EghtesadOnline: So long as profit margin for retailers in the CNG sector remains low, the privately-owned industry is unlikely to grow, head of the Iran CNG Association said.
“The cost of managing and developing a CNG station has increased ten-fold in five years. The profit margin remains as low as 3,000 rials (1.4 cent) for one cubic meter and has not increased since 2018,” Ardeshir Dadras was quoted as saying by Mehr News Agency.
Although the government is encouraging car owners to retrofit their vehicles to CNG hybrid, low margins for filling stations are pushing the CNG retail sector over the edge, Dadras said.
“This business will not grow unless the private sector is reassured” about a reasonable profit. According to the official, CNG fuel is sold at 2,500 stations across Iran, of which 500 cannot afford to purchase necessary equipment namely multiple emergency shut off valves due to financial constraints caused by unprecedented rise in currency rates and low profit margins.
Upholding standards is key to improving infrastructure for CNG sales and cover design, construction, operation, inspection (safety and controls) and maintenance of equipment, he noted.
CNG filling stations dispense gaseous fuel stored at very high pressure, and require specific design and construction, including building materials that differ substantially from those used for gasoline and diesel stations. The stations must be designed and built as per strict regulations due to the special properties of the fuel and ensure full safety.
“Unless the station owners are offered some relief in utility bills and taxes, most will be forced to quit.” Many filling stations are dilapidated and need spare parts to repair and replace ageing equipment at exorbitant prices.
Referring to the nationwide plan underway for retrofitting 1.4 million gasoline-powered public transport vehicles and private cars to CNG hybrids, Dadras said daily CNG demand is 24 million cubic meters and rising.
Filling station owners, however, are under financial pressure to meet expenses and the situation could very likely impact the major conversion scheme, he warned.
The CNG conversion scheme is free for taxis, pickups and commercial vehicles. Of the total 52,000 vehicles registered with the gcr.niopdc.ir website of the state-run National Iranian Oil Products Distribution Company, 27,000 cars have been retrofitted. The rest are either being converted or are waiting for their turn because the number of authorized conversion centers are limited and demand is growing.
CNG sale has reached 24 mcm/d, up 25% compared to 2018, but the NIOPDC is facing serious financial constraints in increasing retail suppliers due to high and rising land prices plus major hurdles for importing equipment and parts.