• Natural Gas News

    Iran CNG Plan Fails

Summary

Iran has not made the gas price cheap enough to encourage vehicle owners to switch from already heavily discounted gasoline.

by: Dalga Khatinoglu

Posted in:

Natural Gas and LNG Latest & Breaking News, Middle East, Corporate, Political, News By Country, Iran

Iran CNG Plan Fails

Iran hiked the price of compressed natural gas (CNG) by about 10% May 21 to rial 6,568/kg, the petroleum ministry announced. That is equal to $32/'000 m³ at the unofficial rate of exchange.

Iran planned that CNG would have three quarters of the vehicle market, but consumption has not changed from about 20mn m3/d since mid-2005 and it serves only about a tenth of the market, or 3.5% of total gas demand.

The head of the CNG stations association Ardashir Dadras told local Fars news agency that the price of 1 kg CNG should be about 25-30% of the price of a litre of gasoline, but it is as much as half the price. “CNG prices at this level are not attractive for people to use in dual fuel vehicles,” he said, adding that the gasoline price should increase.

Iran’s national currency has lost 70% of its value since the second quarter of 2018, when US withdrew from the nuclear deal with Iran and imposed sanctions, but the gasoline price remained unchanged at rial 10,000/litre, which is between a sixth and a tenth the price in neighbouring countries.

This has created interest in smuggling and 11.5mn litres/day are illegally delivered to Pakistan, Afghanistan, Turkey and elsewhere.

The Iranian government announced that it is planning to increase gasoline price, but parliament blocked that, warning about rising inflation, already over 30% and expected to reach 35% or even 50% by end-2019, according to the International Monetary Fund.

The fuel price in Iran is very low and the government loses out on fuel and electricity sales, paying above $45bn/yr in subsidies.