Big Potential: Small-scale LNG technology emerges as a commercially viable fuel option

Small-scale LNG technology emerges as a commercially viable fuel option

India is the fourteenth largest gas consumer with a consumption of 58 billion cubic metres (bcm). It also imports 31 bcm, becoming the fourth largest LNG importer. The economy is growing at a CAGR of 6-7 per cent with similar growth in energy consumption. The government aims to significantly increase the share of natural gas in the energy basket in the coming years. Despite an increase in domestic gas production, the dependence on imported gas is expected to increase substantially. The pipeline network is not able to meet the country’s demand at present and needs to be expanded further, connecting new markets.

To this end, a total of 136 geographical areas (GAs) have been awarded in the ninth and tenth rounds, covering 298 districts across 23 states and union territories. However, meeting the minimum works programme requirement is a challenge in several GAs due to poor connectivity and economics. In this scenario, small-scale liquefied natural gas (SSLNG) has emerged as a viable option.

SSLNG and its advantages

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 produces less than 1 million tonnes of LNG per annum. There are three major end uses of SSLNG – marine fuel (bunkering), fuel for heavy road transport, and power generation in off-grid locations. The SSLNG market is developing rapidly, serving end users in remote areas and areas that are not connected to the main pipeline infrastructure globally. SSLNG stations cater to residential, commercial, transport and industrial consumers.

Since LNG vehicles use a dedicated heat-insulating tank at low temperatures, their initial capital outlay is higher than that of conventional petroleum-fuelled vehicles. As such, LNG-fuelled vehicles are better for long-haul operation of more than 100,000 km per year. In China and the US, LNG vehicles are often used as long-haul freight trucks.

SSLNG offers various advantages. First, SSLNG initiatives, in contrast to large-scale LNG projects, offer investors immediate and potentially attractive returns in the medium term. Further, SSLNG projects offer a “plug-and-play” service with lower investment requirements and shorter commissioning schedules. This reduces uncertainty on the project execution timeline. Second, SSLNG is scalable, and operators can easily add capacity to meet the growing demand. This makes SSLNG an ideal solution for addressing the short-term fluctuations in demand. Third, owing to flexibility, SSLNG can stimulate demand in areas that were previously unsuited to LNG as a fuel source, such as off-grid power generation on islands and in remote areas.

Key initiatives

Petronet LNG is developing a pilot route with 20 LNG fuelling stations, the average distance between two stations being about 250 km. The proposed route is as follows:

  • Delhi to Mumbai Highway
  • Ahmedabad to Mundra Highway
  • Mumbai to Chennai
  • Mangaluru to Bengaluru
  • Mangaluru to Thiruvananthapuram

The company is finalising a business plan with various oil and natural gas marketing companies for setting up LNG fuelling stations. In addition, H-Energy plans to invest Rs 10 billion to create LNG refuelling infrastructure.

Sahaj Ganga, a flagship project of Venerable LNG Private Limited (VLNG), is an initiative to create an SSLNG supply chain network across the Ganga river to offer a customised, flexible supply and multimodal distribution system. Further, the Hazira LNG terminal in Gujarat is deploying an LNG truck loading unit for the distribution of fuel in off-grid areas where there are no gas pipelines.

In India, 4-5 mmt of diesel is used by generators. Although small, generators can also emerge as a possible area of LNG use. In addition, as large parts of the country do not have access to gas, the need for green fuel may result in a significant amount of off-grid industrial demand.

Technologies on offer

The transportation segment is still largely dependent on oil. However, this is likely to change with the advent of SSLNG technologies. With the ability to produce LNG in remote locations and transport the product to areas of demand, SSLNG has emerged as an attractive source of natural gas. Some of the most commercially viable SSLNG technologies are small-scale LNG tankers, containerised LNG tankers, small-scale liquefaction plants and LNG-fuelled heavy vehicles.

The capacity of SSLNG tankers is typically in the range of 10,000-15,000 cubic metres. These tankers are ideal for use in rivers, ports, inter-islands, 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 5,000-7,000 cubic metres, these tankers are highly flexible and, therefore, well suited for small distributed applications. containerised LNG tankers are easy to move with the help of a rail or road network.

Small-scale liquefaction plants are developed to cater to specific markets and supply LNG to end users in areas where traditional infrastructure is not available, or to consumers that require 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 and trucks to use diesel if natural gas is not available.

Issues and challenges

The price of SSLNG depends on the international prices of LNG. Thus, a sharp rise in international LNG prices will make it difficult to encourage SSLNG adoption as it will become more expensive.

The price of SSLNG as compared with other fuels is a key factor in determining its demand in the future. As a fuel for remote power generation, it has to compete with coal and petroleum products such as fuel oil and diesel, which are the main fuels used in the industrial, transportation and buildings sectors. Renewable energy sources, such as solar and wind power, are also expected to play an increasing role in meeting fuel, electricity and heating demands going forward, posing a challenge for the SSLNG segment.

An optimal supply route must also be established to distribute LNG to end users. The high cost per unit of supply is a major drawback of the SSLNG supply chain. In order to overcome this challenge, it is necessary to optimise the logistics. There are other associated difficulties such as supply chain optimisation, training of large numbers of people skilled in handling LNG, and accurate prediction of future demand in remote areas.


SSLNG is currently a niche and nascent market. However, it is projected to grow rapidly. The demand for SSLNG is projected to reach 75-95 mtpa by 2030 globally. Most of the demand will come from China where efforts are being made to adopt clean fuels in order to fight air pollution.  significant capacity SSLNG is already present in China, Japan, Spain, Portugal, Turkey and Norway. The SSLNG industry has immense potential in India as well. It can help meet the growing demand for environment-friendly fuels in the trucking and shipping industries.