The massive scale of the recently concluded ninth and tenth bidding rounds has highlighted the government’s vision of accelerating the creation of city gas distribution (CGD) infrastructure 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, four will get 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 will source gas from imported regasified liquefied natural gas (RLNG) and domestic gas from existing as well as upcoming pipelines. Also, only 50 per cent of the GAs awarded under Rounds IX and X are connected by pipelines. This highlights the 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). Though still at a nascent stage in India, the ssLNG industry offers immense potential to meet the growing demand for environment-friendly fuels via the trucking and shipping industries.
The government’s increased emphasis on setting up of large-scale CGD networks as well as its commitments under the Paris Accord to mitigate the emission of carbon dioxide, have paved the way for the growth of the natural gas vehicle (NGV) segment in the country. With new options such as NGVs and ssLNG, gas will become a real option for many more consumers, unlocking the pent-up demand in a number of new GAs. Going forward, greater participation from private players is expected as there are huge opportunities for developing CGD networks in the country and thus exploring new options for meeting 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 subsequent introduction into the gas transmission grid. Under an ssLNG network, the LNG is ferried on smaller trucks from RLNG terminals to the liquefied compressed natural gas (LCNG) station, from where it is distributed to end-use consumers. In addition to traditional CNG and commercial and industrial piped natural gas (PNG) consumers, these LCNG stations will serve a fourth segment of consumers (transport) using LNG.
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 (as per specifications from the International Organization for Standardization), the other transport option, are not yet permitted to be used in India.
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 dependence on human resources. Further, the availability of gas to end-customers 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, a growth rate of 7 per cent. Geographically, three states – 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.
Expansion of the CGD network and an increasing number of CNG stations is expected to provide an impetus to the growth of NGVs 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 that will be developed under Round X of CGD bidding. The Ministry of Petroleum and Natural Gas plans to set up another 10,000 CNG stations across 300 districts in the next decade or so. This is expected to provide a major impetus to the NGV segment.
Further, bio-CNG is being explored as an alternative, economically viable source of CNG in the country. 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 cheaper than CNG. However, the production cost of bio-CNG is dependent on the price of raw materials delivered to the site, cost of electricity, and the prevailing cost of labour in the region where the production plant is set up. Currently, one such plant is being set up in Pune on a pilot basis. If successful, bio-CNG will create a unique sustainable model of local waste being converted to local fuel while also generating local employment and income.
Recently, there has been an increasing
focus of original equipment manufacturers (OEMs) on NGVs. Many automotive companies are launching new models powered by CNG, while CNG alternatives are already available for a wide spectrum of vehicles. Also, LNG has turned out to be an economically viable fuel for long-haul trucks worldwide which, in turn, has encouraged 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 and has showcased the first LNG-run bus.
Last, but not the least, government initiatives such as exemption from permit requirements and rebate on road tax will also help in augmenting the growth of the NGV segment.
Challenges and proposed solutions
Several challenges across the value chain of the natural gas ecosystem need to be tackled in order to facilitate growth of NGVs in India. High vehicle costs, vehicle weight and limited boot space are some of the issues facing the segment. Boosting NGV adoption through incentives and infrastructure development will help in establishing economies of scale in manufacturing and thus reduce costs. Additional weight due to the CNG kit/cylinder reduces the carrying capacity of the vehicle. This can be overcome by the use of composite lightweight materials in CNG components and Type IV tanks. Installation of the CNG cylinder in the boot results in space constraints. Therefore, alternatives need to be explored for packaging the cylinder.
Despite having vast untapped deposits of natural gas, only about 7 per cent of India’s primary energy needs are met by it. Therefore, there is an imminent need to shift the energy mix from imported oil towards domestic gas. This is in line with the government’s vision of gas accounting for 15 per cent of the energy mix by 2030. The high volumes and favourable conditions in the Indian automotive market present an opportunity to promote widespread adoption of NGVs in the country.
Given the challenges that India continues to face with regard to enhancing its natural gas grid, developing diversified ways of transporting and distributing natural gas assumes the utmost importance. In order to ensure gas supply to the remotest parts of the country, development of an ssLNG supply chain supported by cryogenic containers over roads, railways and inland waterways is the need of the hour.
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
Given the challenges that India faces with regard to enhancing its natural gas grid, developing diversified ways of transporting and distributing natural gas assumes the utmost importance.