Small Scale LNG - The Changing Landscape of Indian LNG Industry
M K Manu
Managing Director - India Branch
TGE Gas Engineering Private Limited

The story of gas in India began in 1970's. A country of over 1.2 Billion people with rising energy requirements and high growth rate has in the past couple of decades met with challenges of rising pollution level in its vast metros like Delhi, Mumbai, Bangalore, Hyderabad besides other highly polluting industrial cities / towns. While Natural Gas was initially considered as a fuel / feedstock for large industries like Power, Fertilizers, Petrochem, Ceramics etc., the Supreme Court of India, in 1992 gave a landmark judgement to convert all commercial diesel vehicles in Delhi from Diesel to CNG in a phased manner. This further pushed the Government to take the opportunity to initiate a City Gas Programme in Delhi which was subsequently planned across the nation; the primary objective being to control the rising pollution / emissions (GHG - Greenhouse Gas) and to curtail the rising crude import bill and consequent high current account deficit.

Being deficient in gas prompted the Government of India to give a push to LNG imports. Consequently, India's first LNG Terminal at Dahej was set up by Petronet LNG Limited (PLL) in 2004 as a joint venture of GAIL, ONGC, IOCL, BPCL.

India has always been deficient in gas and prevailing sources and infrastructure have always fallen short of meeting the growing energy requirements of the country. While the primary energy consumption of India has grown at a CAGR of about 5.7% during the last plan period 2009 - 2014, the share of natural gas in the energy mix has dropped from 10% in 2009 to 7% in 2014. The present Central Government of India plans to increase the share of gas in the energy basket to minimum 15% by 2022.

The 2015 PPAC report indicates a total gas consumption of the country at 139 MMSCMD which was met through 86 MMSCMD of domestic gas production and 56 MMSCMD (~15.5 MMTPA) through LNG imports. The report analysis also indicates an LNG growth rate of 11.1% with increase in the share of LNG from 20% in 2010 to about 40% in 2015. The share of LNG in the consumption of gas in India is estimated to improve by 50% and above by the next plan period. The above is also based on the premise that the INDIA GAS VISION 2030 and the low international LNG price regime is maintained keeping in view the alternative / disruptive energy sources.

The Infrastructure:

India today has about 32 MMTPA of installed LNG import capacity at its existing terminal at Dahej, Hazira, Dabhol & Kochi. An additional 26 MMTPA import capacity is under execution at Mundra, Ennore, Pipavav, Jaigarh, Hazira & Dhamra. Additional 23 MMTPA capacity is at various stages of planning and shortly to be executed at locations like Charra, Mangalore, Digha and Gangavaram.

THE LNG OPPORTUNITY - REASONS FOR

While most of the LNG Terminals are concentrated on the Western Coast, a few are planned / under construction on the Eastern Coast too. This is due to the fact that major energy consumption industries as well as mostly the 17 ,500 Kms of the existing transmission pipeline network is concentrated along Western Coastline and up North. The proposed augmentation of over 15,000 kms of additional transmission network currently faces major hurdles of viability as well as issues related to ROU acquisition.


Source: www.iwai.nic.in

Also, India has committed itself to control and reduce the GHG emissions and ratified the COP21 Paris agreement as per its Intended Nationally Determined Contribution (INDC) - reduction in emissions by 33 - 35% of its GDP by 2030 from 2005 levels and to create an additional carbon sink 2.5 - 3 Billion tons of Carbon Dioxide equivalent by 2030.

This is a huge task and requiresstrong political will and transformation capabilities.Reduction of liquid fuels and moving towards alternate energy sources is one of the most effective way to achieve the same. Government of India, has in this direction together with major Oil & Gas Companies taken several policy initiatives. Some of the key and relevant initiative are listed below:-
  • LNG has been approved as an automotive fuel – intended shifting medium and heavy commercial vehicles and buses on LNG. There is already news of planned LNG highway corridors starting from New Delhi upto Kochi and Bengaluru.
  • Inland waterways Authority has identified 6-7 major waterways to be developed on the major rivers and canals across India (refer enclosed National Waterway map). This shall improve movement of goods and reduce cost of transportation. The Waterways authority plans to use LNG fueled barges to avoid pollution in the hinterland. Small terminals have been identified on the waterways for LNG storage, distribution and bunkering.
  • Ministry of shipping has unveiled its prestigious SAGARMALA / OCEAN NECKLACE project (refer the ocean necklace map below) that envisages 12 major and 14 non-major ports along the 7,500 kms of Indian Coastline. These ports shall promote movement of goods along the coastline / from West to East Coast. Cochin Shipyard has already entered into agreement with EIL to design and build LNG powered ships and barges.

Source: www.newindianexpress.com

OPPORTUNITIES IN SMALL SCALE LNG (SSLNG)

As the demand of imported gas is increasing and the R-LNG transmission capacity is limited, a vast opportunity arises in small LNG Terminals across the coastline and the hinterland to meet the growing demand / shifting fuel requirements from liquid fuels to gas. CGD projects on LNG and L-CNG Fueling Stations on highways are shortly going to become a reality. Industrial Regas Stations are already witnessing a steady growth in this low LNG price regime.

Use of LNG by Railways, Inland shipping and coastal shipping shall further boost the requirement of Small Scale LNG Storage and distribution plants. These shall not only enable LNG to reach the hinterland but also enable to reduce the growth deficit amongst the various regions within the country. The inherent advantages of Small Scale Terminals i.e. flexibility and reach can be leveraged to fill the supply and demand gap of Natural Gas in India. The major drivers in favor of SSLNG Terminals are:
  • Short Project Gestation
  • Lower Capex
  • Sharp reduction in infrastructure cost - facility can be built on existing ports
  • Projects can survive on short term / spost LNG contracts
  • Customers acquisition relatively easier on short term contracts
  • Distribution through LNG road tankers - flexibility to customers and less dependence on gas pipeline infrastructure
TGE Gas Engineering Pvt. Ltd. is a 100% subsidiary of TGE Gas Engineering GmbH, member of CIMC group, brings with it an experience of over two decades in design, engineering, procurement and construction of LNG Terminals together with LNG solutions for storage and distribution.