COMPARISON OF HOST GOVERNMENT PETROLEUM CONTRACTS AND APPLICABILITY FOR TURKEY DEEPWATER OFFSHORE LICENCES

2021-5-31
Vural, Fatih
In the boundaries of sovereign nations, which has a legal dominion over of its geographical area, including natural resources, the vast majority of the World’s energy sources are developed. If a country opens the resources for exploration and development which is referred to host country and the agreements signed between host country and National Oil Company (NOC), private companies or any combination of them to explore and/or develop petroleum licences are called as host government petroleum contract. The fiscal system of host government contract is expected to encourage exploration and development activities, allow special incentives for some challenge fields and enable to provide fair sharing of economical incomes for Host Countries (HC) and International Oil Companies (IOCs). Especially, expenditures and risk factors are very high for deepwater operations during exploration and development phases until reaching first commercial production for Operator that might be HC only, JV or an IOC. Therefore petroleum law, regulations, host government contracts and tender strategy should be arranged by considering items: geology (prospectivity of field, reserves, productivity and HC quality and type “gas or oil”), political stability of HC and abroad, legal system, fiscal system, transparency, market conditions and operational challenges. Deepwater Offshore Operations are the most challenge ones in exploration and also production stages. In order to start and continue such deepwater projects, HCs prefer to announce tender for opening offshore licences to investors. Before issuing such tenders, HC has to be sure about the status of above items to create an attractive atmosphere for potential bidders. Also tender strategy, financial terms/fiscal regime, contract methodology should be re-evaluated in every stages which are without discovery, after discovery, in exploration and production phases. The petroleum law of Turkey published in 2013 and the regulations has been in effect since 2014. However there have been major changes in Turkey deepwater offshore activities after this year and some serious developments have taken place such as inclusion of 3 drillships in Turkish Petroleum (TPAO) Inventory, drilling one after another deepwater wells in Mediterranean and Black Seas, a gas discovery in the Black Sea, following potentials in the deepwaters and a deepwater service company established with own capital of TPAO. As a result, petroleum contract type, tender strategy and fiscal regime of Turkey for deepwater operations should be re-examined and all related terms to be re-evaluated by considering current market conditions and any changes in the neighbouring countries. The modern fiscal terms which are currently used by most of countries could be considered while making these evaluations. One of this modern term is royalty systems based on sliding scales as per daily production or cumulative production. A sample deepwater project economics will be run to understand and compare the economic impacts of this system.
Citation Formats
F. Vural, “COMPARISON OF HOST GOVERNMENT PETROLEUM CONTRACTS AND APPLICABILITY FOR TURKEY DEEPWATER OFFSHORE LICENCES,” M.S. - Master of Science, Middle East Technical University, 2021.