The unprecedented rise in currency rates and low margins of fueling stations are pushing the CNG retail sector to the brink of insolvency, a member of the board of directors at Iran's CNG Association said.
“Although costs associated with developing and running a CNG station has increased ten-fold in the past five years, the profit margin for retailers remains as low as 3,000 rials (1 cent) for one cubic meter and has not increased since 2018,” Mohsen Johari was quoted as saying by ILNA.
The cost of CNG business is increasing not the profit. “This is a disincentive to CNG suppliers” and apparently pushing gas station owners to the wall, Johari said.
“Unless station owners are offered some relief in utility bills and taxes, most may have to declare insolvency sooner or later.”
According to the official, many stations are getting old and need spare parts to repair and replace ageing equipment at exorbitant prices.
Referring to the nationwide plan now underway for retrofitting 1.4 million gasoline-powered public transport vehicles and private cars to CNG hybrids, he said the daily CNG demand is at 24 million cubic meters and rising. Nonetheless, suppliers (station owners) are under mounting financial pressure to meet expenses that could very likely impact the conversion scheme.
---- Conversion Schemes at Risk
If CNG station owners are left to their own devices for long efforts to convert vehicles to CNG hybrids will be in vain, he warned.
The CNG conversion scheme is free for taxis, pickups and commercial vehicles. Of the total 52,000 vehicles registered with gcr.niopdc.ir belonging to the state-run National Iranian Oil Products Distribution Company, 23,000 cars have been retrofitted and the rest are either being converted or are waiting to do so because the number of authorized centers are limited and demand is high and growing.
CNG fuel is sold at 2,400 stations in the country, but the NIOPDC is facing serious problems increasing CNG pumps due to high and rising land prices plus major hurdles for importing equipment and parts.
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.
Significant costs associated with setting up a gas filling station are related to land, engineering, station design, equipment and installation. The actual cost of a project varies according to specific needs.
One cubic meter of CNG is sold for 5,000 rials (1.6 cents). According to NIOPDC data, CNG consumption has reached 24 million cubic meters per day and is estimated to increase by 15 mcm/d as more cars and public buses are equipped with CNG tanks.
CNG consumption fell to 10 mcm/d in March and February due to closedowns to control the coronavirus. However, use of the environmentally-friendly fuel doubled in June and now daily consumption is in the region of 24 mcm.
The US, EU, Russia and China daily use 75 mcm, 45 mcm, 40 mcm and 25 mcm of the fuel, respectively. An estimated 15 million CNG-run vehicles ply the roads in the world, of which 1.5 million are in Europe.
In the last decade an estimated $2.4 billion was invested to expand CNG use in Iran.
