The Voice of Yağız Eyüboğlu – an interview with the WLPGA First Vice President and CEO of Aygaz

WLPGA:  Mr Eyüboğlu, please tell us a little about Aygaz and its key activities.

Mr Eyüboğlu:  Aygaz has been the leader of the LP Gas market since its foundation in 1961, and is the tenth largest industrial organisation in Turkey. Aygaz is a member of Koç Group and Koç Group is Turkey’s largest industrial and services group in terms of revenues, exports, employees and market capitalisation on the Stock Exchange-Borsa İstanbul. With a $47.3 billion combined revenue, Koç Group is Turkey’s largest conglomerate representing 9% of Turkey’s GDP and 10% of Turkey’s total exports. With 1.7m tons in sales and $3.1b in revenues, Aygaz had 29% market share across its segments – cylinder, Autogas and bulk – in 2012.

In addition to LP Gas distribution, the company manufactures and exports LP Gas devices to Europe, Africa and the Middle East. We have a highly efficient supply, logistics and sales organisation spanning from LP Gas ships and tankers, storage terminals, filling stations, a cylinder manufacturing plant to a vast distribution network of ~4000 cylinder and Autogas dealers.  On a daily basis, Aygaz dealers deliver filled cylinders to 100,000 households while over one million vehicles run on Aygaz Autogas. In addition to our operational excellence, Aygaz has a reputation for being a pioneer.  Examples of our leadership include being the first with an LP Gas maritime fleet in Turkey and being the first in the world with an enhanced Autogas for extra performance and fuel economy.   Aygaz aims to continue to be the leading company providing energy solutions to Turkey and other potential markets, in LP Gas and natural gas.

WLPGA:  What do you see as the key challenges today in the Turkish market?

Mr Eyüboğlu:  In the cylinder market, the wide distribution of natural gas, the urbanisation project and the illegal filling of cylinders are the key challenges.  I will go over them one at a time. Since the global energy demand is expected to increase by 50% by 2030, we need to secure future energy supply by creating energy alternatives.  LP Gas remains the most sustainable and environmentally friendly choice for many nations. However, in Turkey, our government’s policies support and promote natural gas. Currently, LP Gas has a disadvantage because of its higher excise duty.  Natural gas distribution has penetrated almost all of the metropolitan areas, and is now being expanded to economically infeasible places.  According to the new urbanisation policy of our government, a significant portion of households residing within the earthquake zone will be demolished and rebuilt for safety reasons.  The new buildings are being linked up with natural gas, affecting the LP Gas market negatively. There is not much to say with respect to the illegal filling of the cylinders in the Autogas stations. Except that, this is still an issue despite significant penalties enforced by the law. When we look at the Autogas market, the government has an incentive program to phase out old cars, majority of which run on LP Gas.  However, the new car models mostly run on diesel, and the automotive firms have not shown much interest in producing cars that run on LP Gas.  This transition from old to new cars can negatively impact the growth of our Autogas market.

WLPGA:  And what about the main opportunities for Aygaz today?

Mr Eyüboğlu:  Aygaz, together with the Mogaz and Lipetgaz brands, maintained its leadership in all segments of the LP Gas sector in 2012, with a market share of 43% in cylinder gas and 23% in Autogas.  We aim to maintain and grow our market share, domestic and international sales volume without compromising our profitability.  We will continue to cultivate our strong brand – one of our top competitive advantages – with sustained investments in product quality, safety and innovation.   In the Autogas market, expected regulatory changes may provide several opportunities for Aygaz. After several years of lobbying against the underground parking restriction, the government has recently shown signs of being receptive to our lobbying efforts.  Lifting of such a ban will stimulate growth and improve the perception of the Autogas.  In addition, the restriction for sales promotion activities in the Autogas stations is also expected to be removed. This will enable us to create promotion campaigns and leverage our brand and distribution network more effectively.   In addition, the Euro 6 standard is expected to be in force by 2016. The changes required by the new emission limits may cause automotive firms to increase the price of diesel cars.  We anticipate that the cars that run on gasoline and may be converted to LP Gas will be more preferred and this will help our market grow further. In addition to achieving growth in our core segments, we will explore a new segment given expected regulatory changes in power generation policies.  These changes may allow LP Gas to be used as a secondary and/or a primary source of energy in natural gas cogeneration plants. We also have growth plans for our natural gas business, but I will keep this interview limited to our activities in LP Gas.

WLPGA:  What benefits do you see as being a Board (and Industry Council) member of the WLPGA?

Mr Eyüboğlu:  World LP Gas Association is the most effective, in fact the only platform, where we can come together in order to help shape the future of the LP Gas industry.  While facing increasing regulatory and competitive pressures, we have to stimulate global market growth by expanding the LP Gas use in current as well as new markets.  We need to approach new areas of development in a coordinated way in order to best influence the key stakeholders.  By sharing best practices and cultivating joint projects, we need to keep innovating along the supply chain and keep exploring new business models.  We can also act as a united lobby group to educate and influence policymakers.  We are all here to find solutions for our common problems, seek cooperation, enhance our capabilities and create growth.  The WLPGA platform enables such an effective facilitation across different applications and geographies.  As such, I am proud and excited about being a Board member of the WLPGA.

WLPGA:  How do you see the future of the Turkish LPG market?

Mr Eyüboğlu:  The Turkish Autogas market is the second largest market after South Korea in the world while the Turkish cylinder market is in the top five in Europe. In terms of volumes, the growth of the Autogas segment in Turkey has been compensating for the decline of the cylinder gas market.   Over the last decade, the cylinder market has been impacted severely by the expansion of the natural gas distribution.  However, such impact will be limited going forward as the natural gas expansion has almost reached saturation. We expect the growth of the Autogas market to continue due to the following factors:

  • Autogas has an economical advantage for end-users, and this is expected to continue in the future;
  • Besides its economics, we are also promoting LP Gas’s other attributes such as performance, convenience and environmentally friendliness;
  • Autogas is widely available within 10,000 gas stations representing ~70% of total gas stations, and the distribution network is expected to grow further;
  • Development of the conversion systems enables gasoline cars to run on LP Gas without compromising engine performance;
  • The car ownership percentage of Turkey is still lower than the percentages of the developed countries.