(Adds comment from Total)
By Humeyra Pamuk and Asli Kandemir
ISTANBUL, April 24 (Reuters) - Total aims to sellits fuel distribution business in Turkey and has asked SocieteGenerale to lead the process, sources said on Friday, as theFrench oil producer looks to retreat from a highly competitiveand regulated market.
Turkey has some of the steepest fuel prices in Europe butheavy taxes and other regulations leave little margin for profitfor the 70 different retailers.
As a result, Total is looking to get out of the business,three people familiar with the matter said.
Two of them said French bank Societe Generale hasbeen chosen to lead the potential sale.
"Profitability in fuel distribution is under seriouspressure in Turkey. Other foreign companies may follow suit,"one of the sources said.
A spokeswoman for Total would not confirm or deny theplanned sale but said, "The group regularly analyses itsportfolio of assets to position itself best strategically ... InTurkey we have clearly expressed for the past two years ourplans for growth and we have continued to invest in thecountry."
SocGen had no immediate comment.
Total has just 5 percent of the 80 billion lira ($29.4billion) fuel distribution market, according to figures frommarket watchdog EPDK. That leaves it in sixth place behindbigger players like market leader Petrol Ofisi, owned byAustria's OMV, and fourth-ranked BP.
Founded in 1992, Total Turkey indirectly employs around10,000 people and operates around 440 petrol stations. That is asmall number compared with the 2,200 run by Petrol Ofisi.
A sale would not mark a wholesale withdrawal from Turkey, asTotal also sells chemical products there.
Demand for refined products saw years of robust growth inTurkey, thanks to rising economic output and cheap creditfacilitating car sales. While demand has stalled over the pastfew years, the long-term outlook is buoyant, analysts say.
But despite promising growth prospects, market competitionand price cap absorb the profits.
"When the market share is small and the network of stationsis not wide, the margins are seriously squeezed and leaveslittle point for the business to continue," another source said.
"Bigger players may find a way to survive but Total's marketshare has been relatively small."
Market watchdog EPDK sets a cap for the price of refinedproducts at the pump, leaving little room for retailers to raisethe price. The latest cap has been removed earlier this week,but the retailers remain closely monitored by the authority toprevent unfair pricing.
Currently the price for eurodiesel, the most commonly usedfuel in Turkey, is at around 3.94 liras ($1.44) per litre.($1 = 2.7200 liras) (Additional reporting by Michel Rose and Matthias Blamont inParis; Editing by Keith Weir and Greg Mahlich)
BP (BP.)