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Turkey Freight Transport Report Q4 2008

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Report Summary

Oil started flowing through the Baku-Tbilisi-Ceyhan (BTC) pipeline again on August 25, after repairs following a blast and fire at a pumping station in eastern Turkey 20 days earlier. UK energy company BP, which operates the pipeline, together with Turkish oil company Botas, in charge of the Turkish section, both said it was operational once more, and that crude from Azerbaijan’s Caspian fields was flowing through to the Turkish, eastern Mediterranean port of Ceyhan. At 1,774km BTC, opened in 2006, is the world’s second-longest pipeline, with the capacity to pump 1.2mn barrels per day (bpd). There were conflicting reports over the cause of the damage, with anti-Turkish Kurdish rebels claiming they had caused the blast, while Turkish officials insisted it had been no more than an accident. There was also concern over the security of the pipeline as fighting broke out around its path, when Russian forces moved into Georgia. A total of 155km of the BTC runs through Georgian territory. In our latest Turkey Freight Transport Report, BMI, which also assesses a number of other pipeline projects, we conclude that oil and gas pipeline throughput is set to grow by an annual average of 10.8% across the 2008-2012 forecast period.

Various factors support this prediction. Reasonably strong Turkish economic growth, set to average 5.9% per annum in the next five years, will underpin rising energy demand. More importantly, however, Turkey is set to become a pipeline hub for Europe. The BTC and the Nabucco line are among several projects, initially devised to meet Turkish energy demand, that have also drawn growing European interest as a gas supply route from the energy-rich Caspian. Among other plans for the energy corridor are an oil pipeline between Samsun on the Black Sea and Ceyhan, as well as two gas pipelines from Russia, which wants to extend the Blue Stream pipeline to Israel. Turkey receives gas via a pipeline from Iran, while the Shakh-Deniz project, now functioning, is bringing Azerbaijani gas from the Caspian to Turkey.

Pipeline developments come against a generally favourable outlook for the freight sector as a whole. By the end of the forecast period to 2012, sea freight is anticipated to be the largest sub-sector, accounting for approximately 50% of all shipments, compared with 43% for road freight. By transport mode, we expect the fastest growing to be pipelines, followed by airfreight at an annual average of 10.6%; followed by maritime cargo at 8.8%; road haulage at 6.1% and rail freight at 3.1%. With a score of 65.3 out of 100, Turkey’s overall freight rating is just above the average for the Middle East and Africa (MEA) region.

Turkey scores well in terms of infrastructure growth, regulatory and competitive environments and the transport intensity index.

For the 2008-2012 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole in value terms. It will achieve average annual growth of 6.1%, versus 5.9% for overall GDP. The total value of transport and communications GDP will rise to US$164.3bn in nominal terms by 2012, representing 11.3% of Turkey’s GDP.

Table of Contents

Executive Summary .........5
SWOT Analysis ...................................................................... 6
The Baku-Ceyhan Oil Pipeline Industry SWOT ..................... 6
Turkey Political SWOT .......................................................... 7
Turkey Business Environment SWOT..................................... 8
Turkey Economic SWOT........................................................ 9
Business Environment Rating ...................................................10
Table: Europe Freight Transport Business Environment Ratings........................................................................................................................ 11
Freight Industry Ranking..................................................... 11
Turkey Performance Index (LPI) ......................................... 12
Economics – Long-Term Risk .............................................. 12
Politics – Long-Term Risk ................................................... 13
Freight Transport Growth ................................................... 13
Transport Infrastructure Growth ......................................... 13
Regulatory Environment ...................................................... 14
Competitive Environment..................................................... 14
Transport Intensity Index..................................................... 14
Political Risk Summary........................................................ 14
Economic Risk Summary...................................................... 15
Business Environment.......................................................... 15
Legal Code/Corruption........................................................ 15
Red Tape.............................................................................. 16
Labour Force....................................................................... 16
Industry Trends And Developments ...............................................17
Rail ...................................................................................... 17
Sea ....................................................................................... 17
Pipelines .............................................................................. 18
Industry Forecast Scenario .............................................................20
Quarterly Oil Products Price Outlook ................................. 20
Table: BMI’s Long-Term Fuel Price Assumptions, 2004- 22
Table: BMI’s Medium-Term Fuel Price Assumptions, Q108-Q409 ..................................................................................................................... 22
Macroeconomic Outlook...................................................... 23
Table: Turkey – Macroeconomic Activity, 2005-2012 ......... 25
Transport Outlook ............................................................... 25
Table: Freight Turnover, Domestic And International, 2005-2012...................................................................................................................... 27
Table: Freight Turnover, Domestic And International, 2005-2012...................................................................................................................... 28
Trade Environment.........29
Table: Total Value Of Imports, 2005-2012 (US$mn) ........... 29
Table: Total Value Of Exports, 2005-2012 (US$mn) ........... 30
Table: Top Export Destinations, 2000-2006 (US$mn)......... 31
Table: Export Trade, 2001-2006 (% growth y-o-y).............. 32
Table: Import Trade, 2001-2006 (% y-o-y).......................... 32
Table: Top Import Sources, 2000-2006 (US$mn) ................ 33
Trade Environment.........34
Multi-Modal.............................................................................. 34
Infrastructure....................................................................... 35
Competitive Landscape: Multi-Modal.................................. 36
Company Profile.................................................................. 37
DHL Turkey ......................................................................... 37
Road.......................................................................................... 38
Competitive Landscape: Road ............................................. 38
Company Profile.................................................................. 39
Exel...................................................................................... 39
Rail ........................................................................................... 40
Competitive Landscape: Rail .............................................. 40
Air............................................................................................. 41
Competitive Landscape: Aviation ........................................ 41
Company Profile.................................................................. 43
Türk Hava Yollari – Turkish Airlines................................... 43
Water ........................................................................................ 44
Competitive Landscape: Maritime....................................... 45
Company Profile.................................................................. 46
Eregli Denizcilik .................................................................. 46
Pipelines ................................................................................... 47
Competitive Landscape: Pipelines ....................................... 47
BMI Forecast Modelling ..............................................................50
How We Generate Our Industry Forecasts .......................... 50
Transport Industry ............................................................... 50
Sources ..................................................................................... 51