Fresh Measure to Privatize Gas Stations

Fresh Measure to Privatize Gas StationsFresh Measure to Privatize Gas Stations

Plans to hand over the distribution of petroleum products to the private sector are gaining momentum, following a directive issued by Oil Minister Bijan Namdar Zanganeh this week.

The directive lays out the requisites for private companies that want to run gasoline and compressed natural gas stations under their own brand names, Shana reported.

The biggest criterion is financial ability, followed by operational experience, workforce and facilities.

To start operations, companies should hold a minimum of 7% stake in refineries/petrochemical complexes and have at least 60 fuel pipes.

They are obligated to increase the number of pipes to 300 within two years by buying stations or establishing new ones.

To prevent monopoly, a single brand can own up to 30% of all pipes in any municipality and 20% of the total number of pipes nationwide.

The commercialization of gas stations made headlines last year after reports circulated on the entry of international contractors in Iran's energy supply market.

According to reports, which were strongly denied by government officials, British oil and gas firm Royal Dutch Shell and French major Total were given the green light to establish a total of 200 gas stations in Iran.

At the same time, there were rumors that the first privately-owned gas stations will be named "Iranian" or "Iran's Green Fuel", but so far, no private company has been allowed to operate in a supply market that has traditionally been monopolized by the government.

------- Ambiguities

The state-run National Iranian Oil Refining and Distribution Company, the largest subsidiary of the Oil Ministry, is the main body responsible for the supply of gasoline and other fuels. 

The ministry has embarked on outsourcing some of its duties in line with a large-scale plan toward privatization and downsizing the government.

It says the privatization of gas stations is aimed at improving the quality of services and customers' welfare, although some questions remain.

The ministry is planning to rank gas station brands. The directive specifies that all private brands shall receive gasoline and CNG from NIORDC's storage units, meaning they would basically offer similar fuel, regardless of their facilities and services.

The question is whether gas stations, or at least top-tier brands, will be allowed to charge extra, considering that they cannot differentiate themselves by offering better quality fuel.

In other words, the ministry is only privatizing the final leg of fuel supply, undermining competition by holding sway over imports and production.

Privatization of gas stations was piloted five years ago after the launch of 30 CNG station "with private-sector's contribution" in Isfahan Province, but failed to gain traction in other areas.