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Tailor-made laws in the Western Balkans and Turkey

Amendments to the Law on Natural Gas Market - Tailor-made laws in the Western Balkans and Turkey

Amendments to the Law on Natural Gas Market

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Introduction

Law No. 6353 introduced amendments to several laws and decree laws, including Law No. 4646 on the Natural Gas Market, adopted in 2001. Article 23 of Law No. 6353 put forward changes not only to the details of the privatisation process for Baskent Natural Gas Distribution Company (Baskent Gaz), which operates in Ankara, but also to the fees for gas transport.

Country
Turkey
Type of Law
Capturing a market, an industry or public resources

Description of the law

Law No. 6353 introduced amendments to several laws and decree laws, including Law No. 4646 on the Natural Gas Market, adopted in 2001.

Article 23 of Law No. 6353 put forward changes not only to the details of the privatisation process for Baskent Natural Gas Distribution Company (Baskent Gaz), which operates in Ankara, but also to the fees for gas transport. Previously, the privatisation of Baskent Gaz shares had involved separate tenders for the public’s 80 per cent shareholding and Ankara Metropolitan Municipality’s 20 per cent shareholding, but neither of the processes ended in success (see here). The new amendment enabled the inclusion of the municipality’s 20 per cent shareholding in a new privatisation programme for the public’s 80 per cent shareholding so that 100 per cent of the shares could be privatised in a single tender process undertaken by the Directorate of Privatisation Administration.

Based on Article 23, the revenues generated by the privatisation would be used to cover all the debts owed by the municipality and the General Directorate of EGO to the General Directorate of BOTAS and the state treasury. The same article also increased the natural gas transport fee payable to Baskent Gaz from US$0.055 to US$0.077 per cubic metre before the tender process in 2013. This pricing was set to remain in effect for eight years (see also here and here).

During the parliamentary hearing, the period of eight years for the transport fee was criticised by opposition MPs. For instance, Levent Gok of the Republican People’s Party (CHP) argued that the law puts Ankara at the mercy of the company that would get the authority to determine the gas tariff after eight years. He further stated that Ankara consumes more expensive gas than other cities, and posited that with the amendment the residents of Ankara were likely to suffer more from any potential increase in gas transport fees after eight years. (See the parliamentary discussion here.) It was also asserted that the main reason behind the amendment to press forward with privatisation of Baskent Gaz was simply to cover all of Ankara Metropolitan Municipality’s debts to BOTAS and the state treasury (see here).

On 26 January 2013, the tender process to privatise Baskent Gaz was completed and a Torunlar Food subsidiary, Torunlar Energy, won the bid for Turkey’s second largest natural gas grid, with an offer of US$1.162 billion. The new company will operate Baskent Gaz for 24 years (see also here). However, the tender process shows signs of being tailor-made. Even though the 2008 tender for 80 per cent of the company received an offer of US$1.6 billion, the bid from Torunlar Energy was only US$1.162 billion, which is far less than the earlier offer. Some also drew attention to the owner of Torunlar Food, Aziz Torun, who is a friend of Recep Tayyip Erdoğan from Imam Hatip High School. It is claimed that Torun, because of his close relationship with Erdoğan, has been given several privileges during the AKP’s years in government (see here, here and here).