Unlike many European countries, LPG is a very popular type of fuel in Turkey. The Turkish LPG market ranks 14th in the world (1.5% of worldwide consumption in 2009) and 2nd in Europe, trailing only Russia. In 2010, LPG consumption stood at an estimated 3.68mn tons, representing 17.8% of total fuels consumed in Turkey. 85% of the LPG that reaches the Turkish consumer is imported, coming mostly from Algeria, Kazakhstan, Russia, Norway and Nigeria. The segmental split of LPG consumption in 2010 was 68% auto-LPG, 29% cylinder LPG and 3% bulk. Aygaz maintained its market leadership position in 2010, with 1.04mn tons of LPG sold and an overall market share of 29%. Aygaz services the Turkish market with the Aygaz and Mogaz (100% subsidiary) brands.
Auto-LPG had a 13.6% share of the total 18.4mn tons in automotive fuels sold in 2010, marking a record level. Below we illustrate the development of the composition of automotive fuels in Turkey.
In the period from 2000 to 2010, the popularity of auto-LPG has grown substantially, recording a CAGR of 6.9%. This was mainly driven by the cost advantage of LPG over the other fuel types, especially gasoline. While gasoline demand was more than 118% higher than that of auto-LPG in the 2000, consumption of both fuel types was nearly equal in 2009. In 2010, auto-LPG demand clearly surpassed that of gasoline. The cost advantage of auto-LPG over gasoline stems from the difference in the tax treatment of the two products, while LPG as a commodity is in fact more expensive. While the annual average taxes (special consumption tax plus VAT) applied to gasoline was TRY 2.47/ liter in 2010, it was TRY 1.8/liter for low-sulfur diesel, TRY 1.71/liter for rural diesel and TRY 1.06/liter for auto-LPG.
The Turkish auto-LPG market is dominated by the large fuel retailers. With 578,000 tons sold and a market share of 23% in 2010 (4.7% is attributable to Mogaz), Aygaz is the market leader, followed by Petrol Ofisi, Shell and BP. At the end of 2010, Aygaz had a total of 1,226 auto-LPG dealers across Turkey.
The growth in auto-LPG over the past 10 years, however, was not enough to compensate for the deterioration in the demand for other LPG segments, namely cylinder and bulk LPG. As can be seen in the graph below, auto-LPG sales have grown strongly since 2001, while both cylinder and bulk LPG have seen a sharp decline in consumption. This has led to a slight drop in overall Turkish LPG consumption, from 3.8mn tons in 2000 to 3.7mn tons in 2010. Going forward, we expect the trend from the past to continue, with the demand for bulk LPG reaching a floor and cylinder LPG consumption contracting further, albeit at a slower rate. We are optimistic on the future development of auto-LPG and project its demand to gradually increase. Overall, we reckon with a CAGR of 1.6% in the Turkish LPG consumption for 2010-15.
Consumption of cylinder LPG has fallen from 2.13mn tons in 2000 to 1.1mn tons in 2010, recording a negative CAGR of -6.7%. The reason for the contraction is that LPG cylinders as an energy source have increasingly been substituted for by natural gas, as it is cheaper, the taxes are lower, the natural gas infrastructure has been expanded in Turkey and the average income has risen, making initial conversion costs more easily affordable. In 2010, Aygaz (incl. Mogaz) had a market share of 39% with 409,000tons of cylinder LPG sold.
In March 2011, Aygaz announced that it purchased the usage rights of cylinder gas dealership agreements and associated licenses from Totalgaz for TRY 36mn. The deal is dependent on the approval of the Competition Board. Adding Totalgaz’s market share of 4.5% to that of Aygaz results in a dominating 42%-43% share (adjusted for overlaps) of the cylinder LPG market for the latter.
The enormous increase in natural gas sales by BOTAS, the Turkish state owned natural gas pipeline operator, since the late 1980s shows the commodity’s growing popularity in Turkey. As described above, cylinder LPG and bulk LPG sales have contracted by a negative CAGR of -6.7% and -20.0%, respectively, from 2000 to 2010, while BOTAS’ natural gas sales recorded CAGR of 8.0% over the same period. As natural gas is a substitute for LPG, its growth was the main reason for the deterioration of cylinder and bulk LPG sales figures. The graph below shows the growing popularity of natural gas in Turkey (BOTAS only).
For the future, we believe that the trends of the recent past will remain in place. Our estimates are based on a steady escalation of natural gas sales, despite the crisis-related drop in 2009 and 2010, at the cost of cylinder and bulk LPG consumption. Thus, both of these LPG segments will be of little attractiveness for Aygaz and other distributors looking for sales growth. However, the opposite is true for auto-LPG, which we forecast to retain its popularity, due to its cost advantage compared to other fuel types, and therefore expect to remain on its growth path.
Source : bne
via Balkans.com Business News : Unlike European countries, LPG is a popular type of fuel in Turkey.
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