The ninth and tenth CGD (city gas distribution) bidding rounds concluded recently are expected to accelerate CGD infrastructure expansion in the country. However, this expansion comes with its own set of challenges. Of the 91 geographical areas (GAs) awarded under Rounds I to VIII, only four receive gas supply from a planned pipeline passing through the GA, 10 through existing pipelines passing at a distance from the GA and four through a planned pipeline passing at a distance from the GA. The remaining GAs import regasified liquefied natural gas (RLNG) and source domestic gas. Further, only 50 per cent of the GAs awarded under Rounds IX and X are connected by pipelines. Thus, there is a need to look at alternatives for ensuring gas availability in the unconnected GAs. A potential solution is to service the network using small-scale LNG (ssLNG). Currently at a nascent stage in India, the ssLNG industry offers immense potential. It can help meet the growing demand for environment-friendly fuels in the trucking and shipping industries.
The government’s increased focus on setting up large-scale CGD networks and its commitments under the Paris Accord to mitigate carbon dioxide emissions have paved the way for the growth of the natural gas vehicle (NGV) segment in the country. The emerging segments such as NGV and ssLNG will unlock the demand for gas in a number of new GAs. Going forward, greater participation from private players is expected in the expansion of CGD networks. They will also explore new options for meeting the gas demand.
ssLNG – A potential solution
The term ssLNG refers to the direct use of LNG in its liquid form, rather than the traditional model of regasification and its subsequent introduction into the gas transmission grid. Under the ssLNG network, LNG is ferried on smaller trucks from RLNG terminals to the liquefied compressed natural gas (CNG) station, from where it is distributed to end- consumers. In addition to traditional CNG and commercial and industrial piped natural gas (PNG) consumers, these liquefied CNG stations will serve a fourth segment of consumers – transport.
Current infrastructure
Petronet LNG Limited’s terminals at Dahej and Kochi have six truck loading bays capable of handling 60 LNG tankers. Similar truck loading bays are being developed at other LNG terminals in the country. It takes about two hours to fill one LNG tanker of 17 tonne capacity. LNG is then transported using trucks as ISO containers, manufactured as per specifications from the International Standards Organization (ISO), are not yet permitted to be used in India.
Cost-benefit analysis
As ssLNG eliminates the need for laying pipelines, the associated right-of-way issues related to laying of pipelines and developing support infrastructure are eliminated, thereby accelerating project implementation. This also results in huge cost savings as compared to conventional CGD networks. It also enables faster access to markets, resulting in faster realisation of the existing demand, thereby making the project more profitable. However, the transport of ssLNG through trucks, operation of LCNG stations and other associated infrastructure results in higher operational expenditure and also increases the dependence on human resources. Further, the availability of gas to end-consumers depends on other stakeholders in the ecosystem such as logistics and infrastructure providers, thereby increasing the volatility of network operations.
NGVs – An emerging segment
The penetration of natural gas vehicles (NGVs) in India has been increasing steadily. CNG vehicles have grown from 2.55 million in March 2015 to 3.18 million in September 2018, at a rate of 7 per cent. Geographically, Delhi, Maharashtra and Gujarat make up around 87 per cent of the total CNG vehicle population, with Delhi alone accounting for about 33 per cent. Further, the share of transport in natural gas consumption has grown steadily and India ranks second in the world in terms of percentage consumption of natural gas by the transport sector.
Growth drivers
Expansion of the CGD network and an increase in the number of CNG stations will provide an impetus to the NGV segment in the country. Notably, seven states, accounting for 51 per cent of the total vehicle sales in the country, will benefit from the CNG infrastructure to be developed under Round X of CGD bidding. The Ministry of Petroleum and Natural Gas is planning to set up another 10,000 CNG stations across 300 districts over the next decade. This is expected to provide a major boost to the NGV segment.
Further, bio-CNG is being explored as an economically viable fuel. Notably, 40-45 tonnes of agro residue with less than 10 per cent moisture content can produce 5 tonnes of bio-CNG. The average cost of setting up a 5 tonne bio-CNG plant is Rs 150 million and the cost of producing 1 kg of bio-CNG could be Rs 15-Rs 20 less than that of CNG. However, the production cost of bio-CNG is dependent on the price of raw materials delivered to the site, the cost of electricity, and the prevailing cost of labour in the region where the production plant is located. Currently, one such plant is being set up in Pune on a pilot basis. If the plant is successful, bio-CNG will create a unique sustainable model of local waste being converted to local fuel while also generating local employment and income.
Of late, original equipment manufacturers have been focusing on NGVs. While CNG alternatives are already available in a wide range of vehicles, many automotive companies are now launching new models powered by CNG. Also, LNG has turned out to be an economically viable fuel for long-haul trucks worldwide, driving LNG vehicle development in India. While LNG-powered trucks are currently more expensive, primarily due to import costs of the cryogenic cylinders used in them, these turn out to be 25-30 per cent cheaper than diesel on a running cost basis. In India, Tata Motors has been at the forefront of developing LNG commercial vehicles. It has showcased the first LNG-run bus in the country.
Further, government initiatives such as exemption from permit requirements and road tax rebate will help in driving the segment growth.
Challenges and proposed solutions
Several challenges across the value chain need to be tackled in order to facilitate the growth of NGVs in India. High vehicle costs, vehicle weight and limited boot space are some of the issues facing the segment. The additional weight of the CNG kit/ cylinder reduces the carrying capacity of the vehicle. This can be overcome with the use of composite lightweight materials in CNG components and Type IV tanks. The installation of a CNG cylinder in the boot results in space constraints. Therefore, alternatives for packaging the cylinder need to be explored. There is a need to promote NGV adoption through incentives. Increased uptake will help create economies of scale in manufacturing, thus reducing costs.
Conclusion
While India has vast natural gas reserves, only about 7 per cent of its primary energy needs are met by natural gas. There is an urgent need to shift the energy mix from imported oil towards domestic gas. This is in line with the government’s target of adding 15 per cent gas in the energy mix by 2030. The high volumes in the Indian automotive market present an opportunity to promote the widespread adoption of NGVs in the country.
Given the challenges that India continues to face with regard to enhancing its natural gas grid, it is important to develop diversified ways of transporting and distributing natural gas. An ssLNG supply chain supported by cryogenic containers over roads, railways and inland waterways will ensure gas supply to the remotest parts of the country.
Based on presentations by Pankaj Wadhwa, Senior Vice-President, Petronet LNG, and Ashim Sharma, Partner and Group Head, Business Performance Improvement (Auto, Engineering & Logistics), Nomura Research Institute, at a recent India Infrastructure conference
Expansion of the CGD network and an increase in the number of CNG stations will provide an impetus to the NGV segment in the country.