Analysis of the Gaseous Alternative Fuel Market in Turkey

1. Analysis of the Gaseous Alternative Fuel Market in Turkey Adnan Kaya, Koç Statoil Yusuf Siyalom, Aygaz 05/12/2005

2. Contents • Company Profiles • Liquified Petroleum Gas (Autogas) • History of Natural Gas • Liquified Natural Gas Activities • Compressed Natural Gas Activities • Natural Gas Vehicles Predictions

3. Koç Holding Business Segments and Key Companies Automotive Durable Goods Koç Financial Services Energy Koç Information Technology Food & Retailing Other Koç Sistem Int.Trade • Tofaş • Group • Tofaş • Otoyol • Türk Traktör • Birmot • Koç-Fiat Kredi • Arçelik Koçbank Aygaz • Tat KoçSecurities Ultra TV • Maret OPET Tourism & Construction • BekoElektronik KoçLease Comsat • Pastavilla Entek/ Zinerji KoçFaktor Koç.net Arçelik-LG Düzey Koçbank NV Demir Export Bilkom • Otosan • Group • Ford Otosan Sek Artesis Koçbank Azerbaijan Koç Bryce Koç Statoil BOS Koç - Ata Koratrade Kangurum Koç Yapı Marketleri • Various • Automotive • Otokar • Otokoç KoçFinans Biletix Book in Turkey GVZ Kotonline Kobiline Promena Koç Ece Koç AllianzLife • Migros Koç Allianz

4. Aygaz Inc. • Founded in 1961, Aygaz is Turkey’s undisputed market leader in domestic LPG sector, with 32 percent share of the overall LPG market. • In 2004, Aygaz’s LPG sales reached a total of 1 million tons. • Being one of the main Koç Group companies in the energy sector, Aygaz has 1.010 employees and more than 2.000 dealers nationwide.

5. Best known brand in Turkey • 150 Co. over 63,000 emp in 23 countries • Biggest Co in Turkey, Rev $28Billion • Largest Petroleum & Gas Co. in Europe • Active partner in the Shah Deniz • Broad experience in natural gas supply Founded in April 2004 LNG Distribution with Road Tankers CNG Distribution by Cylinder Trailers Koç Statoil Gaz Co shall become an efficient and profitablemarketer of natural gas in theTurkish market with a market share of minimum 10% by 2010.

6. Autogas Sales, Turkey 300 %

7. LPG Cars Converted, Turkey

8. Autogas Market • Total autogas consumption of 1.4 million tons • More than 1.2 million cars running on autogas • None of the vehicles are OEM • The majority were converted with first/second generation kits • %25 of the total passenger cars use LPG • Over 4,500 LPG filling stations spread throughout the country

9. Market Competition Aygaz LPG filling stations; 490, (11%) Mogaz LPG filling stations; 380, (8%) 2005 Market Shares (Sales);

10. Lessons Learned • Long Term Planning is necessary • Control mechanisms is necessary before the market is emerged • Commitment from the government is essential • Positioning of the alternative fuel has to be made • Marketing effort will be supportive to create a customer perception • Involvement of OEMs contributes and they should be encourged

11. Tofaş-Aygaz Albea Project CAR MANUFACTURER (OEM) • LONG-SHORT TERM POLICIES • Energy • Environmental Sustainable Market CONVERSION KIT MANUFACTURER LPG SUPPLIER

12. Natural Gas Business • Started from 1987, 0.5 billion m3 • Consumption 2004, 22 billion m3 • 60% Electric, 2% Fertilizer, 18% Industry, 20% Residential • Projection 2010, 40 billion m3 • Domestic production (353 million m3, %1.5) • Main importers, Russia and Iran

13. LNG • 1 LNG terminal (685,000 m3/hr) • Algeria (3.2 billion m3) and Nigeria (1 billion m3) • 19.26% of the natural gas supply

14. LNG Trade in Turkey • LNG is distributed to industrial customers • Algeria (3.2 billion m3) and Nigeria (1 billion m3) • 19.26% of the natural gas supply

15. Natural Gas for Vehicles • Filling stations; • Tofaş, Ankara, İstanbul (2), İETT • Approximately 400 cars • Municipality of Ankara agreed to buy 400 dedicated CNG buses from MAN. • Some ISO standards are translated, standarts for Filling Stations is not translated

16. Price Structure

17. Training in Ankara • Organized by the Turkish LPG Association • Fuel and LPG distribution companies, universities, automotive industry, government and municipalities, NGOs (ex.Automotive Industry Association) attended • Politics and strategies, filling infrastructure and natural gas vehicles were discussed • 3 Workshops took place for the active participation of the attendees

18. Politics and Strategies • Standarts • Control Mechanisms • Tax Policies • Long Term Strategies • Consumption of Natural Gas

19. Natural Gas Vehicles • Environmental benefits • OEM activities • Safety (Customer Awareness from LPG) • Municipality vehicles • Customer perception • Cars using LPG

20. Filling Stations • Standarts and Safety • Harmonisation • Investment • Planning • Technical background

21. Conclusions • Long Term strategies for NGVs should be defined and declared (Tax, price, energy, environment) • Balance between energies should be taken into consideration instead of competition • Standarts should be published • Expectations from the future market must be known

22. Conclusions (cont.) • Position of CNG must be determined compared to other fuels. • Alternative fuel strategies must be prepared • OEMs like Fiat, Ford, Iveco should be encourged and supported to be involved • Safety should be considered as the first priority • Certification is necessary for every part of the value chain • Converted vehicles must be registered and periodically inspected