Turkey Freight Transport Report Q1 2008

Having reached agreement in principle during the third quarter of 2007, Turkey and Iran were expected by the end of October of that year to sign a formal contract for the further development of Iran's South Pars natural gas deposits and the construction of a pipeline to bring the gas to Turkey and onwards to Europe. The deal is strategically important to Turkey, and part of its wider ambition to turn the country into a 'energy bridge' between Asia, the Middle East, and Europe. It also faces intense opposition from the US which is trying to isolate Iran because of Iran's refusal to stop its nuclear enrichment programme as requested by the United Nations. Under the terms of the discussions between the two countries, the state-owned Turkish Petroleum Corporation (TPAO) will invest some US$3.5bn in the development of Phases 22-24 at the South Pars deposits. According to news agency Dow Jones, in August Gholam- Hussein Nozari, Iran's interim oil minister, said the aim was to set up a joint venture between the two countries to build a 35bn cubic metre gas pipeline from Assaluyeh to the Turkish border, and from Turkey onwards to Europe. An additional pipeline would also be required to transit gas from fields in Turkmenistan through Iran and onwards to Turkey. On the long term the Turkish government sees the South Pars agreement not only meeting the expected energy shortfall in Turkey, but also matching Europe's strategic desire to reduce its dependence on Russian gas. Turkey is also involved in other pipeline projects, such as the Baku Tbilisi Ceyhan (BTC) oil pipeline, which cost about US$4bn to build, and was officially opened in in 2006. The US$6bn European-backed Nabucco pipeline project is designed to carry natural gas from Caspian and Middle Eastern countries via Turkey, Bulgaria, Romania and Hungary to Austria and Western Europe. A new gas pipeline to Greece began operating in 2007. In our latest Turkey Freight Transport Report, BMI concludes that oil and gas pipeline throughput is set to grow by an annual average of 10.1% across the 2007-2011 forecast period.

Various factors support this prediction. Strong Turkish economic growth, set to average 5.7% 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 2011, sea freight is anticipated to be the largest sub-sector, accounting for approximately 49% of all shipments, compared with 44% for road freight. The total volume of freight transport in 2011 will be 577.869bn tonnes-km. By transport mode, we expect the fastest growing to be air freight at an annual average of 10.8%; followed by pipeline throughput at 10.1%; maritime cargo at 8.6%; road haulage at 6.0% and rail freight at 2.8%. Turkey's overall business environment rating is significantly 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 2007-2011 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 6.0%, versus 5.7% for overall GDP. The total value of transport and communications GDP will rise to US$69.2bn in nominal terms by 2011, representing 11.3% of Turkey's GDP.