Black Sea; Turkey’s frame for exploration

successBlack Sea

Oil & Gas Summit11-12 November 2015

İstanbulDr. Zeynep Elif YıldızelAssociation of Geological Researches

Fossil Fuels in the World and Turkey Energy Demand

• Today fossil fuels meets the 86% of the energy demand of the World and 91% energy demand of Turkey

• In the next 20 years, still the fossil fuels will meet the 80% of the energy demand of World

BP,2015

BP,2015million toeBP,2015million toe

Historical Background of Petroleum Regulations in Turkey• 1934 Mineral Research and Exploration Institute drilled the Baspirin-1 well in Southeast Anatolia• 1934-1954 million barrel Garzan and Raman fields discovered• 1954 Türkiye Petrolleri A. O. established with Law no 6326 as a state economic enterprise as an integrated oil company

holding rights to explore, produce, transmit and refine the oil. • By the same law General Directorate of Petroleum Affairs also established in order to enforce the oil sector.• In 1984 midstream and downstream separated from the company and since then she is responsible for E&P activities.• Since 1954 %63 of the total applications were assigned to companies• Since 1954 total of 229 company executed petroleum exploration and production activities• %77 of this 229 companies are foreign companies• Since 1934 total of 207 fields discovered and discovery success is %10 which is the industry average

Source: GDPA

Turkey Runs on Tax and Royalty• The petroleum policy is executed by Ministry of Energy• The regulatory body is the General Directorate of Petroleum

Affairs• Company is being granted a license thru application to GDPA• Company has right to perform exploration operations

themselves; there is no carry of state or NOC • Transfer of rights are available• Company can sell the produced oil in arms length• Company pays tax and royalty to the government• Company owns the resources underground

Total of 158.1 million $Source: GDPA

Turkey’s Government Take

•Turkey is one of the best countries that the Government take is the lowest

•There are a plenty number of countries on World that runs the oil business with concession type

• In tax and Royalty (concession) contractor interest and contract stability increases and host government control decreases

Law. No. 6491 OFFSHORE ONSHORE

Exploration Period 8+3+3= 14 years If discovery made extra 2 years given

5+2+2=9 yearsIf discovery made extra 2 years given

Production Period 20+10+10 20+10+10

Licence area max. 1 million hectares max. 56.000 hectares

Commitment 1 well and 1 well / extension 1 well and 1 well/ extension

Guarantee %1 of total investment should be given as guarantee within 30 days

%2 of total investment should be given as guarantee within 30 days

Application Period 90 days from the first application to the same area 90 days from the first application to the same area

Granting Duration 60 days prior to first 90 days 60 days prior to first 90 days

Royalty %12 (~1/8 of total production) %12 (~1/8 of total production)

Tax

corporate taxwithholding tax

income taxTotal not exceed %55

corporate taxwithholding tax

income taxTotal not exceed %55

Capital transfer Transfer is allowed for every quarter Transfer is allowed for every quarter

Offshore seismic and drilling Exempted from cabotage law NA

Materials used in petroleum operations Exempted from custom duties Exempted from custom duties

Export (for only discoveries made after 1980) %45 of total production is allowed %35 of total production allowed

Petroleum Law of Turkey

How Much Exploration Done in Black Sea

North Sea• First 75 wells dry• Since 1966, 33 wells had been drilled in the

Norwegian sector of North Sea and discovery had been made in the 34th well

• In 2013 a company archived 85.000km of 2D and 125.000 km2 of 3D seismic data

• EEZ signed by Norwegian in 1977• Industrial focus over 30 years• More than 7000 wells drilled

Black Sea• Since 2005, 6 wells had been drilled in the Turkey

sector of Black Sea• The total of 2D and 3D seismic acquired in Turkey

Black Sea is 140.000km and 15.000 km2 2D and 3D respectively.

• Black Sea EEZ signed in the year 1978 and ratified after Russian Federation in 1997

• Before 2005 nearly 100 wells drilled. • Frontier area for the industry• One major discovery in the offshore Romania (Neptun

block)

Source:GDPA

Black Sea

What Has Been Done in Black SeaTurkey’s Black Sea Deep Water Drilling

Well Name Year JV TD(m)

Hopa-1 2005 TPAO-BP 3171

Sürmene-1 2010 TPAO 4800

Sinop-1 2010 TPAO-Petrobrass 5531

Yassıhöyük-1 2010 TPAO-Chevron 5155

Kastamönü-1 2011 TPAO-Exxon 5000

Şile-1 2015 TPAO-Shell 6440

Country Estimation of Reserves InvestmentSource:GeoExPro, 2013 vol.10 no:1

Georgia Modest reserves Limited industry interest

Turkey 10 billion bbl oil and 53 Tcf gas Approximately 4 billion $ between 2011-2013

Russia 3.5 billion bbl 11.200 km2 seismic acquisition

Ukraine 40Bcm/year 725 million $

Bulgaria 1.600 Bcm 19.571 km2 acreage licensed, 3D seismic acquisition and 4 wells

Romania 3 Tcf 6000km2 seismic acquired and 3 wells drilled, yet there are other prospects to be drilled in front

GDPATotal:4628 well

How Much Reserves in Black SeaNorth Sea vs Black Sea

Intense seismic coverage

Moderate seismic coverage

Loose seismic coverageNorth Sea Black Sea Deep

Worlds 4th largest oil and 3rd largest gas producing area NA yet

Cumulative production 48 billion bbl and 127 Tcf gas > 10 billion bbl and > 56 Tcf gas resource estimation

Cumulative gross revenue approximately 1500 billion$ NA yet

More than 7000 wells drilled Approximately 100 wells drilled

Why To Invest in Turkey’s Black Sea• Turkey has the advantage of tax and royalty for investors, compared to the other oil

business investment instruments

• Turkey is still the biggest market in domestic gas demand

• Turkey has the advantage of being a gas hub for gas flowing from source to

consuming industries

• In order to meet the energy consumption of the world 1,5 trillion $ investment in

needed until 2030

• Black Sea is still wildcat exploration area; where commercial quantities are expected

to lie within the deep offshore area

• Black Sea has a big advantage of agreed and signed Economic Exclusive Zone with

the regional countries

• Turkey has the biggest acreage position in Black Sea, with the deepest water column

among the regional countries

www.jade.org.tr

Creating Win Win Partnerships between IOC’s and NOC’s1. What are the main differences between IOCs and NOCs on the subject of

their strength and/or weaknesses and how do these differences can be used to create a synergy?

2. How do you think about the NOCs acting like IOCs? Does this makes the partnership more beneficial? (Petrobras, KNOC, Total)

3. What are the major stressful points for NOCs when partnering with big 10 (BP, shell, Chevron etc)? And how does this partnership can be made beneficial for both parties?

4. What is the improvement area to be handled in the JOA and/or PSA signed between NOCs and IOCs

5. Why partnership of IOC and NOC is very common in upstream but less likely in midstream and downstream? How can we make this relationship improved?