Compressed natural gas stations across the country have sustained losses of about $4 million over the last month as the National Iranian Oil Company has restricted natural gas delivery to pumps under the pretext that household gas consumption is above 650 million cubic meters per day, a member of the board of directors at Iran's CNG Employers Association said.
“The economic damage to the sector will be a disincentive to the private companies willing to invest in the industry,” Hamidreza Sohrabi was quoted as saying by ILNA.
The CNG retail sector will be pushed to the brink of insolvency unless it can continue selling the fuel without interruptions, he said adding that frequent power and gas outages in the last 30 days have disrupted the normal function of some equipment and several pumps have to be repaired.
“The government is expected to help CNG station owners compensate the losses incurred by gas cuts; otherwise, a number of them may be shut down for good that will be a negative signal for the potential investors who have a plan to set a pump.”
According to the official, NIOC’s decision to curtail gas delivery to CNG stations has forced CNG-hybrid vehicles to have their cars filled up with gasoline, due to which gasoline consumption has risen by at least 7 million liters per day.
CNG stations receive fuel via a local utility at a pressure lower than that used for vehicle fueling and the fuel station compresses the gas to a higher pressure for vehicle fueling, so when the pressure is low, compressors will stop functioning automatically.
Substantial Drop
Close to 30 mcm of CNG should be supplied to 2,650 CNG filling stations in Iran per day, but this has dropped substantially since mid-January.
“Supplying gas to households is NIOC’s top priority,” the official said, adding that due to high consumption, gas pressure has dropped considerably and NIOC is struggling to supply residential buildings with gas, let alone CNG pumps.
According to Ardeshir Dadras, the head of the Iran CNG Association, the number of vehicles with hybrid CNG engines has surpassed 5 million and if the supply is limited, many car owners could face problem as they will have to fill up their tanks with gasoline that is costlier than CNG.
Gasoline is sold at two rates in Iran.
As per the directive issued by NIORDC in 2019, private car owners can only buy 60 liters of subsidized gasoline every month at 15,000 rials (4 cents) a liter and at double the rate for additional purchases (unsubsidized fuel).
One cubic meter of CNG costs 6,000 rials (1.5 cents), which is about three times cheaper than gasoline.
The National Iranian Oil Products Distribution Company, a subsidiary of NIOC, has announced that of the 19 million vehicles in Iran, over 5 million have hybrid CNG engines, accounting for 20% of overall CNG consumption.
Globally, Iran is the fifth biggest CNG consumer.
The United States, the European Union, Russia and China use 75 mcm, 45 mcm, 40 mcm and 35 mcm of the fuel per day, respectively.
Harmful Emission
Unlike gasoline, eco-friendly CNG minimizes harmful carbon emission. This helps engines run more efficiently and increases the life of spark plugs.
In the last decade, $2.4 billion were invested to expand CNG use in Iran.
“A large number of CNG-hybrid cars have been sent to the junkyard over the past decade, but they have not been replaced with new automobiles, because of which CNG demand is witnessing a downward trend,” Mohsen Johari, a member of Iran's CNG Association, said.
The more gasoline-based vehicles are produced, the more CNG demand will decrease, he added.
As long as automakers continue to manufacture gasoline-powered cars instead of CNG-hybrid vehicles, CNG supply will outstrip demand and this will push the sector to the brink of insolvency.
The official noted that despite all the publicity about the importance of replacing gasoline with CNG, the government is importing gasoline-based vehicles rather than CNG-hybrid vehicles.
Most car factories have almost stopped the production of CNG hybrids, meaning the demand for clean fuel will reduce steadily.
Iran's CNG Association has urged the administration to change its wrong policies regarding CNG. Nonetheless, most officials have so far largely turned a deaf ear to the request.
Johari said the marginal difference in CNG and gasoline prices discourages car owners to opt for CNG.
Under the current deplorable economic situation, the government has no plans to raise gasoline tariffs.
