August 17, 2006

The world leader in natural gas vehicles: tiny Armenia

By Hasmik Mkrtchian

YEREVAN -- Ex-Soviet state Armenia is blazing a trail in the global quest to move to cleaner fuels -- not by choice but out of necessity.

The tiny country of 3 million people in the Caucasus mountains has a strong claim to be a world leader in running vehicles on natural gas: a fuel that produces fewer harmful greenhouse gases than gasoline or diesel.

The transport ministry estimates that between 20 and 30 percent of vehicles in Armenia run on gas. That compares to just over 3 percent in the Netherlands, a front-runner in natural gas-powered transport, according to the World LP Gas Association.

Stop one of the creaking, Russian-made taxis plying their trade in Armenia's capital, Yerevan, and odds are it will have a gas canister strapped into the boot. Battered buses have rows of red canisters fastened onto their roof-racks.

In countries like the Netherlands, switching from gasoline to gas is seen as a green option.

In landlocked Armenia, it is not concerns over climate change or global warming that are driving growth in natural gas-powered vehicles. Instead, it is harsh necessity -- and an unresolved war with Azerbaijan, its neighbor to the east.

"In our taxi firm, we have 30 cars and all of them run on (natural) gas," said 45-year-old Seryozha Harutunian, driver of a natural gas-powered Volga sedan. "And there are (natural) gas refueling stations on every corner in Yerevan," he said.

Richer countries offer tax incentives to make natural gas for use in vehicles -- known as autogas -- more attractive to motorists than traditional fuels. But they have had only limited success.

"They are niche markets," said Yvon Sellier, director of business practices with the World LP Gas Association, a Geneva-based lobby group. "(Natural gas is a) small proportion of the fuel consumed by vehicles."


Crude oil and oil products used to be brought into Armenia by rail direct from Azerbaijan's oil fields and refineries. Since a territorial conflict between the two neighbors in the early 1990s, the border has been closed.

Now, oil and oil products -- Armenian officials do not say where they come from -- have to be shipped in through Armenia's other neighbor Georgia, a long and tortuous journey through the Caucasus mountains.

That creates an extra cost on top of the already high price for fuel on world markets.

In Georgia, a liter of the cheapest grade gasoline costs consumers 82 U.S. cents. In Armenia, the same fuel costs 91 cents -- a significant difference in a country where the average monthly wage is about $140.

Natural gas, meanwhile, is pumped to Armenia by pipeline from Russia.

Russian natural gas monopoly Gazprom supplies the fuel at $110 per thousand cubic meters, a hefty discount on the price Gazprom customers in Europe pay. Armenia is one of several ex-Soviet states that enjoy favorable rates for Russian natural gas.

"Petrol is getting more expensive," said Transport and Communications Minister Andranik Manukian. "(Natural) gas ... has not gone up by that much so it is preferable to use it."


Armenia has a tradition of resourcefulness in the face of adversity.

In the 1990s, its Metzamor nuclear power station was shut down, leaving large parts of the country with no electricity. To keep warm, people welded together wood-burning stoves and rigged up flues in their high-rise apartments.

Armenia's remoteness and the border closure with Azerbaijan make it expensive to export many of its goods. So its growth industries are electronics and diamond-cutting, which produce small, high-value items that can be profitably exported by air.

Most of the world's natural gas-powered vehicles run on Liquefied Petroleum Gas (LPG), a by-product of crude oil and natural gas refining. Armenia uses the natural gas it has readily available.

The state natural gas importer sells the fuel to wholesalers, who pressurize it and distribute it to the natural gas filling stations that have sprung up across the country.

"A lot of vehicles are switching to (natural) gas," said Grisha Davtian, manager of a Yerevan natural gas station. "The number of our clients is up 30 percent compared to last year."

Taxi driver Harutunian said it cost between $800 and $1,000 to convert a vehicle from gasoline to natural gas. After that outlay, running the car is three times cheaper.

"I don't know who introduced this idea into Armenia, but it has really helped us escape the high petrol prices," he said.