Compressed natural gas prices rose by 33% on July 12, the head of the Commercial Services Department at the National Iranian Oil Products Distribution Company said.
“As per the directive approved by the Cabinet and the Economic Council, CNG prices will increase by 1,500 rials [0.5 cents] per cubic meter,” Aliakbar Arab-Ameri was also quoted as saying by ISNA.
Each cubic meter of gas was sold for 4,500 rials [1.5 cents], but from today it will cost 6,000 rials [2 cents], up 33%, he added.
A liter of gasoline is sold for 15,000 rials (5 cents).
The number of dual-fuel cars has increased significantly in Iran over the past three decades and most taxis and low-cost cars have the dual system, as successive governments strive to safeguard the environment and fight air pollution.
According to NIOPDC, a subsidiary of the National Iranian Oil Company, Iran is one of the leading countries promoting CNG with at least 2,700 stations. More than $2.4 billion have been invested to expand CNG use in the last decade and 22,000 people work for this rapidly expanding industry.
According to Ardeshir Dadras, the head of Iran CNG Association, although expansion of the privately-owned CNG 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.
“Gasoline demand in Iran will surpass supply in the foreseeable future and the most effective strategy to help prevent NIOC from becoming a gasoline importer again is by developing the loss-making CNG sector,” he said.
“Despite having one the most extensive 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.”
The cost of setting up a CNG station has increased tenfold in five years.
Low Margins
Dadras said exorbitant maintenance costs, in addition to low margins for filling stations, are pushing the CNG retail sector over the edge.
“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,” he added.
The official noted that if the government invests only 10% of the money that will be 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 100 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.
Manufacturers of CNG kits and tanks 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, Dadras said.
