Consumers are not taking the opportunity to switch to a more efficient fuel

26 february 2016 |

The online magazine has published an article penned by the Analytical Center's expert Alexander Amiragyan and titled Development of the Fuel Gas Market in Russia: Progress and Problems so Far. According to the expert, it has now been three years since the state began to actively support the fuel gas market. In this time, regulation of maximum retail prices for fuel gas has been cancelled; a program is now being implemented to purchase gas fuel motor vehicles and equipment for utility companies in major cities, under which regions have been getting federal subsidies on the annual basis. However, these measures have failed to produce tangible results in the industry’s statutory regulations.

Alexander Amiragyan
Alexander Amiragyan
Department for Fuel and Energy Sector

Compressed natural gas (CNG) has a number of advantages over gasoline and diesel fuel (the most important of which are a lower price and lower emissions), which should make it possible for it to be used more, especially in public transport. In addition to the underdeveloped refueling infrastructure, the main obstacle to wider adoption of CNG as a fuel is the high cost of fuel gas vehicles and of the equipment that allows vehicles with gasoline or diesel engines to use CNG as fuel. To boost the development of the fuel gas industry, all interested parties must take an active part: oil and gas companies should be building CNG filling stations for motor vehicles, the state should subsidize the purchase of fuel-gas public transport vehicles through regional governments while automakers should expand the range of vehicles that run on CNG.

Currently, CNG filling stations are utilized at 20-30% of their maximum capacity; in other words, consumers are not switching to the more efficient fuel.

An important role in promoting gas fuel was played by a meeting chaired by Russian President Vladimir Putin in May 2013, after which a number of instructions and resolutions were issued. In June 2013, the 2020 targets were set for the partial replacement of public transport and utility equipment in major cities (with populations of 100 thousand of more) with vehicles and equipment running on fuel gas.

Oil and gas companies have become more active too. The Ministry of Energy of the Russian Federation was put in charge of hitting the targets. The funding in the sum of RUB 3.8 billion in 2014 and RUB 3.0 billion in 2015 that was provided by the Ministry of Trade and Industry was used to purchase almost 4,000 fuel gas vehicles.  The bulk of the money went to Volga and North Caucasus regions, and in 2015 subsidies were also given to the Crimean Federal District. In 2016, the Ministry of Trade and Industry plans to spend about RUB 3 billion on the promotion of fuel gas. It is now difficult to assess the effectiveness of these subsidies, which should be measured in the amount of money local treasuries and operators of motor vehicles save on fuel. The problem is lack of data at this point, including data on the increase in the consumption of fuel gas.

One of the main obstacles holding back the development of the refueling infrastructure is that currently CNG filling stations are classified as dangerous industrial installations. This means that special licenses need to be obtained to build them and very strict requirements have to be met when choosing locations and running them. In early 2015, a bill was drafted to end the classification of CNG filling stations as dangerous industrial installations (classification of gasoline and diesel fuel filling stations as dangerous industrial installations was ended in 2011) to avoid the extra costs and time needed to build them. 

For more, see the article.