Investing in CNG Economically Viable

EghtesadOnline: Investing $1 billion in the compressed natural gas sector, as an alternative green fuel, will help replace 20 million liters of gasoline with 20 million cubic meters of CNG per day, a deputy oil minister said Saturday.

News ID: ۷۸۶۲۰۴

07 March 2021

“Expanding gasoline output capacity (110 ml/d) by 18% or 20 million liters a day requires at least $15 billion, which is not good economics compared to investment in CNG,” IRNA quoted Alireza Sadeqabadi as saying.

Thanks to vast natural gas reserves in Iran, developing the CNG sector (either to increase the number of CNG-hybrid vehicles or add 20 mcm to the current daily production) would deliver in less than two years.

However, adding 20 million liters of gasoline to the existing capacity means constructing three large refining units that would last minimum six years, he noted.

“Boosting CNG production will help expedite plans to increase export of value-added commodities namely gasoline.”

According to the official, 2,461 CNG filling stations are active throughout the country and can supply at least 25 mcm of clean fuel a day. However, due to low demand a part of the capacity is unused.

Sadeqabadi, who also is managing director of the National Iranian Oil Refining and Distribution Company, stressed that not developing the CNG industry would be a strategic error of judgment Iran cannot afford.

“The more we invest in CNG infrastructure, the more we will be able to export gasoline.”

Gasoline export started in 2018 and is being promoted to help manage the expanding inventory of the fuel, which is a result of the slump in domestic demand caused by the Covid-19 pandemic.

Of the total 110 million liters of gasoline produced in Iran every day, 75 million liters is consumed at home and the rest is sold to neighboring Iraq, Pakistan and Afghanistan.

He emphasized that in quality terms, the gasoline Iran produces and exports is among the best in the region.

Referring to the national plan to convert 1.4 million gasoline-powered public transport vehicles and private cars to CNG hybrids, he said close to 200 conversion centers in 25 provinces are each equipped with 150,000 domestically-made kits and tanks.

In addition to curbing gasoline and diesel use, the plan is basically to help reduce CO2 emissions from gasoline and diesel-powered engines that are heavy polluters. Comprised mostly of methane gas, CNG produces fewer undesirable gases compared to gasoline and diesel.

The oil official said NIORDC and Bank Mellat signed an agreement in 2019 to contribute to pool resources to get the retrofitting job done.

As per the contract, the equivalent of $510 million required to convert 1.4 million gasoline-powered vehicles to CNG hybrids comes from Bank Mellat.

One cubic meter of CNG costs 4,600 rials (1.8 cents), about four times cheaper than gasoline. A liter of subsidized gasoline costs 15,000 rials (6 cents) and non-subsidized fuel 30,000 rials (12 cents). Each private car has monthly quota of 60 liters of subsidized gasoline.

Moreover, inauguration of the first privately-run CNG cylinder manufacturing plant last month is expected to give impetus to the conversion plan.

Annual production capacity of the factory that was built with the help of a private firm (Tose Andishan Atlas Company) is 250,000 tanks and it will accelerate the process of converting gasoline-powered vehicles to CNG hybrids. When the plan ends in 2022, it will cut gasoline use by 20 million liters per day.

"Over the past decade, Iran has become the world's biggest producer and consumer of CNG … Pakistan, Argentina, the US and Australia have the biggest CNG production and distribution networks after Iran.”

NGVs

In related news, ngvglobal.com quoted Amir Khaki, managing director for Tamkar Gas Equipment Co., a Tehran-based firm that has designed, manufactured and installed hundreds of large CNG fuel stations as saying that Iran is second on the list of countries with the most natural gas vehicles (NGVs).

That rank is upheld by the government’s policy to strengthen the NGV sector thanks to the massive gas reserves.

“There are five million natural gas vehicles in the country. Only China has more NGVs according to NGV Global statistics.”

Natural gas is a clean-burning, abundant, and domestically produced source of energy. CNG has recently kindled interest as a clean transportation fuel because of such attributes, cost benefits and relative price stability compared to conventional petroleum fuels.