TransAtlantic Petroleum Corporation - Turkey

Turkey

In December 2005, the Company applied for three blocks in southeastern Turkey. Determination by the Government on the Company's applications is expected in the 2nd quarter 2006. Two of the blocks applied for are adjacent to the producing Molla /Yasince oil field. Transatlantic's focus is on a deeper under-explored Palaeozoic play in the area. Palaeozoic reservoirs (up to 30% porosity) are present at various depths over most of the region. The presence of suitably timed structural traps and sealing lithologies are the main controls on this play. The third block applied for was also applied for by another company and therefore it is anticipated that the Government will base its award on the merits of the respective applications. This third block is closer to the Iraq border near the town of Cizre. Surface oil seeps indicate the existence of an active petroleum system in the area. Transatlantic is focused on deeper sub-thrust plays in the area similar to those found in the major Iraqi and Iranian Zagros fields further south. The presence of a suitably timed structural trap and sealing lithologies are the main controls on this play. Detailed fieldwork and geochemical analyses will be required to confirm prospectivity with the possibility of later seismic acquisition to define a drilling location as there is no seismic data available on this block.

The Company began activities in Turkey in April 2005 when it entered into an exclusive option to acquire a 50% interest in five exploration licenses which cover 239,744 hectares (approximately 500,000 acres) in southeastern Turkey located on the border with Syria from Polmak Sondaj Sanayii A.S. The Company reprocessed 2D seismic over five prospects which were identified on the licenses and analyzed other available data to confirm their potential. The Company's evaluation concluded that there was no drillable prospect with an acceptable risk profile. In February 2006, the Company elected not to exercise the option and withdrew from the project.

Fiscal Terms

Turkey's fiscal regime is presently comprised of royalties and income tax. Royalties are at 12.5% and the corporate income tax is at a rate of 20%.

Licensing Regime

The licensing process in Turkey for oil and gas concessions occurs in three stages: Permit, License and Lease. Under a Permit, the Government grants the non-exclusive right to conduct a geological investigation over an area. The size of the area and the term of the Permit are subject to the discretion of the General Directorate of Petroleum Affairs ("GDPA"), the agency responsible for the regulation of oil and gas activities under the Ministry of Energy and Natural Resources.

A License grants exclusive rights over an area for the exploration for petroleum. A License has a term of four years and requires drilling activities in the third year but this obligation may be deferred into a future year by posting a guaranty. The License may be extended for up to two 2-year extensions. No single company may own more than eight licenses within a district. The national oil company, TPAO, has the first right to acquire licenses in preference to private companies. Rentals are due annually based on the hectares under license.

Once a discovery is made, the license holder applies to covert the area, not to exceed 25,000 hectares, to a Lease. Under a Lease, the lessee may produce oil and gas. The term of a lease is for 20 years. Annual rentals are due based on the hectares under lease.


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