 1 January 2020 to (i) preserve their minimum paid share capitals at the amount envisaged with the legislation in force prior to 31 December 2019, (ii) fulfil the minimum paid share capital amount requirement set out in Article 7(7)(a) of the Regulation by 1 January 2021, and (iii) submit a report from a certified public accountant to EMRA by 1 February 2021 attesting that the minimum paid share capital requirement is fulfilled. The Amendment extends the deadline for the fulfilment of the obligations described in points (i) and (ii) above until 1 April 2022 and 1 May 2022, respectively.

As the Amendment states that this change is deemed applicable as of 1 January 2021 (i.e., retroactively), it is understood that no sanction will be imposed by EMRA against companies that failed to fulfil these obligations by the previous deadlines of 1 January 2021 and 1 February 2021.

Conclusion

The Amendment, which entered into force on 24 April 2021, eases the licensing procedure for companies wishing to obtain a mineral oil license and distribution license in Turkey and that have rather large production capacities and extends the deadlines for share capital-related obligations for current license holders. It also provides new obligations for market actors, and in that sense, the Amendment may be seen as another indicator of EMRA's recent efforts to more tightly regulate Turkey's petroleum market.

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