French oil and gas giant Total has sold its distribution operation and gas stations in Turkey to Demirören Group for 325 million euros.
"After operating in Turkey for several years, we conducted an in-depth review of our position and the competitive environment. We concluded that it would be difficult to attain a large enough retail market share to achieve the level of profitability expected for our operations worldwide," Philippe Boisseau, Total's president of marketing and services, said in a statement.
Total said it will stay in the petroleum product market in Turkey through its lubricant activities, including a blending plant in western town of Menemen and odorless liquefied petroleum gas operations.
Total plans to sell $10 billion of assets between 2015 and 2017, including $5 billion this year, to adapt to low global oil prices. The company is also scaling back investments and exploration, as well as reducing operating costs.
Demirören Holding conducts business in energy, tourism, management, tourism, construction and media. The group operates 436 gas stations in Turkey under Moil brand.
It was reported in April that Total has given authority to Société Générale to sell its distribution operation and gas stations in Turkey, Total has a five percent market share and listed at sixth place in Turkey's oil distribution sector.
Total has operated in Turkey since 1992 and currently employs 10,000 people in 440 gas stations throughout the country with an estimated 5.5 percent market share. Reuters have reported that taxes reaching up to 60 percent and tough regulations in Turkey's oil distribution sector may have caused Total to quit Turkey, although Total and Société Générale officials cannot be reached for comment.
Turkey's energy market watchdog Energy Market Regulatory Authority (EMRA) enforces ceiling prices from time to time to protect the consumers, which limits profits for energy companies and their dealers.
Dealer contracts were also limited to five years in 2010, which forces oil companies to spare high amounts to keep their existing dealers and acquire new dealers.
An anonymous source from Turkey's banking sector told Reuters other foreign players of the sector may follow Total if it succeeds in finding bidders.
According to EMRA's data, a total of 70 companies operate in Turkey's $80 billion worth oil distribution sector, however, first ten companies make up to 80 percent of the market. Petrol Ofisi A.Ş., which was privatized in 2000 and acquired by Austrian OMV in two phases in 2006 and 2010, is leader of the market with a 25 percent share. OPET is the largest Turkish player of the sector and listed second largest of the market with a 17 percent share, followed by Shell-Turcas and BP.