Iran's Compressed Natural Gas Association has proposed a plan to the Oil Ministry to encourage motorists to consume more CNG and postpone gasoline imports, the head of the association said.
“Based on the proposal, all motorists with CNG-hybrid vehicles will be supplied with free CNG for three years,” Mohsen Johari was also quoted as saying by ISNA.
Highlighting the short-term benefits of the scheme, the official noted that if implemented properly, the proposal will help reduce daily gasoline consumption by at least 20 million liters in the first year.
Iran’s current gasoline consumption is around 100 million liters per day.
“The surplus gasoline can be exported and the Oil Ministry can generate $2 billion in revenues per annum, which is more than enough to cover the costs of all CNG stations,” he said.
“The free supply of CNG is expected to encourage more car owners to convert their vehicles to CNG-hybrid, which might encourage automakers to manufacture more hybrid vehicles.”
According to Johari, the government has no intention of increasing gasoline prices to compel people to use less fuel, as its inflationary effects will be catastrophic. On the other hand, the daily consumption of the fuel is on the rise and the National Iranian Oil Company has already started to tap into strategic gasoline reserves to narrow the gap between supply and demand.
Referring to a nationwide plan underway for three years to retrofit 1.4 million gasoline-powered public transport vehicles and private cars to CNG hybrids, he noted that since the start of the program in 2020, less than 200,000 gasoline-powered public transportation and commercial vehicles have been converted into CNG hybrids.
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. But it has not registered any progress due to economic instability and wild fluctuations in foreign exchange rates.
The scheme has literally failed, as it is estimated to require a budget of $1 billion that cannot be allocated by the government.
Iran has over 2,500 CNG stations and ranks fifth in global CNG consumption.
Multiple Advantages
Boosting the CNG share in the fuel basket can have multiple advantages, especially as it reduces gasoline demand and air pollution.
“The most important reason behind the downtrend in compressed natural gas demand lies in the government’s wrong policies, due to which the number of CNG-hybrid vehicles is dwindling,” Johari said.
“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.”
The more gasoline-based vehicles are produced, the more CNG demand will decline.”
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, although most officials have 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.
One cubic meter of CNG costs 6,000 rials (1.5 cents), which is about four times cheaper than gasoline. A liter of subsidized gasoline costs 15,000 rials (3.5 cents) and non-subsidized fuel 30,000 rials (7 cents).
Bi-Fuel Vehicles
The production of bi-fuel vehicles has stopped and the price of gasoline has not increased, so it is economically unviable for people to buy CNG.
According to the official, CNG stations have the capacity to supply 40 million cubic meters of CNG, but at present they are operating at half the capacity as fewer motorists are buying the eco-friendly fuel.
"Of the 20 million vehicles, over 5 million have hybrid CNG engines. This is while the share of CNG in fuel consumption is hardly 20% ... The bulk comes from gasoline,” he added.
Johari noted that despite having one of the largest natural gas networks in the world, CNG demand in Iran is about 24 million cubic meters per day.
According to estimates, current gasoline demand in Iran (100 million liters per day) will surpass supply (105 ml/d) in the foreseeable future and the most effective strategy to help prevent NIOC from becoming a gasoline importer is by developing the CNG sector.
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.
