The vast potential that gas offers in India has prompted energy companies to push plans to supply LNG by trucks into top gear, a move that will expand the clean fuel's reach to relatively smaller pockets of demand where there are limited pipeline access.
Not just state-run companies, but even global energy multi-nationals are seeing a window of opportunity to capture a piece of the market.
"The segment of LNG by trucks is making good progress in India. It's a great option to expedite the push towards a gas-based economy. There are places where laying a pipeline is not feasible or economical, such as some hilly areas," Dinesh Sarraf, former chairperson of the Petroleum and Natural Gas Regulatory Board, told S&P Global Platts.
"The only issue is that it loses its cost advantage if the consumption point is very far away from the terminal," he added.
Analysts said the recent unveiling of Shell Energy India's first small-scale LNG supply infrastructure, a truck loading unit at its LNG terminal in Hazira, is an effort by private companies to tap into a segment that has the potential to grow exponentially.
"This will now augment Shell's natural gas supply offerings in India to include supply of LNG via trucks," Shell said in a recent statement.
Shell Energy India owns and operates a 5 million mt/year LNG import terminal at Hazira in Gujarat. The terminal has been in operation since 2005 and has received more than 600 LNG cargoes to-date.
India is promoting natural gas through various policy and regulatory reforms to raise the share of gas in the primary energy mix to 15%, from the current 6%.
Small-scale LNG is expected to play a key role in moving towards this target. While gas customers in industrial clusters are expected to be primary beneficiaries, small-scale LNG can also support the development of the recently licensed city gas distribution networks, which are not yet connected by pipelines.
TRANSPORT, CITY GAS NETWORK
Shell said small-scale LNG supply infrastructure would also contribute to faster adoption of LNG as the preferred transportation fuel for medium and heavy commercial vehicles, mainly for long-haul transport.
"This development extends our downstream customer offering and now, in addition to supply of R-LNG via pipeline, we can also supply LNG by trucks to customers across India," Nakul Raheja, country head for Shell Energy India, said.
In early 2019, Shell acquired an additional 26% equity in the Hazira Terminal and created a fully-owned and integrated Shell value chain -- getting supply from their global LNG portfolio, regasification at the Hazira facility, as well as downstream customer sales.
Sumit Pokharna, vice president at Kotak Securities said that LNG by trucks was turning to be a big opportunity because the government was keen to push gas consumption in areas where pipeline access would either take a lot of time to build or may not come altogether. He added that the segment would witness double-digit annual growth in the foreseeable future.
India's petroleum and steel minister Dharmendra Pradhan recently laid the foundation for India's first 50 LNG fuel stations across key national highways. The government plans to invest close to $1.4 billion in the next three years in setting up 1,000 LNG stations.
"A lot of these LNG fuel stations may end up receiving LNG by trucks since some of them may not necessarily be close to pipelines," one industry official said.
According to Petronet officials, LNG would be ideal for long-haul trucks and buses as its relatively higher energy density can help vehicles to travel up to 900 km in one full tank, compared with about 300 km for a diesel vehicle.
PICKING UP SPEED
Industry officials said LNG by trucks started more than a decade ago, but has been a slow starter. There is substantial utilization of loading facilities at the Ennore terminal, primarily because of the lack of progress in pipelines in that area.
A senior official working with a private oil and gas firm said the expenses related to LNG storage and regasification as compared with alternative fuels is a major road block for adoption of small scale LNG.
"We do see many transporters and players like CGD entities and traders getting into this business, while we had just a few state-run companies a few years back. Allowing ISO containers to transport LNG is pending approval and hopefully that should have a positive impact on small-scale LNG adoption," the official added.
State run companies are actively pushing plans to expand the LNG by trucks segment. Petronet is diversifying to many other businesses across the LNG value chain, offering services like providing LNG as automotive fuel through its chain of LNG stations in collaboration with other state-run oil firms and city gas distribution companies, as well as supplying LNG for industrial usage through trucks.
Last year, state-owned gas utility GAIL transported LNG using cryogenic trucks from Dahej in Gujarat to the eastern state of Odisha.
