India presents a growing market for bulk liquids, led by petroleum products, petrochemicals and chemicals. Being a consumption-driven market, significant infrastructure spending is going to take place in the country primarily led by oil marketing companies. At present, only 6 per cent of the energy requirement is met by natural gas. However, in the past few years there has been a greater focus on increasing the use of gas to meet energy needs to reduce carbon emissions.
Size and growth
While it is difficult to estimate the actual storage capacity for crude oil owing to the high degree of fragmentation, the installed capacity of key crude oil companies offers an approximate picture. As of May 2019, the total installed capacity of refineries across the country stood at about 250 million tonnes per annum (mtpa). This effectively means that there is a minimum liquid storage facility of 250 mtpa available through companies such as Indian Oil Corporation Limited (IOCL) and Bharat Petroleum Corporation Limited. With regard to storage of liquefied natural gas (LNG), there are six onshore LNG regasification terminals with a total nameplate capacity of 42.5 mtpa. These terminals are Petronet LNG Limited’s Dahej and Kochi terminals, Shell’s Hazira terminal, Konkan LNG’s Dabhol terminal, IOCL’s Ennore terminal and the recently commissioned Mundra terminal which is jointly owned by the Gujarat State Petroleum Corporation and Adani Enterprises.
As of March 2019, the major ports had a cumulative petroleum, oil and lubricants (POL) handling capacity of about 510 million tonnes (mt). The total handling capacity increased by about 60 per cent from 2015-16 to 2018-19. Among the major ports, Kandla had maximum capacity at 152 mt in 2018-19, followed by Paradip port at 98.3 mt.
Small-scale LNG storage
Given the time taken in laying pipelines and securing associated approvals, an alternative approach to supply gas through development of small-scale LNG stations (liquid to compressed natural gas [LCNG]/LNG satellite stations) has gained traction. GAIL has already set up an LCNG station in Bhubaneswar to supply natural gas to local customers in the absence of a pipeline. LCNG stations have also been established at Vadodara, Ratnagiri and Nagpur. The LNG is transported to small-scale LNG stations in cryogenic tankers and then regasified for use in vehicles and for different household, industrial and commercial applications.
According to Ministry of Shipping estimates, liquid cargo volumes at Indian ports could grow to 460 mt in the base case scenario (GDP growth expected at 7.5-8 per cent) by 2025. Rise in liquid cargo will simultaneously lay the foundation for augmented demand for and thus supply of, liquid storage facilities across the country’s ports.
The lockdown measures taken to control the spread of the pandemic has had a significant impact on the country’s gas demand. The daily gas send-out to domestic customers dropped significantly. This caused LNG storage tanks to fill to the brim, with importers unable to accept any more cargo. Several importers were compelled to refuse cargo citing force majeure clauses. The pandemic has also affected the speed of executing pipeline connectivity and LNG infrastructure projects. However, demand levels are gradually recovering with lockdown relaxations. Further, India’s gas demand is poised to grow strongly in the long term supported by low gas prices, increasing environmental concerns and the government’s aim of increasing the share of gas in India’s energy mix to 15 per cent by 2030. As per ICRA estimates, the demand for natural gas will grow from 231 million metric standard cubic metres per day (mmscmd) in 2017-18 to 290 mmscmd in 2024-25, at an expected compound annual growth rate of 3.3 per cent.
With domestic production declining, India will continue to rely on LNG imports for meeting its gas requirements. LNG regasification capacity is expected to increase by 28 mtpa to 70.5 mtpa by 2024-25 with several terminals currently at the construction or planning stage. Besides, capacity expansion will also be undertaken at existing terminals which bodes well for the gas storage industry. Further, the role of LNG as a transportation fuel is gaining traction. Plans to set up LNG stations on major highways have been announced, creating demand for small-scale LNG storage facilities. Also, with natural gas expected to hold a much bigger share in the country’s energy basket in the coming years, India may also explore the development of underground reserves to shield itself from supply disruptions. This is expected to create opportunities for gas storage infrastructure in the country.