The small-scale liquefied natural gas (ssLNG) industry is at a nascent stage in India but it offers immense potential to meet the growing demand for environment-friendly fuels from the trucking and shipping industries. Given its commitments in the Paris Accord (2015) and subsequently, its intended nationally determined contributions to mitigate the emission of carbon, usage of ssLNG is likely to gain traction.
The term ssLNG refers to the direct use of LNG in its liquid form, rather than the traditional model of regasification and subsequent introduction into the gas transmission grid. As per the International Gas Union, a small-scale LNG facility is one which produces less than 1 million tonnes of LNG per annum. ssLNG can be put to various uses such as marine fuel, fuel for heavy road transport, and power generation at off-grid locations.
The International Maritime Organization has imposed new regulations to limit sulphur emissions in emission control areas (ECAs) to 0.1 per cent from the previous limit of 1 per cent, and to 0.5 per cent from 3.5 per cent in non-ECAs. These stringent emission regulations, which will come into effect from 2020, are likely to push the marine industry towards the use of LNG as bunker fuel. Storage tanks, jetties, marine facilities, boil-off gas handling units, LNG vaporisation units, etc. from the largest component of LNG facility setting-up cost. These costs can be brought down through ssLNG facilities, which can be set up using pre-fabricated, modular units. ssLNG facilities also offer shorter construction timelines and payoff periods in comparison with large-scale LNG facilities.
Technologies on offer
The transportation segment is still largely dependent on oil. However, this scenario is likely to witness a gradual change with the advent of small-scale LNG technologies. The ability to produce LNG at remote locations, and the availability of technologies to conveniently transport the product, has made ssLNG an attractive way of delivering natural gas to areas of demand. Some of the most commercially viable ssLNG technologies include small-scale LNG tankers, containerised LNG tankers, small-scale liquefaction plants and LNG-fuelled heavy vehicles.
The small-scale LNG tankers generally have a capacity in the range of 10,000-15,000 cubic metres. These are ideal to use for rivers, ports, and inter-island, loading and receiving terminals. With regard to unloading, specialised facilities are needed for these LNG tankers. Containerised LNG tankers, which consist of interconnected ISO tankers, have also proven to be commercially viable for the transportation of LNG. Although their capacity is in the range of 5,000 cubic metres to 7,000 cubic metres, these are highly flexible and, therefore, well suited for small distributed applications. The containerised LNG tankers are easy to move further with the help of the rail or road network.
Small-scale liquefaction plants are generally developed to cater to specific markets and supply LNG to end users in areas where traditional infrastructure is not available, or to consumers requiring liquid fuel. The capacity of small-scale liquefaction plants is typically less than 0.5 million metric tonnes per annum.
Dual-fuel engine technologies have also proven to be quite beneficial. These allow medium-heavy duty vehicles such as buses, trucks, etc. to use diesel, in case natural gas is not available.
The global experience
The usage of LNG as an automotive fuel has been gaining traction across the globe. In Europe, the LNG Blue Corridors project was started in 2013, with the objective of setting up around 14 LNG or liquefied-to-compressed natural gas (L-CNG) stations along identified corridors and introducing around 100 LNG heavy duty vehicles. As per estimates, LNG consumption on the Blue Corridors is expected to reach around 20 mmtpa by 2030.
China, which lacks in terms of gas infrastructure, has seen large application of ssLNG. Small-scale liquefaction plants have been used to evacuate gas from domestic fields, that are not connected by gas pipelines. Further, it has around 0.3 million LNG trucks in use, which are supported by around 3,000 LNG filling stations.
Several ports across the globe such as Antwerp, Amsterdam, Rotterdam, Zeebrudge and Stockholm have developed LNG bunkering facilities. China has around 275 LNG-powered vessels while Singapore, which is the world’s largest bunkering hub, is also investing heavily in the development of LNG bunkering capabilities. ssLNG has also played a crucial role in the electrification of Indonesia.
The Indian scenario
Following the approval of LNG as an automotive fuel, in August 2017, the Ministry of Commerce and Industry notified amendments to the rules governing the use of cylinders carrying gas under pressure, thereby paving the way for LNG refuelling stations and commercial service of LNG vehicles. This will help in establishing a storage and supply chain for LNG stations through daughter trucks, as is the case of CNG stations.
Given the regulatory and policy push, adoption of ssLNG technologies is also picking up pace in India. In November 2016, the first LNG-fuelled bus in India was launched in Kerala on a pilot basis. Further, Petronet LNG Limited (PLNG) has already identified around 4,000 km of highways on the west coast to set up 20 LNG refuelling stations. In addition, H-Energy plans to invest Rs 10 billion to create LNG refuelling infrastructure.
Petronet LNG is also in the process of finalising its plan to come out with LNG-fuelled trucks and buses, in collaboration with Tata Motors and Ashok Leyland. Under Phase I, it plans to develop LNG trucking on the Delhi-Mumbai and Mangaluru corridors. Further, under Phase II, it aims to cover five corridors, namely, Jammu-Delhi-Mumbai, Delhi-Chennai, Mumbai-Chennai, Delhi-Bengaluru and Kandla-Mumbai-Kochi. Under Phase III, it plans to launch pan-Indian LNG trucking services.
Sahaj Ganga, a flagship project of Venerable LNG Private Limited (VLNG), is another initiative under which a ssLNG supply chain network would be created across the Ganga river to offer a customised, flexible supply and multimodal distribution system. Further, the Hazira LNG terminal in Gujarat is also proposed to have an LNG truck loading unit by 2019 for the distribution of fuel in off-grid areas where there are no gas pipelines.
In India, around four to 5 mmt of diesel is used by diesel generators. Although small, generators can also emerge as a possible area for LNG consumption. In addition, as large parts of the country do not have access to gas, the need for the usage of greener fuel may result in a significant amount of off-grid industrial demand.
The way forward
As per estimates by Motilal Oswal Financial Services Limited, LNG trucking in India could create demand of 4.5 mmtpa within five years of its implementation. Further, buses could add another 2 mmtpa, while off-grid power and industrial applications could require an additional 1.8 mmtpa. However, coastal as well as inland bunkering are likely to be small players, with a cumulative demand of 0.3 mmtpa.
Given the challenges that India continues to face with regard to enhancing its natural gas grid, developing more diversified ways of transporting and distributing natural gas assumes utmost importance. In order to ensure gas supply to the remotest parts of the country, in addition to the laying of natural gas pipelines, development of anssLNG supply chain supported by cryogenic containers over roads, railways and inland waterway, is the need of the hour.