CNG-A FUEL OF CHOICE

As a policy the government is making endeavors to encourage and promote the use of CNG in private and public transport vehicles

From: SHAMIM AHMED RIZVI, Islamabad
Dec 12 - 18, 2005

The use of Compressed Natural Gas (CNG) as an automotive fuel was introduced in Pakistan more than two decades back. Its demand however has tremendously increased during the last two to three years owing to lower cost as compared to rocketing oil prices besides the government effort to promote this environment-friendly fuel.

The ever-rising prices of petrol and petroleum products have forced more and more vehicle users to switch to CNG.

The first CNG station was established in 1982 in Islamabad by the Hydro Carbon Development Institute. Till early 2003 the number of CNG stations rose to 317 when Oil and Gas Regulatory Authority (OGRA) was set up and responsibility of granting licences to CNG stations was assigned to it. Since then it has granted 2450 licences for setting up CNG stations throughout the country. As on 1st December this year, 850 CNG stations are in operation (including the earlier 317), while 200 more are in the process of installation and the rest in the pipeline.

OGRA is issuing almost 100 new licences every month since the beginning of the current year but the speed of installation of the CNG stations is not that fast. Licence holders complain of the cumbersome, red tapism and even mal practices in obtaining NOCs from the district authorities. The vehicle owners complain of black marketing of CNG kits, specially the cylinders, which are all imported. The prices of cylinders have almost doubled during the past few months because of increased demand. CNG kits including cylinder can easily be manufactured locally. Surprisingly, however, nobody from the private sector has come forward so far in this field in spite of vast market and lucrative profit it offers.

The compressed natural gas as an automotive fuel has been in use in developed countries since 1940s. Over the years, the technology for CNG usage in automotive vehicles has been refined in several countries of Europe, North America and New Zealand. In recent years the interest in CNG usage as an automotive fuel has substantially increased, as it is an environmentally clean fuel.

In Pakistan CNG as an automotive fuel has been in use since 1982. The use of CNG has a special significance for Pakistan, as natural gas to be used for CNG is locally available while gasoline being consumed by automotive sector is an imported fuel.

As a policy the government is making endeavors to encourage and promote the use of CNG in private and public transport as such large scale CNG usage will lead to savings in foreign exchange as well as positive effects on the environment. The advantages of CNG as an automotive fuel has been enumerated as under in the government policy documents.

a) CNG has big safety features that enable it to be inherently a safer fuel as compared to gasoline, diesel or LPG.

b) The exhaust from using CNG is environment friendly and this will be an added advantage particularly in the light of Pakistan government's concern at the deteriorating condition of environment pollution.

c) The CNG is an economical fuel owing to lower cost of natural gas and higher fuel efficiency as compared to gasoline, diesel, and LPG. A gasoline consumer has to spend 2.82 times more, while HSD consumer has to spend 1.39 times more and an LPG consumer has to pay 1.62 times more money in terms of fuel purchase as compared to environment benign CNG. This disparity will go up with the increasing trend in oil prices.

d) The life of the engine is increased by using CNG. Lubricating oil life is extended considerably because CNG does not contaminate and dilute with crankcase oil. Due to the absence of any lead content in natural gas, the lead fueling of plug is completely eliminated and plug life is greatly extended. CNG enters the engine in gaseous form, whereas petrol or diesel spray in the form of mist. This dissolves lubricating oil from top piston ring area, causing engine wear, which is not a case in CNG, thus use of CNG extends life of engine.

e) CNG is being used for many years in vehicles in countries like New Zealand, Italy and USA. These countries have categorized CNG as safer fuel than gasoline.

The Government of Pakistan is encouraging the use of Compressed Natural Gas (CNG) as an alternate fuel for automotives in order to control environment degradation, save foreign exchange in import of liquid fuels and generate employment. Due to government's encouragement, Pakistan has become third largest CNG user in the world. To ensure rapid development of the CNG industry and considering the proposals of this Ministry, the CBR exempted import duty and sales tax on CNG Euro-2 buses wether in CBU or CKD under SRO 576 (1) 2005 dated 06-06-2005 and Sales Tax Act exemption section 13(1).

Realizing the usefulness of CNG as an automotive fuel the government has embarked upon CNG commercialization program and in its liberal petroleum policy (2001) has given incentives including complete exemption of CNG equipment from import duties and sales tax. The emphasis of the government and earlier mentioned incentives have attracted private investors in this area. The government is encouraging the use of CNG in the country and is very keen to boost this industry in order to decrease the oil import's bill which is a major set back to Pakistan's economy. Total CNG stations and vehicles converted to CNG up to the end of financial years 2003-04 and 2004-05 are given as under:

S. No.

CNG Activity

End of 2003-04

End of 2004-05

%Increase/ Decrease

1.

Total operational CNG station till end of financial year (F.Y)

546

732

34.1

2.

Vehicles converted to CNG

500,000

750,000

50.0

3.

Total No. of provisional licenses issued till end of financial year

1486

2100

41.3

The Director General (Gas) of the Ministry of Petroleum and Natural Resources has made the following recommendation for the current financial year (2005-06)

GASOLINE CARS

* Current policy in terms of price differential between gasoline and CNG is robust and should continue.

* Current directive for no import duty on CNG kits should remain in place.

BUSES

* Long term franchise permits on specific routes for buses should be provided for buses operating on CNG to enable them to take advantage of economies of scale.

CLUSTERING OF CNG STATIONS

* All new CNG stations should be mandated to conduct Initial Environmental Examinations (IEEs) to ensure that factors such as safety and excess noise are avoided and that new stations are not constructed very close to each other.

* Appropriate guidelines for the IEEs should be prepared and implemented by OGRA.

CNG SAFETY STANDARDS

* Mechanism of inspection of vehicle cylinders, which are being used for over 5 years, is not developed and implemented.

* New standards/guidelines developed after 1992 may be included or referred to in the CNG Rules after careful consideration that these do not adversely impact the existing practices.

METERING AT CNG STATIONS

* At present the T&D companies sell gas to the CNG stations on an average monthly temperature value, this system needs to be improved and daily temperature reading should be incorporated in the gas billing process. SSGCL has provided temperature-volume correction meters inmost of its franchise area, but SNGPL has to work a lot in this direction. OGRA should provide some deadline for this purpose.

ELECTRICITY TARIFFS FOR CNG STATIONS

* The current commercial electricity tariff applicable for CNG stations could be changed to an industrial tariff (issue currently before NEPRA).