License Types In Natural Gas Market

The legal entities wishing be active in market must be incorporated as a joint stock or limited liability company and all its shares must be nominative. The board generally takes into consideration following matters during its evaluation on the license application:

a. Conformity to purposes foreseen in relevant code,
b. The effect on protection of consumer rights and development of competition and market,
c. Financial power and sources of legal entity and/or its partners,
d. If any, experience and performance in domestic and foreign markets belonging to the applicant legal entity and/or its partners.

1. Import License

Import companies shall conduct the activity of import of natural gas, in LNG or gaseous form, for the purpose of selling it to wholesale companies, eligible consumers or export companies or directly exporting it; and shall be obligated to obtain a separate license for each import arrangement they enter into.

Import companies may purchase natural gas from production, wholesale and import companies; and domestically transfer, by means of sales contracts, the natural gas which they imported or obtained by local purchase, to the wholesale, export, distribution, transmission and sales companies and CNG distribution to eligible consumers; and export it on the condition that they obtain export licenses.

Import companies which have submitted with their applications any pre-agreement or statement showing that they will provide, within five years, the storage capacity to store locally ten percent of the quantity of natural gas to be imported in each calendar year shall be obligated to submit to the Authority the lease contracts entered into for this purpose with licensed storage companies. If the storage facilities in the country at the end of such period are still inadequate, such period may be extended by up to two years by a Board decision.

Import licenses shall be given as long as the duration of the import contract in for minimum 10 years up to 30 years and in case of expiration the duration can be extended by renewing the contract.

2. Export License

The legal entities wishing to export the natural gas imported or domestically produced, shall obtain export license from the Board. The company hoping to obtain license, shall meet the following conditions:

1. Proof of technical and economic competence,
2. Notice of natural gas being exported to which country or by which means of conveyance,
3. Guaranteeing for no paralyzing the system operation and country’s needs, arisen loss and damages in consequence of expert and in case of breach of system security covering and making a compulsory insurance for the recompensation. However, the transmission companies managing transit lines are immuned for term of guarantee.

Pursuant to the new draft code, taking the opinion of ministry shall become obligatory for this license type.

3. Transmission License

The companies carrying out gas transmission via gas pipeline network or liquefied natural gas (LNG) transport vehicles shall obtain a transmission license. It shall be responsible for his own part regarding performance of arrangements and all other services required for ensuring natural gas flow and operation of the system. In addition, the licensee shall be obligated to take all measures ensuring transmission of natural gas through the lines under his responsibility in a secure, effective and cost-efficient manner and take all other actions stipulated in the applicable legislation; and he shall be responsible for planning, designing, construction and operation of the transmission system under his responsibility, in accordance with the standards set forth. The transmission company shall also take into consideration transmission applications related to transit natural gas during its investments. In this manner, prepared investment program shall be submitted for approval to the Authority at latest within 30 days after the receipt of other necessary approvals.

4. Storage License

In order to meet daily and seasonal variations and eliminate the deficit resulting from reduction or interruption of natural gas supply, the company performing the storage as liquefied natural gas (LNG) or gas, is called storage company. However, in the new draft code, the reasons such as seasonal changes are removed and the way of making a license application without submitting a purpose is opened. The licensee shall be responsible for planning, designing, construction and operation of the underground and on-ground storage facilities and LNG facilities.

In case of rejection of requests made to the storage company, the Authority’s being informed on the situation by the system and the Authority’s identification on the violation of the storage company’s published principles and procedures and license conditions, the authority shall force the storage company to provide the requested service. Due to such violation, criminal sanctions specified in the law shall be applicable.

Storage facilities’ connection with transmission and distribution systems shall be executed by an agreement between the parties. Licensee is responsible of its own system’s operation, maintenance, security, balance and security of natural gas supply. Separate licenses shall be obtained for all storage facilities, which do not have a direct connection with each other and located in the places without physical integrity.

5. Wholesale License

Wholesale licensee may sell natural gas purchased to export companies, eligible customers, CNG distribution, transmission and sales companies, import companies, distribution companies and wholesale companies throughout the country. No wholesale company shall not sell natural gas in quantities higher than twenty percent of the estimated annual national consumption as determined and announced by the Authority for the current year, in the month of January every year. If he sells natural gas to distribution companies, the licensee shall be granted for a five-year period from the effective date of the license in order to provide the required storage capacity. Where the capacity of storage facilities has not reached the necessary level in Turkey, the Board may extend such period.

According to the new draft law, licensee legal entities shall guarantee to provide natural gas supply during the sale agreements executed with distribution companies. In case of selling to the eligible consumers, they are obliged to provide the gas within seasonable, daily and hourly elasticity limits.

6. Distribution License

The legal entities supplying natural gas by regional gas pipeline network and making its retail sale shall obtain distribution license. Distribution companies shall be responsible for planning, designing, construction, expansion and operation of the distribution network. Distribution companies shall ensure that the non-eligible and eligible consumers in their respective areas access the distribution network and provide services related to sale and delivery of natural gas to such consumers.

Each distribution company may hold licenses only for two cities within the country. However, this number may be increased by a Board decision, based on criteria such as the level of development of the cities, consumption level and the number of users. The Board may divide a city into more than one distribution area depending on population density and may conduct a separate tender for each area.

Pursuant to the new draft law, licensee distribution company shall be obliged to invite the regional municipality or the relevant municipal company as a partner with share amount %10 without the need of investing capital.

7. Compressed Natural Gas (CNG) License

Any legal entity engaged in purchase of natural gas at wellhead, from national transmission network or from city distribution system and its compression, filling in pressurized containers and sale; transmission of compressed natural gas by means of special vehicles between cities; its sale by reducing its pressure at places which the transmission network does not reach, shall obtain a CNG license with a separate content for each of the mentioned activities from the Board.

CNG licensees, based on the content of their respective licenses, may, throughout the country, perform the activities of compressing, filling into pressurized containers and selling of natural gas, transportation of compressed natural gas filled in pressurized containers by means of special vehicles between cities and selling of compressed natural gas by reducing its pressure at places where the transmission or distribution network does not reach. CNG licensee shall be responsible for planning, designing, construction, procurement and operation of CNG filling, loading and unloading facilities. Activities performed by CNG licensees at CNG facilities shall not be deemed to be storage activity.