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    NGV India Summit 2016: India's 5 mn mt/yr Potential LNG Demand in Transportation Sector


India could potentially use about 5 million metric tons per year of LNG in the near future by substituting high speed diesel (HSD) in rail and road transportation.

by: Shardul

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NGV India Summit 2016: India's 5 mn mt/yr Potential LNG Demand in Transportation Sector

India could potentially use about 5mn metric tons (mt)/yr of LNG in the near future by substituting high speed diesel (HSD) in rail and road transportation, GSP Singh, Deputy General Manager (Gas), Indian Oil Corporation (IOCL) told the audience at NGV India Summit held in New Delhi on July 14-15.

The south Asian nation uses about 70mn mt/yr of HSD. Out of that transportation sector i.e. cars, trucks, buses and railways uses about 28.5mn mt/yr. That works out at about 24mn mt/yr of LNG. “This is the kind of demand potential we are looking at. Even if we assume 20% of HSD users shift to LNG in coming years, it is about 5mn mt/yr. That is a significant figure,” said Singh.

Challenges and solutions

However, Singh argued that for India to realise the full potential of LNG in its transportation sector, certain challenges need to be tackled. The most important one, he said, is the lack of an appropriate regulatory and statutory framework. He said the government’s approach towards CNG and LNG sectors should be similar.

Domestically produced natural gas is allocated on a high priority basis to fully meet CNG demand. A similar approach would help make LNG a success since it has greater benefits compared with CNG, he said. LNG requires less refuelling and covers more distance per refuelling, needs less storage space and it is much safer since LNG is stored at very low pressure (6-8bar) compared with CNG (more than 200 bar). LNG can be pumped at high flow rate compared with CNG and thus saves time, Singh said.

There is no denying that if right policies are designed LNG as transport fuel can be a big success in India. But is India capable of meeting the potential demand?  According to Singh, the country is moving in the right direction when it comes to LNG infrastructure. 

India has four operational LNG receiving terminals and more are expected to come online in next few years. The oil ministry expects country’s LNG import terminal capacity to double in next six years to 47.5mn mt/yr. So availability of the fuel would not be a problem, Singh said, adding that distribution should not be hard because IOCL pioneered the concept called ‘LNG at Doorstep’ in 2007 and is also developing refuelling stations. Other major oil marketing companies and gas marketers in India are working in this direction as well.

Vehicle manufacturers are slow to adapt but India’s biggest commercial vehicle manufacturer, Tata Motors, has made a start by developing India’s first heavy duty LNG fuelled truck, Prima 4032.S. It was tested at Tata Motors’ facility in Pune in June last year. Other manufacturers are looking at the segment as well and are waiting for proper policy to be devised.

The fuel price is another problem. Given the backdrop of low global LNG prices, Petronet LNG insisted on renegotiating its long term contract with RasGas. In December, the two parties signed a revised deal, which bases the price on a three-month average figure of Brent crude oil, replacing a five-year average of a basket of crude imported by Japan, the Japanese crude cocktail (JCC).

Petronet is reportedly looking to renegotiate its Gorgon deal as well. The Gorgon gas is priced at a slope of around 14% of JCC, which Petronet thinks needs to be lowered.

Collaboration is the way forward

Although, India faces certain challenges in turning LNG into a successful transportation fuel, these problems can be easily taken care of if all stakeholders such as government, regulators, fuel suppliers, vehicle makers and consumers collaborate, Singh said in his closing remarks.

“Supply of LNG should not be an issue as sufficient receiving terminal capacity is being added on both west and east coasts. If government extends support in terms of policy, regulations, dedicated corridors for LNG on-board and necessary incentives, the sector will get the required boost,” he said.  

Shardul Sharma