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COURSE: PRINCIPLES OF MICRO ECONOMICS

TITLE: CNG INDUSTRY

DATE: 05-12-2009

MBA Section 3

Project Manager

JALAL UD DIN MB091027

ATIF TANVEER KHAN MB091003

AHMAD NAWAZ MB091010

M.HASEEB ABBASI MB091018

FAZEEL TAHIR MB091021

FAIZAN GUL ABBASI MB091051

SUBMITTED TO: MS. MARIA MASHKOOR

MOHAMMAD ALI JINNAH UNIVERSITY ISLAMABAD

FALL 2009

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DEDICATION

We would like to dedicate this project to our parents who has given us opportunity to

study here in MAJU, and to our respected teachers who give us a chance to work on this

project.

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TABLE OF CONTENTS

 Dedication ………………………………………………………………......…i

 Acknowledgement……………………………………………………….….…ii

 Executive Summary ………….………..…………………………….………...1

 Introduction ………….………..…………………………….………………....2

 History of Natural Gas………………………………………………………….3

 Introduction to CNG ……………………………………………………....…3-4

 Advantages of CNG………………………………………………………..…4-5

 Tax Rate …..…………………………………………….....…...…………….…5

 Consumption and Economic……………………………………………..…..…5

 CNG vs. LPG …………………………………………..……..........................5-6

 Gas Shortfall Forecast ……………………………………………………….....6

 Growth of CNG industry ………………………...………………………........6-7

 Pakistan Has More CNG vehicles……………………………………….…….…7

 NOCs……………………………………………………………………….…….8

 Equipments……………………………………………………………………….8

 How gas become CNG ……………………………………………………...........9

 Compressor ………….………..…………………………….…………………...10

 Measurement of CNG………………………………………………………...10-11

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 Equivalence Table………………………………………………………………..11

 Vehicles ………………………….…………………………………………..11-12

o Engine ………….………..…………………………….………………...12

 Manometer ………….………..…………………………….…....12

 Pressure Regulator…….….………...………………….………...12

 Filling Valve………….………..…………………………….…..12

 Mixer………….………..…………………………….…………..12

 Actuator...……….………..…………………………….………...13

 Electronic Unit………….………..……………………………....13

o Board………….………..…………………………….…………………..13

 Fuel Level Display …..…..…………………………….………...13

o Trunk………………….………..…………………………….…………..13

 Cylinder Valve………….………..………………………………13

 Ventilation System………….………..…………………………..14

 Pressure Regulator ………………………………………………………………14

 Display Level ……………………………………………………….…………...14

 Filling Valve…………………………………………………….……………….15

 Pressure Gauge …………………………………….……………….....................15

 Strike of CNG Stations………………………………………………...……..15-16

 Pakistan Energy Consumption…………………………………………………...16

 Conclusion ……………………………………………….……………………...17

 Referencing ……………………………………………………………...……..18

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ACKNOWLEDGEMENT

First of all we are thankful to Almighty ALLAH for giving us much cooperation and

supporting parents who has given us this opportunity to study here. I would like to thank

Ms. Maria Mashkoor for giving us the confidence and opportunity to prove ourselves.

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INTRODUCTION

We write this report as per requirement of our Subject Microeconomics as final

project report which contains marks in the final grading of us.

This report is written to increase the knowledge of people about the current situation of

CNG industry and the gas problem in Pakistan and also discuss about the CNG stations

strike in Pakistan.

In this report we discuss the CNG kit working and the difference between the LPG

and CNG and we also discuss the Growth of the CNG industry.

When we made these report we have no information about CNG. Then we search this

on the internet and newspaper for combing the data. We have faced some problem about

the identification of the equipment which is used in the CNG stations.

This report is made for those business students who have no idea about the CNG

industry.

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Executive Summary

The Basic purpose of this report is to carry out the growth of the

CNG industries in Pakistan.

In this Report we learn that how natural Gas is compressed to

CNG. What tools and Equipment are needed to convert natural gas to

CNG, and also learnt the Difference between LPG and CNG. CNG is

cheaper than Petrol. In this report we also discuss the shortfall forecast

of Gas in Pakistan. We write the growth of CNG Industry in Pakistan

and Pakistan is the third largest CNG consumption all over the world

and which NOC’s is require for the Commencement of Business. We

compared CNG measurement with Petrol.

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History of Natural Gas

Natural gas is nothing new. In fact, most of the natural gas that is brought out from

under the ground is millions and millions of years old. However, it was not until recently

that methods for obtaining this gas, bringing it to the surface, and putting it to use were

developed.

During most of the 19th century, natural gas was used almost exclusively as a source

of light. Without a pipeline infrastructure, it was difficult to transport the gas very far, or

into homes to be used for heating or cooking. Most of the natural gas produced in this era

was manufactured from coal, as opposed to transport from a well. Near the end of the

19th century, with the rise of electricity, natural gas lights were converted to electric

lights. This led producers of natural gas to look for new uses for their product.

Introduction of CNG

CNG is abbreviation of Compressed Natural Gas. It is considered to be

Environment Clean. Natural Gas is widely used as a fuel in homes, industries and

factories in Pakistan. When we compress or pressurize the Natural Gas to 250 bar

pressure then its called CNG. CNG is made of methane CH4. Natural Gas or CNG

consists of at least 85% methane and 10% of nitrogen and carbon dioxide.

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At the end of 2007 the CNG Industries of Pakistan has invested over Rs 70 billion

during the last few years as a result of encouraging policies of the government.

Nowadays 2,700 CNG stations are operating in the country in 85 cities and towns,

and 1000 more would be setup in the next three years. It has provided employment to

above 30,000 people across the country.

According to the International Association for Natural Gas Vehicles, Pakistan has

the third-largest number of natural gas vehicles. Argentina and Brazil are the two

countries with the largest Consumption of CNG vehicles. As of 2005, Pakistan is the

largest user of CNG in Asia, and third largest in the world.

In March 2009 over 2 million vehicles converted to CNG, and the Ratio of 35%

annually. 291678 Moter vehicles converted to CNG per Month. All Pakistan CNG

Association (APA) Sana-ur-Rehman confirms that CNG stakeholders have invested

Rs.90 billion in this sector and another Rs 20 billion investment is in pipeline. The

CNG consumers had invested around Rs 60 billion in converting their vehicles to

CNG. CNG replace 6.12 billion liters of petrol every year and saved the foreign

exchange by turning the of billion of dollars.

Advantages of Compressed Natural Gas

Following are some Merits of the CNG

 CNG produces significantly less pollutants than gasoline

 CNG is to Considered an Environmentally Clean

 CNG engines are superior in performance to gasoline engines

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 Natural gas is cheaper per equivalent gallon than gasoline.

 CNG is safe or safer than other fuels.

TAX RATE

The CNG Industries pays 24 percent sales tax and 4 percent withholding tax to the

government. It pays not direct to Federal Board of Revenue (FBR). The Sui Northern

Gas pay Tax on the behalf of CNG station and Sui Northern Gas recover it on Gas

Bill.

CONSUMPTION AND ECONOMIC

CNG consumption depends on the size of the engine. However, since 1 KG CNG has

more energy than 1 Liter Petrol, the consumption of CNG is lower than that of Petrol

under equal conditions. Here is 30 to 40% saving to the pocket, by running car on

CNG instead of Petrol, considering the prices of CNG and Petrol in year 2008-09.

Difference between CNG and LPG

In Pakistan, some cars used to run on LPG (Fongas, Eirad, Indus gas, Pak gas) but

now CNG has dominantly taken place of LPG. LPG is abbreviation of “Liquefied

Petroleum Gas” and it has different nature than CNG.

1. CNG is natural gas (methane) while LPG is mixture of propane, butane and

others.

2. CNG comes from gas field but LPG is a by-product (waste) of petroleum

3. LPG becomes liquid after being compressed, but CNG does not.

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4. Natural gas is significantly less expensive than LPG.

5. CNG and LPG have different properties. LPG is stored at pressure of 5 - 15 Bar

while CNG at 250 bar, therefore LPG cylinder cannot contain CNG.

CNG is lighter than air so in case of leakage CNG will dissolve in atmosphere, but

LPG is twice heavier than air so it will drop down and form a pool

CNG in its pure form has no smell. But for safety reasons, scents are mixed with CNG

so that any leakage can be smelled (the scent is same as household gas). These strong

smelling scents are not dangerous. In case this smell is felt in car, a certified workshop

should be contacted

Gas Shortfall forecast

Pakistan is likely to face major gas shortfall, starting with 778 MCFD (million cubic

feet per day) by 2009 and rising to more than 11,000 MCFD by 2025, with

continuously declining domestic supplies and growing economic needs.

The country's gas demand this year stands at about 4,000 MCFD and will increase to

4,492 MCFD in 2008 and further to 5,086 MCFD in 2010. This means that the

shortfall would range between 300 and 350 MCFD in the next two years and increase

to 778 MCFD in 2010.

Growth of CNG Industry

There are about six million vehicles running on CNG all over the world. Pakistan

alone has over one million natural gas vehicles (NGVs). Asian countries like China,

Iran, India and Bangladesh are developing their CNG industry by creating

infrastructure for new gas pipelines and CNG Stations. Pak-Shell is participating in the

growth of CNG industry in Pakistan. Shell has opened a good number of ‘Shell CNG

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gas stations’ in Karachi and Islamabad, and there are plans for many more stations to

be made operative soon. This will include CNG stations in nearly all the provinces in

Pakistan.

Pakistan Has More CNG Vehicles and Stations than Any Other Country

Pakistan has been reported to have the largest number of CNG-powered vehicles in the

world - leaving behind Brazil and Argentina for the first time, according to

International Association of Natural Gas Vehicles. Pakistan also boasts the largest

number of CNG filling stations in the world. The number of operational CNG pumps

has increased to 2,700, while around 1000 CNG pumps are being established in next

three years. The number of CNG-run cars have exceeded to 1.6 million throughout the

country. The number of CNG filling stations has also grown largely in the country.

"The country has shown an extra-ordinary growth of 5.5 million vehicles in the last

seven months of the current year as the number of CNG-run vehicles stood at 10.5

million at the beginning of the year." Brazil, the second largest user of natural gas, has

1.42 million CNG-run vehicles. The third largest user, Argentine, has 1.35 million

consumers. Private owners run around 70 percent of CNG filling stations while 30

percent are run by Oil Marketing Companies. www.dailytimes.com.pk

NOCs

No Objection Certificate will be required from the following departments prior to the

commencement of the business:

• Traffic Engineering and Planning Authority (TEPA)

• Traffic Police (SSP)

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• Department of Civil Defense

• National Highway Authority (NHA)

• Federal Board of Revenue (FBR)

• Civil Administration-Tehsil Municipal Administration (TMA)

• Irrigation Department

• Forest Department

The cost associated for obtaining the above NOCs is estimated at Rs.100,000.

Equipments

Once connected to the gas network the refueling station is supplied gas that after being

compressed will become CNG.

The compression system is made up of:

 Compressor

 Storage Cylinders

 Dispensers

 Control Pannel

How Natural Gas become CNG

The natural gas inside the gas pipeline is between 2 and 60 bar. The compressor

increase this pressure up to 200/250 bar, according to the standards in each country.

Once compressed, CNG is stored in cylinders to guarantee refueling stations have

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permanent pressure of gas ready to be sold. Dispensers are the devices that supply

vehicles with CNG fast and safely. Each dispenser has a pair of highly resistant

flexible hosepipes to fill two vehicles simultaneously.

The whole process is monitored by a control panel. This panel monitors alarms,

control s pressure, gas discharge from the compressor to the storage cylinders and the

use of dispensers. In addition, the panel can register all filling data for better sales

control.

Compressors

A gas compressor is a mechanical device that increases the pressure of a gas by

reducing its volume. Compressors are similar to pumps: both increase the pressure on

a liquid and both can transport the liquid through a pipe. As gases are compressible,

the compressor also reduces the volume of a gas. Liquids are relatively

incompressible, so the main action of a pump is to pressurize and transport liquids.

CNG is Compressed Natural Gas stored at high pressure of 250 bar. Natural gas is a

gas that comes from within the earth and consists of 85% methane, 10% nitrogen and

carbon dioxide, and the balance is ethane, propane, and butane. The octane rating of

natural gas is 130. One GGE of CNG has more energy than 1 gallon of gasoline so the

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amount of CNG used is a little lower than that of gasoline. The octane rating of

natural gas is 120.

CNG measured in Kg

CNG is measured in the mass unit kg and not in liters or m³, both measures for

volume. One cubic meter of CNG under 10 bar pressure has just a fraction of the

energy value than one cubic meter of CNG under 200 bar pressure. However, one

kilogram of CNG has always the same calorific value, no matter whether it has a

volume of 500 liters, or just a volume of 60 liters - under 200 bar pressure.

1 kg CNG = 1.51 liters of Petrol

Equivalence table

This table shows CNG Vs other fuels.

CONSUMPTION 100 KM IN VEHICLES

CNG
TYPE OF VEHICLE PREMIUM

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GASOLINE (LTS.)

AUTOMOBILE
10.70 9.47

PICK- UP 14.30 12.65

Source: NGV Group

Vehicle

To convert a vehicle to CNG and guarantee up to a 60% reduction in relation to other

fuels like gasoline or diesel, it is necessary to get familiar with the equipment that will

be installed in your vehicle by authorized shops.

 Engine

 Board

 Trunk

Engine

MANOMETER

Pressure indicator installed between the supply valve and pressure regulator to

permanently measure and show cylinder CNG pressure. The amount of gas in the

cylinder is in close relation to pressure, therefore the pressure gauge sends a signal and

indicates on the panel the amount of CNG available.

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PRESSURE REGULATOR

Regulates pressure of CNG to the engine and has different regulating stages. Through

these stages the cylinder pressure, varying according to consumption, is regulated to a

steady and unique pressure for the operation of the engine.

FILLING VALVE

Multi-valve with quick closing supply device, that keeps CNG stored in the cylinder.

Through this valve the vehicle is refueled with CNG.

MIXER

Controls the amount of CNG inside the engine, setting the ideal air/gas relation for

good operation.

ACTUATOR

It is an essential part to improve the engine performance and reduce excessive

environmental consumption

ELECTRONIC UNIT

It enables the automatic correction of the air/gas relation. It controls actuators and

sensors to improve the mixture.

Board

FUEL LEVEL DISPLAY FUEL SELECTOR SWITCH

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Electronically controls fuel shift from inside the vehicle. Indicates CNG availability

level in the storage cylinder of the vehicle.

Trunk

CNG CYLINER

Stores CNG, Faultless steel manufactured and prepared to operate with pressure levels

ranging from 200 kg/cm² to 250 kg/cm².

CYLINDER VALVE

Installed at the cylinder gas outlet with safety devices for over pressure and for a quick

closing.

VENTILATION SYSTEM

Made up of safety equipment that allows the system to ventilate

See how a vehicle converted to CNG works.

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CONNECTION TUBES

Hard high pressure tubes connect the CNG cylinder to the engine.

PRESSURE REGULATOR

It regulates pressure of CNG to the engine and has different regulating stages.

Through these stages the cylinder pressure, varying according to consumption, is

regulated to a steady and unique pressure for the operation of the engine

DISPLAY LEVEL OF COMBUSTIBLE SELECTION INDICATOR

Operates combustible changes electrically from the interior of the vehicle. Indicates

CNG level available in the storage cylinder of the vehicle.

FILLING VALVE

Multi-valve with quick closing supply device, that keeps CNG stored in the cylinder.

Through this valve the vehicle is refueled with CNG.

PRESSURE GAUGE

It is a pressure indicator installed between the supply valve and pressure regulator to

permanently measure and show cylinder CNG pressure. The amount of gas in the

cylinder is in close relation to pressure, therefore the pressure gauge sends a signal and

indicates on the panel the amount of CNG available.

Strike of CNG Stations

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All Pakistan CNG Station Owners Association observed strike on Tuesday (November

12), in Rawalpindi, Islamabad, and from Attock to Jehlum, which created numerous

problems for the CNG users.

The CNG association is protesting against the government’s decision to close gas

refilling stations for two days a week under its “Gas Load Management Program

2009-10”. The association has turned down the government’s plan and announced to

observe systematic strike in various cities of Punjab including the Federal Capital.

All CNG refilling stations in Rawalpindi, Islamabad and from Attock to Jehlum

remained closed till mid-night on Tuesday (November 12). In Lahore and Sargodha,

CNG stations were remained closed on November 12, whereas in Multan and

Bahawalpur strike was observed on November 13.

“We apologize to the people as they suffered due to the closure of CNG stations but

we have no other option than to observe strike,”

Pakistan Energy Consumption

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Conclusion
We write in this report the history of natural gas. Natural gas is nothing new. In fact,

most of the natural gas that is brought out from under the ground is millions and millions

of years old. Then we write the introduction of CNG. CNG is abbreviation of

Compressed Natural Gas. It is considered to be Environment Clean. Natural Gas is

widely used as a fuel in homes, industries and factories in Pakistan.

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