Scope for Expansion: LNG market trends and development plans

LNG market trends and development plans

India is the world’s fourth-largest buyer of liquefied natural gas (LNG), after Japan, South Korea and China. The LNG market in India has been witnessing strong fluctuations, mostly owning to Covid-related restrictions in the economy. India had recorded LNG imports of 6,660 million standard cubic metres (mscm) during the January-March 2019 quarter. Imports fell to a mere 4,920 mscm during April-June 2020. This was due to the first wave of the Covid-19 pandemic and ma­ss­i­ve supply chain disruptions across the globe. A year later, during the April-June 2021 quarter, LNG imports stood at 8,181 mscm, registering an increase of 66 per cent (year-on-year basis).

Upcoming investments in the sector

India is expected to expand its LNG import capacity by 40 per cent in 2022 with the commissioning of the much delayed new terminals. India currently has six LNG import terminals with a combined capacity of 42.5 million tonnes per annum (mtpa). Another 17 million tonnes are expected to be added in the near future. Plans are underway for the development of India’s first large LNG import terminal, which would have the capacity to cater to both bunker and fuel industries in the state of Karnataka. The Karna­ta­ka government, through the New Mangalore Port Trust (NMPT), has signed an agreement with the Singapore-based LNG Alliance to develop this LNG terminal.

Over the next three years, LNG Alliance intends to invest approximately $290 million to develop, construct and operate a Floating Sto­rage and Regasification Unit (FSRU) and manage LNG supply. The initial capacity will be four mtpa, with a provision for LNG virtual pipelines and an LNG bunkering facility. It will also have the potential for expansion up to 8 mtpa to meet the estimated demand increase in the fu­ture. This will also be India’s first dedicated LNG bunkering facility that will be providing LNG as fuel for ships visiting the NMPT and bunkering shuttles to the west coast of India.

Petronet plans to invest Rs 170 billion in the domestic LNG import capacity addition and petrochemical foray. The investment inclu­des Rs 6 billion in raising the capacity of the Dahej LNG import terminal in Gujarat to 22.5 mtpa from the current 17.5 mtpa. Additionally, Rs 12.45 billion would be invested in building an additional storage tank and bays for truck loading of LNG.

The Dahej import terminal is the largest in the world and the port will host a third jetty where propane, ethane and LNG can be im­ported. Petronet, which operates a 5 mtpa im­port facility at Kochi in Kerala, will also be setting up a 4 mtpa FSRU-based LNG import facility off the Gopalpur port in Odisha, which later will be turned into a land-based terminal with a higher capacity of 5 mtpa. This would also have a scope for raising it in the future. Gopalpur port would entail an investment of Rs 16 billion for setting up a floating LNG import facility.

Swan Energy, an emerging green energy company, is developing a floating LNG terminal off the Gujarat coast at an investment of Rs 56 billion from the Gujarat Maritime Board. The operations of the terminal are expected to be started in 2022. This would help raise the cou­ntry’s LNG import by 12 per cent.

LNG in the transport sector

The Indian government is taking various measures to give a big push to the LNG sector in the country. It is actively working towards making LNG one of the feasible alternative economical and environmentally friendly fossil fu­els for medium and heavy-duty vehicles. To kick-start the development of the LNG fuel-bas­ed transport ecosystem in the country, the government has been setting up LNG stations across the golden quadrilateral national highways and in major mining clusters in the country. In the first phase, this initiative will involve the establishment of 50 LNG stations. This would help in the establishment of LNG as a transport fuel for increasing the share of natural gas in the total energy basket of the country, besides providing environmental benefits to society.

In order to boost the use of LNG as a transport fuel in heavy vehicles and buses, the go­vernment has taken various steps to increa­se awareness amongst statutory and regulatory authorities for faster penetration of LNG in the transportation sector, including expansion of the national gas grid to about 35,000 km fr­om the current 20,000 km, expansion of the CGD network and setting up of LNG terminals.

The central government inaugurated the country’s first commercial LNG filling station at Dighori, Nagpur. The facility has been set up by the Baidyanath Ayurvedic Group. It has a capacity of 23 tonnes and serves LNG-powered cars, trucks and buses. The company decided to set up the station, following the government’s decision to invest in the LNG dispensing stations across the country.

In sum

India, the world’s fourth-largest LNG importer, plans to raise the share of natural gas in its energy mix to 15 per cent by 2030, from the current 6.2 per cent. There lie various opportunities in the LNG sector.

As per the Ministry of Petroleum and Natural Gas data, an estimated 100,000 bus­es and trucks are projected to use LNG by 2024. Also, the use of LNG is one of the most promising options for achieving a reduction in pollution for inland shipping and short-sea shipping. The Inland Waterways Authority of In­dia is implementing several projects to de­ve­lop the infrastructure to facilitate the broad use of LNG.