BMI's Executive Summary

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BMI's latest Turkey Petrochemicals Report welcomes the Turkish government's decision to sell a Saudi- Azerbaijani-Turkish consortium a 51% stake in Petkim, instead of transferring ownership to the highest bidders, the Kazakh-Russian consortium TransCentralAsia Petrochemical Holding.

The reason for the government's reversal of its decision appears to be political. Armenian national Ruben Vardanian owns a 65% stake in Troika Dialog, one of the members of the TranscentralAsia consortium. Anti- Armenian sentiment in Turkey made the TranscentralAsia unpopular, according to local media reports. However, BMI also welcomes the development, having raised concerns about TranscentralAsia's financial situation in our previous report. We had argued that a take-over by TransCentralAsia may not generate the investment the company badly needs and that the consortium did not have the financial backing to expand and improve the company's production facilities.

Control over Petkim could be handed over to the Socar-Turcas-Injaz consortium by the end of January 2008. All three firms are eager to establish a regional force in the petrochemicals sector, with proximity to Europe and Central Asian gasfields. With the Turkish petrochemicals market set to be worth US$12bn by 2015, up from US$6.5bn in 2007, Petkim also has a large domestic market. However, despite investments totaling US$370mn over the past four years in the modernisation and expansion of its plants, Petkim is still burdened with outdated equipment, and will need significant investment if it is to remain competitive. Consortium members have indicated that they are prepared to begin investing as soon as they gain control. BMI has more confidence that the consortium is in a better position than TransCentralAsia to finance the expansion of Petkim, with a solid base in terms of terms of financial, marketing and infrastructural support for Petkim's future expansion.

The privatisation of the firm could still be upset by industrial action. The Turkish oil sector workers union Petrol-Is has lodged a lawsuit to block the sale, claiming that it was not in the country's interest to privatise the sole basic petrochemicals producer, which is a vital source of raw materials for many downstream businesses. Instead, Petrol-Is believes investments should be made to expand Petkim's capacity. The legal action could delay the sale. In the past the trade union has won court cases, delaying the sale of oil refiner Tupras and Petrol Ofisi. The sale is also opposed by the opposition Republican People's Party (CHP). However, the CHP was unsuccessful in the July 2007 general election, with the incumbent Justice and Development Party (AKP) winning an overwhelming majority of seats.

In the Middle Eastern Petrochemicals Business Environment Rankings matrix, Turkey is ranked ninth with 48.1 points, putting it 10.8 points ahead of Algeria and 0.7 points behind Egypt, but 8.2 points below the regional average. Factors holding Turkey back include a small petrochemicals industry with no current plans for expansion and a relatively poor country risk profile. However, these factors will improve as Petkim's new owners announce expansion in petrochemicals production capacity and Turkey continues its efforts to converge with the EU economy, with plans for full membership.

Contents

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Chapter 1 - Executive Summary

Market Overview

Privatisation Initiatives

Industry Developments

Industry Forecast

Turkey Petrochemicals Industry SWOT

Turkey Political SWOT

Turkey Business Environment SWOT

Turkey Economic SWOT

Chapter 2 - Market Overview

Market Structure

Market Evolution

Table: Turkey Petrochemicals Sector – Cracker Capacity Data and Forecasts (000tpa)

Business Outlook

Chapter 3 - Industry Trends And Developments

Privatisation

Projects And Expansions

Recent Developments

EU Accession

Chapter 4 - Industry Forecast Scenario

Table: Turkey – Historical Data and Sector Forecasts

Chapter 5 - Economic Outlook

Table: Turkey – Macroeconomic Indicators

Chapter 6 - Company Monitor

Petkim

Turkish Petroleum Refineries Corporation

Dow

DuPont SA (Advansa)

Chapter 7 - BMI Forecast Modelling

How we generate our industry forecasts

Chemicals & Petrochemicals Industry

Cross Checks

Competitive Landscape for Middle East & Africa Petrochemicals Reports: Sample of Companies Ranked

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Comparative company analyses and rankings by US$ sales, % market share, employee size, registration date and ownership structure. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) on all leading international and national operators in each market, including competitive intelligence in the following: Overall geographic presence, competitive positioning against local companies; production capacity, sales and market share; joint ventures, foreign direct investment, projects and acquisitions strategy.