Although expansion of the privately-owned compressed natural gas industry can help curb gasoline consumption by 40 million liters per day, government negligence is pushing the CNG retail sector to the brink of insolvency, the head of Iran CNG Association said.
“Gasoline demand in Iran will surpass supply in the foreseeable future and the most effective strategy to help prevent the National Iranian Oil Company from becoming a gasoline importer again is developing the loss-making CNG sector,” Ardeshir Dadras was also quoted as saying by ILNA.
Despite having one the most expanded natural gas networks in the world, CNG demand in Iran is less than 25 million cubic meters per day while CNG filling stations can supply more than 40 mcm of the clean fuel per day, he added.
The cost of setting up a CNG station has increased tenfold in five years. On the other hand, the profit margin remains as low as 3,000 rials (1 cent) for one cubic meter and has not increased since 2018.
“Exorbitant maintenance costs, in addition to low margins for filling stations, are pushing the CNG retail sector over the edge,” Dadras said,
“If CNG stations go bankrupt and stop working, NIOC will have to import at least 25 million liters of gasoline per day at a cost of $8 billion per year.”
The official noted that if the government invests only 10% of the money that will be spent on fuel imports on solving CNG sector’s financial problems, not only can it save billions of dollars, but also help save 40 million liters of gasoline, making some space for generating revenues through exports.
Each liter of gasoline is traded at 90 cents in international markets.
According to the official, the industry cannot boom unless more gasoline-powered public transport and commercial vehicles are converted to compressed natural gas hybrids.
CNG kits and tanks manufacturers should be supported financially, retailers’ profit margin must rise based on the inflation rate and the price difference between gasoline and CNG should increase so that more motorists are encouraged to use CNG, he added.
Commission Fee
As per the directive issued by the government in 2018, CNG stations’ commission fee (per cubic meters) was supposed to rise by 25% per year, but this has not happened and the government owes close to $100 million to CNG station owners.
Unlike gasoline, eco-friendly CNG minimizes harmful carbon emission. This helps engines run more efficiently and increases the life of spark plugs.
Abundant gas deposits and cost-effective production justify replacing gasoline with CNG.
One cubic meter of CNG costs 6,000 rials (3 cents), which is about four times cheaper than gasoline. A liter of subsidized gasoline costs 15,000 rials (7.5 cents) and non-subsidized fuel 30,000 rials (15 cents).
“As long as the price difference between gasoline and CNG is as low as 4 cents, motorists will have no motivation to fill up their tanks with CNG,” he added.
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 25 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.
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 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 growing.
CNG fuel is sold at 2,400 stations in the country, but NIOC is facing serious problems in increasing CNG pumps due to high land prices plus major hurdles for importing equipment and parts.
The US, European Union, 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 were invested to expand CNG use in Iran.
