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Foreign Firms “Unlikely” in Retail Gasoline Market

Foreign Firms “Unlikely” in Retail Gasoline MarketForeign Firms “Unlikely” in Retail Gasoline Market

The first condition under which international oil companies will agree to start retailing gasoline in Iran under their brand names is to sell their petroleum products in the stations that make the move impossible due to their much higher end prices, the head of Iran Gas Station Owners Union said.

“It is unlikely to see major international brands, such as the French oil and gas company Total and the Anglo-Dutch firm Royal Dutch Shell, establishing brands in Iran as they tend to sell products that are not possible for us to accept,” Bijan Haj-Mohammad Reza was also quoted as saying by ILNA.

Haj-Mohammad Reza added that since these companies’ products have high prices, it is not economically viable for Iran to distribute their gasoline.  

“For instance, if we purchase Total’s gasoline at 30,000 rial (around 86 cents), add to that the costs of warehouses, fuel evaporation and transportation, it would not be economical, as gasoline price is about 10,000 rial (29 cents) on average in the Persian Gulf countries,” he said.

"Even if international companies’ prices would equal that of domestic producers, it is not viable because of additional costs."

According to the official, gas station projects with at least 40% physical progress until mid-April can continue construction, but stations with less progress as well as those that have only obtained the required permits must work under brand names or establish new brands.

Haj-Mohammad Reza referred to ambiguities in commercializing gas stations and said as stations’ commission is paid based on rating regulations, Iran may encounter problems in this regard because brand owners will receive a portion of the commission.

On the costs of setting up a gas station in Iran, he noted that on average the owner incurs $1.44 million, which project will need an investment of $3.46 million in the capital Tehran.

  Past Developments

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, Shell and Total were given the green light to establish 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.

However, 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 in April.

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

 

Financialtribune.com