Close to 200,000 gasoline-powered public transportation and commercial vehicles have been converted into compressed natural gas hybrids over the past two years, a member of the Iran CNG Association said.
“The initiative that is part of a nationwide scheme launched by the National Iranian Oil Refining and Distribution Company has helped curb gasoline use by 350 million liters in the 24-month period,” IRNA also quoted Navid Khasebaf as saying.
The scheme’s long-term goal is to convert 1.46 million gasoline-powered vehicles into CNG hybrids that will help curb gasoline consumption by 23 million liters per day and add the same amount to the CNG consumption rate.
According to the official, to sign up for conversion, cab and pickup owners are required to register at Gcr.niopdc.ir, where their personal ID and vehicle information are checked for eligibility.
“The plan was expected to wind up in 24 months, but Covid-19 pandemic has delayed the plan,” he said.
According to the official, CNG consumption is growing and has exceeded 24 mcm/d. This figure is expected to rise by a further 90% to reach 45 mcm/d at the end of the conversion scheme.
Drawing a parallel between Iran and China, he noted that there are about seven million CNG hybrids in the latter, which has helped reduce gasoline consumption by 130 million liters per day.
Referring to domestic manufacturers’ challenges, Khasebaf said although they have indigenized CNG-kits and cylinders as per Russian standards, the equipment cannot be used domestically and most kits are imported for no clear reasons.
Khasebaf said the Ministry of Industries, Mining and Trade has set up and certified over 400 conversion centers in 25 provincial centers to help implement the scheme.
“The scheme is estimated to require a budget of $570 million, which are being supplied through savings made from the reduction of gasoline consumption [by raising fuel price and setting a quota]. Two local banks are helping NIORDC accomplish the task,” he said.
Switch to Natural Gas
Motivating people to switch to natural gas has long been on the Iranian government’s agenda. However, these efforts have mostly been limited to major cities like Tehran.
Long before the free services became the topic of debate, NIORDC started offering low-interest loans to owners of all commercial and passenger vehicles running on gasoline and diesel to convert them to CNG hybrids.
With the introduction of various incentives, CNG consumption in the country has increased, but the government aims to further promote the use of this clean fuel.
Its endeavors have been aimed at curbing fossil fuel consumption and reducing toxic emissions released into the air by diesel engines that are considered heavy polluters.
However, according to the latest report, CNG consumption can increase to over 40 million cubic meters per day.
CNG is projected to comprise 35% of Iran's total fuel consumption by the end of 2022. To achieve this goal, the government has launched the initiative to motivate more drivers to convert their gas-burning vehicles to CNG hybrids.
Iran has over 2,500 CNG stations and ranks fifth in global CNG consumption.
Boosting the CNG share in the fuel basket can have multiple advantages, especially as it reduces gasoline demand and air pollution.
“Nonetheless, government negligence is pushing the CNG retail sector to the brink of insolvency”, Ardeshir Dadras, the head of Iran CNG Association, said.
Effective Strategy
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.
Despite having one of 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, while the profit margin remains as low as 3,000 rials (1 cent) for 1 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 spent on fuel imports on solving the 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 Dadras, the industry cannot thrive 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.
