CNG Conversion Plan for 1.4m Vehicles

EghtesadOnline: National Iranian Oil Refining and Distribution Company has launched an initiative to convert 1.4 million gasoline-powered vehicles (pickup trucks, taxis and vans) to compressed natural gas hybrids, director of the CNG office of NIORDC (a subsidiary of the National Iranian Oil Company) said.

News ID: ۷۸۵۳۹۰

16 February 2020

“Private firms will manufacture 700,000 CNG tanks which will be delivered to authorized conversion centers in the next 15 months,” Hamid Qasemi was quoted as saying by the Oil Ministry’s news portal Wednesday.

Of the total (1.4 million vehicles), 41 have been equipped with CNG kits and tanks since last week and the number will reach 36,000 by March, Financial Tribune quoted Qasemi as saying.

Contracts have been signed with seven firms each of which has the capacity to convert at least 1,200 car engines into CNG hybrid per month, he said without providing details.

In addition to curbing diesel use, the plan is intended to also help reduce CO2 emissions from diesel engines that are heavy polluters and contribute terribly to the worsening air pollution.

Regarding financial issues, the oil official said NIORDC and Bank Mellat signed an agreement last December to contribute to the plan to convert gasoline-based vehicles to hybrid CNG engines.

As per the contract, $510 million required to convert 1.4 million gasoline-powered vehicles to CNG hybrids will be put up by Bank Mellat.

Motivating people to switch to natural gas has been on the government agenda for long. However, the efforts have largely been limited to big cities like Tehran.

Following the government's decision to raise gasoline prices last November, compressed natural gas consumption reached 25 million cubic meters per day, up 31% compared to March-Sept of last year when consumption was 19 mcm/d.

In the last two months, close to 30,000 car owners have applied for converting their vehicles to CNG hybrids at authorized centers.

“Due to the large number of applicants, the authorized centers [supervised by NIORDC and the Industries Ministry] will follow the policy of first come first served,” Ali Mahmoudian, the head of Alternative Fuels Union, said.

Much-needed parts and equipment to convert cars to CNG hybrids have been indigenized and centers are working round the clock to meet rising demand.

According to NIORDC data, of the 19 million vehicles in Iran, over 5 million have hybrid CNG engines.

The NIORDC said in the last fiscal year that ended in March 2019, daily gasoline consumption was 90 million liters. This is while gasoline in Iran is costlier than CNG.

One cubic meter of CNG costs 4,600 rials (3.5 cents), about four times cheaper than gasoline. A liter of subsidized gasoline costs 15,000 rials (13 cents) and non-subsidized fuel 30,000 rials (26 cents).

The NIOPDC’s gasoline output now is 115 million liters per day, of which 94 ml/d is used domestically and the rest (21 ml/d) is exported.

Iran is 5th in global CNG consumption. There are over 2,500 CNG stations in the country.

CNG is projected to comprise 35% of the total fuel consumption by the end of the Sixth Five-Year Economic Development Plan (2017-22).

Boosting CNG share in the fuel basket can have multiple advantages, especially cutting demand gasoline demand.