Privatization of Retail Fuel Market to Benefit Customers

EghtesadOnline: The government has taken steps over the last year to commercialize gas stations as part of a scheme to privatize Iran's retail energy market.

News ID: ۷۸۱۲۹۶

14 January 2018

However, question marks hang over the transition as the government's control over fuel distribution and supply has entirely pushed out competition from the private sector.

But Mohammad Reza Mousavikhah, the head of National Iranian Oil Products Distribution Company, hints that Iran's commercialization efforts are moving in the right direction, ILNA reported on Sunday.

Central to raising competition in the retail fuel market is allowing gas station "brands" to source and sell their own fuel products, Financial Tribune quoted him as saying.

The move will provide customers with the freedom to offer fuels of different quality and prices.

"Currently, all gas stations offer the same fuel, but we need to start from somewhere … It's been nearly 40 years since the [1979] Islamic Revolution and NIOPDC is 90 years old. It's time we moved on from tradition toward a [modern] system," he said.

Brand owners will not be immediately authorized to supply their own fuels once the privatization plan comes into effect, "but this [diversification of fuels] must be done."

Mousavikhah said that in the near future, gas stations will be retailing various grades of gasoline at different prices, much like most western fuel markets as well as those in the nearby Persian Gulf region.

The government has held four rounds of auctions to commercialize gas stations nationwide and reduce its footprint in the fuel market. Iran’s economy is reportedly 85% state-owned.

In the UAE, a country of 9.2 million people, a mix of at least eight private or state-owned companies runs the country's gas stations.

A shortage of gas stations is another concern officials hope the privatization plans will alleviate.

According to reports, there is one gas station for every 7,500 people in the UK and one for every 2,600 people in the US. NIOPDC data show Iran has one gas station for every 22,000 people.

The dearth of filling stations, particularly in big cities, creates long queues of motorists. There are around 3,600 gas and diesel stations as well as 2,400 CNG stations in Iran.

Reports circulated in 2015 that Royal Dutch Shell and Total S.A. had acquired the rights to own and operate 200 gas stations across Iran, but government officials denied the reports.

--- Customers to Benefit

Mousavikhah said the commercialization scheme will benefit gas station operators and customers in equal measure.

"For how long do customers have to go to gas stations with restrictions?" he said, apparently referring to the customers' gasoline options limited to regular and premium grades.

"For how long should we keep witnessing bad customer service because operators lack any incentive to attract customers?"

Under his vision, station owners will have the freedom to import a type of gasoline that is competitive in terms of both pricing and quality.

"Gas station brands in certain areas like [the southern port city of] Chabahar may prefer to bring in gasoline from the UAE instead of [refineries in] Bandar Abbas. The imported gasoline can be cheaper and more cost-effective for the supplier," the NIOPDC chief said.

"We have started …We will eventually see the change in the type, price and quality of fuels."