NIGC Mulls Gas Tariff Increase

EghtesadOnline: Natural gas price hike in the household sector by 150% can help reduce demand by at least 10%, the head of Research and Development Department in the National Iranian Gas Company said.

News ID: ۷۸۷۲۸۳

09 November 2021

"Per capita gas consumption in Iran is seven times higher than the global average and to address the worsening crisis, a rise in tariffs seems to be the most effective short-term solution," Mohsen Mazloum Farsibaf was also quoted as saying by ISNA.

Consumers are currently charged 0.5 cent per cubic meters on average between November and March (cold season) and tariffs rise by 500% to reach an average of 3 cents between April and September (hot season).

“Although inflation is high because the current natural gas prices are low, increasing tariffs by 2.5 times in the household sector will not adversely affect people’s purchasing power. Natural gas is different from gasoline as the latter is tightly linked to all sectors of the economy, but the former is not a contributory factor,” the official said

The government raised pump prices in Nov. 2019 by 50%, from 10,000 rials to 15,000 rials for subsidized fuel (allocating a monthly 60 liters per car) and by 200% for unsubsidized gasoline, which led to widespread public protests.

The NIGC official warned there could be a shortage of nearly 200 million cubic meters of gas in the coming winter as demand is expected to increase by 10% year-on-year.

Daily household gas consumption has surpassed 450 mcm and is predicted to reach 700 mcm.

“A 10% reduction in consumption means daily gas supply to thermal power plants can rise by 70 mcm that can help reduce the need to burn eco-unfriendly mazut,” he added.

NIGC has the capacity to pump nearly 900 mcm of gas per day to the national network.

According to Farsibaf, rising prices is unlikely to yield the desired result unless it is accompanied by cultural and educational training.

“As long as consumers do not value precious commodities like gas, price hikes will not work,” he said.

Referring to other strategies to curtail consumption, he noted that the diversification of energy basket can also help the state-run company meet the ever-growing demand more efficiently.

“Households in Iran are too dependent on natural gas as a source of energy for heating,” he said, adding that laying kilometers of pipelines in mountainous villages where less than 30 people live is a wrong policy because such families should be supplied with gas cylinders.

Blessing or Curse

Iran holds the world's second biggest natural gas reserves after Russia and officials often proudly trumpet their success in expanding the natural gas network (including in far-flung villages) over the past four decades.

However, the long-term effects of what they claim to be a blessing is not very clear as it can be a curse.

One question academics and energy experts have raised is, “Was it really necessary to invest billions of dollars to lay huge pipelines and supply 80 million people with gas so that they could heat up their homes when there were other viable options?”

According to Mahmoud Reza Haqifam, a former deputy at the Iran Power Generation, Distribution and Transmission Company and a university lecturer, Russia, the US and Norway, which have also massive gas reserves, rely on other sources of power and do not provide their people with gas for heating purposes.

“Extending gas grid was a wrong policy for several reasons,” he said.

Firstly, the budget used for extending the network to each and every household could have been allocated to build new thermal, solar and wind power stations and develop transmission and distribution lines.

Referring to safety issues, it is said that if an earthquake strikes in mega cities like Tehran, Mashhad and Isfahan, the number of people who will be killed by gas explosion would outnumber those who will lose their lives to the disaster.

What is more regrettable in Iran is that during winter when home gas consumption soars, petrochemical companies, industries and power plants are forced to use mazut whose ecological effects is much more destructive.

Reliable Source

From an economic point of view, it is argued that compared to gas, electricity is a more reliable source as power grids can be expanded faster and make economic sense.

Gas consumption in Iran has surpassed 600 mcm/d and informed sources say the valuable source could have been managed better if it was delivered to thermal power plants and industries (that produce value-added goods) instead of households that anyway do not consume energy prudently.

Haqifam noted that some simply do not care about wasting energy because they assume it is available in abundance while others live in poorly-insulated homes in which energy is wasted easily.

Furthermore, developing power infrastructure (power stations, substations and transmission lines) also helps save water. In Iran, during the hot summer days, most families turn on water-based cooling systems (evaporative coolers) that use huge amounts of water that can be saved if enough power is generated and subscribers are encouraged to use air-conditioners.

It is noteworthy that Russia, Denmark and Sweden provide at least 50% of their people with centralized district heating.

Teleheating is a system for distributing heat generated in a centralized location through a system of insulated pipes for residential and commercial heating requirements such as space and water heating.

In Japan, one of the biggest importers of LNG, people use kerosene and electricity to heat up their accommodation and 92% of the imported liquefied fuel are given to power stations to generate electricity.