The National Iranian Oil Company will need to import gasoline from next March if efficient alternative plans like CNG conversion plans fail to move forward, secretary-general of the Association of Iranian Refining Companies said.
“There is no quick fix for the looming fuel shortages because arrangements such as building new refineries or manufacturing fuel-efficient cars are either infeasible or long-term,” Nasser Ashouri was also quoted as saying by ILNA.
All refineries in Iran are producing at full capacity (110 million liters of gasoline/day) and output cannot rise any further. To meet rapidly growing demand new facilities must be built, Ashouri noted.
Construction of Shahid Soleimani Petro-Refining Plant in Bandar Abbas and Mokran Refinery in Jask Port, both in Hormozgan Province, has started, but estimates show that the projects will come on stream in 2025, he added.
“If and when the new plants go on stream after three years, they can increase NIOC’s refining capacity by 600,000 barrels per day. But the state-run National Iranian Oil Company should have initiated the plan much earlier and raising production level overnight is next to impossible.”
The senior official stressed that the association has long called for the rewriting rules to prevent state and private refineries from bankruptcy and provision of special easy loans to refiners to help improve quality.
Referring to other alternatives to curtail rising gasoline consumption and avoid imports, he added, “Pinning hope on automakers to manufacture energy-efficient cars has been an exercise in futility. They have shown utter negligence and indifference when it comes to producing vehicles whose mileage complies with global norms (less than 7 liters/100km).”
The next best option is to accelerate the nationwide plan to convert 1.4 million gasoline-powered public transportation and commercial vehicles to compressed natural gas hybrids, which was launched in 2019, he noted.
Financial and Environmental Benefits
“It is regrettable that despite its long-term financial and environmental benefits, the CNG conversion venture is moving at a snail’s pace,” Ashouri was quoted by the news agency as saying.
According to Ali Mahmoudian, head of the Alternative Fuels Union, as per the long-heralded scheme, at least 1 million gas-guzzlers should have been retrofitted by now, but has not exceeded 200,000.
Even at the pace, the scheme has helped cut gasoline use by almost 1.5 million liters per day and if the government wanted to import the same volume, it would have to spend $500 million a day, Mahmoudian revealed.
He noted that if the project was implemented as schedule, it could save close to 12 million liters of gasoline per day, which is equal to the daily output of Tehran, Shiraz, Lavan, Tabriz and Kermanshah refineries.
“Importing that amount of fuel (12m liters) would cost NIOC about $6.5 billion per year.” The average international price of gasoline is $1.5 per liter range.
After the plan was approved by the Economic Council in 2019, NIOC started to equip CNG retrofitting centers with the necessary kits and tanks. The retrofitting process made progress in the first two years but has stumbled in the last 12 months due largely to economic constraints and the steep fluctuations in forex rates.
Equipping 300 conversion centers with much-needed tools and paying wages has cost the NIOC around $90 million. Nonetheless, the plan that was supposed to be completed in 2021 is far behind, Mahmoudian said.
According to the official, current gasoline demand in Iran (95 million liters per day) will surpass supply (110 ml/d) in the near future and to prevent NIOC from importing gasoline again, it is essential to improve and expand the loss-making CNG sector.
Iran stopped importing gasoline in 2019 when the development plan of the Persian Gulf Star Refinery was completed and made the country self-sufficient in the fuel production.
Extensive Network
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 when 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, but profit margins for filling stations remain as low as 3,000 rials (1 cent) for one cubic meter and has not increased since 2018.
“High and rising maintenance costs, in addition to the low margins are pushing the CNG retail sector over the edge,” Ardeshir Dadras, head of Iran CNG Association, said.
“If CNG stations file for bankruptcy and stop functioning, NIOC will have to import at least 25 million liters of gasoline per day at a cost of $13.5 billion per year.”
Established a decade ago, the Association of Iranian Refining Companies is responsible for enhancing the quality of products of refineries and subsidiary companies, introduce the refiners and their potential to domestic and foreign markets and improve business transparency.
The association’s members are refiners in Isfahan, Tehran, Shiraz, Qeshm, Lavan, Bandar Abbas and Kermanshah. The major Persian Gulf Star Refinery in southern Hormozgan Province accounts for 80% of Iran’s liquefied gas, gasoline, kerosene, diesel, mazut, sulfur and jet fuel.
