Noticeable Decline in CNG Consumption in Iran

EghtesadOnline: Compressed natural gas consumption has declined 15% since May when prices rose by 10%, head of the Iran CNG Association said.

News ID: ۷۸۴۹۹۰

03 November 2019

“Unlike previous years when CNG use increased by at least 10%, the trend has reversed in the last six months and is expected to exacerbate by the yearend,” Ardeshir Dadras was quoted as saying by IRNA.

Keeping gasoline prices unchanged while raising CNG prices has pushed up consumption of the former depressing use of the latter, the official noted.

Close to 90 million liters of gasoline is burnt every day and is expected to surpass 100 ml/d by next March. Each kilogram of gas is sold for 6,570 rials (4.6 cents), while one liter of gasoline costs 10,000 rials (9 cents), according to Financial Tribune.

"So long as the difference between the two tariffs is not tangible, motorists will not prefer CNG.”

Gasoline prices are not proportional to other energy carriers like CNG, a wrong policy that has taken toll on consumption and made CNG stations operate at half capacity because less motorists are buying the eco-friendly fuel, he added.

Almost 20 million cubic meters of CNG is consumed every day that can double if decision and policy makers revise their policies, he said.

Iran is ranked 5th in global CNG consumption. There are over 2,000 CNG stations across the country.

The US, European Union, Russia and China use 75 mcm, 45 mcm, 40 mcm and 25 mcm of the fuel on a daily basis respectively. Approximately 15 million CNG vehicles ply the roads around the world, of which 1.5 million are in Europe.

Turning to solutions to promote CNG as a clean alternative to dirty fossil fuels, Dadras said plans are underway to provide taxi drivers with special cards to fill up with subsidized CNG. He did not provide details.

"Of the 20 million vehicles in Iran, 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.”

Experts say either cutting CNG prices or increasing gasoline prices is imperative if the government really intends to reduce the rising gasoline consumption.

More than $2.4 billion has been invested in Iran to expand CNG use in the last decade and contribute to the global effort to reduce CO2 footprint.

Shrinking Profit Margins

The trend of increasing the number of CNG stations has almost come to a halt. Pointing to the cost of CNG equipment and maintenance, Mohammadreza Mousavikhah, managing director or the National Iranian Oil Products Distribution Company said private enterprise is no more interested in putting money in CNG filling stations because of the high and rising costs (especially land prices) and shrinking profit margins.

By the same token, gasoline stations are not in a better situation. For example, in Tehran the number of cars has increased several times in the past 40 years, but the shocking lack of petrol pumps is conspicuous throughout the sprawling capital of close to 12 million people with four million cars.

Boosting CNG share in the fuel mix can have multiple advantages, especially cutting gasoline demand, improving the environment, reducing air pollution and exporting fuel.

Low-carbon and clean fuel can help the country export liquefied fuels namely diesel and gasoline, the NIOPDC official said.

According to Hashem Oraei, a faculty member at Tehran's Sharif University of Technology, people's interest in natural gas vehicles notwithstanding, carmakers have done nothing to manufacture NGVs because they have enough customers for their gasoline-fueled poor quality gas guzzlers.

Iran has one of the biggest gas grids in the world and although CNG is relatively cheaper than gasoline, local car companies continue to make gasoline-powered vehicles that contribute terribly to the toxic air in the rapidly expanding urban areas.

The main disadvantage of CNG is its low energy density compared to liquid fuels. A gallon of this gas has only a quarter of the energy in one gallon of gasoline. CNG vehicles therefore require big, bulky fuel tanks, making CNG more useful for big vehicles such as buses and trucks though small sedans use this fuel.