With rising urbanisation, the government’s initiatives to improve city infrastructure and increased focus on developing smart cities, Atmanirbhar Bharat, Make in India are set to increase energy needs. These developments are set to increase the city gas distribution (CGD) demand in India as studies indicate an estimated growth of around 10 per cent compound annual growth rate to about 25,000 million standard cubic meters (mmscm) by 2030 from existing consumption of around 9,400 mmscm. The growth is due to increasing demand of natural gas, in the form of piped natural gas (PNG) and Compressed natural gas (CNG) from automotive, industrial (glass, fertilisers, chemical, power etc.), commercial as well as residential segments. The Petroleum and Gas Regulatory Board (PNGRB) is considering several favourable initiatives in the CGD sector and more public and private companies are being authorised and granted licenses in 9th and 10th rounds to distribute gas in various geographical areas (GAs) across the country. It has helped in expansion of coverage of CGD network to 228 GAs in more than 400 districts, bringing around 3/4th of the population and 50 per cent of the geographical area of the country under CGD network.

India has ambitious plans to shift from oil-based economy to gas based economy as part of its commitment to near zero emission as natural gas is an environment friendly as well as a low-priced fuel. The newer initiatives and revised regulations are helping in increased participation from public and private sectors in the CGD market.

Present scenario

In India, domestic natural gas is supplied from the gas fields located at Hazira basin, Mumbai offshore, KG basin, Assam and Tripura. In 2018-19, the total domestic gas production stood at about 90.05 MMSCM per day, catering to only about 50 per cent the total demand. Therefore, in order to meet the demand-supply gap, liquefied natural gas (LNG) is being imported by the gas marketers under various long term, medium term and spot contracts. Currently, six operational LNG import and regasification terminals are operational in the country with capacity of about 140 mmscmd and are enough to cater to country’s gas demand till 2040.

The transportation of gas through cross country pipeline infrastructure has proven to be safe and economical and provides opportunity for industrial development in the vicinity of the gas pipelines. The work on National Gas Grid (NGG) has been commenced to ensure adequate availability and distribution of natural gas in majority parts of the country. At present, the operational natural gas network in India is around 16,800 km. Besides, another 14,300 km pipelines projects are under various phases of completion. After completion, the NGG would ensure availability of natural gas across wider regions. However, it would still leave significant areas out of the reach of the pipeline network. Besides, the land acquisition and statutory clearances needed for implementation of additional pipeline network is an extremely difficult and time-consuming process. A number of under-implementation pipeline projects are currently plagued by delays and large cost overruns due to regulation, litigation, financing and social issues. To overcome these difficulties, alternate means of gas transportation are being explored and small-scale LNG (SSLNG) can be one of the best fit.

Need for SSLNG

For efficient use of gas pipeline network, the consumers need to be located close to the network as the extension of pipeline network from national gas grid to individual consumers is not cost effective and is time consuming. To that end, the consumers are opting for expensive alternates such as liquefied petroleum gas (LPG) or propane till the time they are connected to the piped natural gas grid. Similar problem of gas pipeline network connectivity is being faced by CGD companies. Many of the new geographical areas awarded under 9th and 10th bidding rounds by PNGRB for CGD are devoid of nearby pipeline network. To find a quick and cost-effective solution, many of the CGD companies are exploring avenues to adapt a modular and flexible technology wherein natural gas can be brought to regions not connected by existing pipelines and can quickly start the gas distribution to residencies and fuelling stations.

The existing infrastructure facilities of LNG import and gasification terminals in India are not functioning to their intended capacity as the pipeline network infrastructure is insufficient. SSLNG is an emerging alternative model in the LNG value chain, with potential to create considerable impact in future due to its cost effectiveness. Many small users in industrial, transport, commercial, residential and power generation sectors will be switching to gas-based PNG, liquefied and compressed natural gas (LCNG) or RLNG instead of existing solid, liquid or LPG fuel once the steady supply is guaranteed. Swift developments and investments in the SSLNG storage and distribution models can prove to be the reliable solution the CGD companies are desperately looking for.

Picture Credit: Cryogas Equipment Private Limited

Distribution from SSLNG to CGD

Distribution of LNG from SSLNG satellite stations by road needs to establish its reliability with respect to continuity, safety and cost effectiveness of a steady basis to be considered as a definite alternative of LNG supply chain. However, it is definitely a faster way of supplying natural gas to geographies where laying gas pipelines are proving to be unviable due to technical or economic consideration.

In order to promote CGD network and better participation from companies, PNGRB has brought several changes in rules and regulations from statutory authorities with regard to LNG transport, storage and CGD licencing applications but there is scope for further relaxation specially in inter-modal transport which may boost utilisation of LNG in newer applications.

The development of gas-based economy with reduced dependency on oil imports has been given greater emphasis by the government. Its commitment towards reduction of country’s carbon emissions is also focusing on alternate clean fuels. The government aims to increase the share of natural gas in the energy mix to 15 per cent in the next decade from the existing share of around 6 per cent. Globally, the share of LNG in the energy mix stands at 25 per cent. The CGD sector will play a vital role in reducing the carbon emission by supplying affordable cooking gas to households in urban areas so that the LPG cylinders shall be diverted to rural area and use of wood / agricultural residue / coal can be avoided, which cause higher carbon emissions. However, to overcome lower domestic gas production, the reliance is increasing on the imported LNG. Slower developments in pipeline network connectivity nationwide is forcing CGD operators to push for alternate gas transportation means  to ensure reliable and continuous source of LNG to satisfy their PNG commitment to households. At present, the share of imported LNG consumption accounts for nearly half the total requirement.

Current and future scenario

LNG transportation and distribution is gaining momentum as SSLNG satellite stations are being installed and the road transportation of LNG is being encouraged. In 2019, the Gas Authority of India Limited (GAIL) transported LNG in tankers from Dahej terminal in Gujarat to LNG satellite station at Bhuvaneshwar, Orissa located around 1,700 km. The satellite station was built at a total cost of around Rs 100 million, including land cost. It has LNG storage capacity of 40 kl. This satellite station can cater to around 1,000 residencies through CGD network and can fuel around 3,000 vehicles through LCNG cylinder cascade filling. This experience is further encouraging other companies to come forward for setting up satellite LNG stations, especially in areas where there is no pipeline connectivity. Further, INOX has set up LCNG facility for Rawmatt Industries in Nagpur. The station supplies CNG to Nagpur Municipal Corporation’s buses. LNG Express India Private Limited has also demonstrated the operations of the LCNG station and is supplying natural gas to Adani Gas Limited for CGD at Vadodara in Gujarat.

Petronet LNG Limited (PLL) has been supplying LNG to small industrial consumers that are located away from pipeline network through road tankers. At present, PLL has installed four truck loading bays at their Dahej Terminal and one at Kochi Terminal. Together, these loading bays can load up to 50 tankers per day. PLL has been operating LNG dispensing stations and four LNG driven buses approved for commercial operations for its staff transportation at Dahej and Kochi terminals.

Initiatives by government

In the past few years, several initiatives have been taken up by the Government of India to create an efficient ecosystem in SSLNG space in a bid to increase the energy mix as part of energy transition.

  • In 2017, Central Motor Vehicle Rules were amended to include LNG as automotive fuel. This is a revolutionary initiative in allowing use of LNG as a clean fuel for transportation to overcome issues associated with emissions from automobiles.
  • PNGRB has recently announced that it is permitting an entity to set up an LNG station in any GA, even if it is not an authorised entity for that GA. This is expected to create new opportunities in LNG and SSLNG transportation and distribution market and help in quicker realisation of gas supply for GAs which are not connected to the pipeline grid.
  • Amendment to the Gas Cylinder Rules, 2016, has included auto LNG under its regulatory framework. This amendment in rules has been extended to storage of LNG in cylinders, possession, import and transport of LNG. These amendment in rules are now specifying the quality standards for a cryogenic cylinder.

All these regulatory changes are an indication of government’s intent in promoting LNG as an economically sustainable, safe and cleaner alternative of fossil fuel.

Picture Credit: Cryogas Equipment Private Limited

Future of CGD

Newer companies are getting involved in distribution of city gas to residential, commercial and industrial sectors after recent rounds in allocation of GAs. They are developing LCNG or satellite stations in GAs that lack pipeline connectivity. The quicker way of monetisation in CGD sector is SSLNG along with road transportation. Several CGD companies are now implementing various projects in the segment.

  • GAIL, pioneer in gas distribution in India is set to increase its footprint by installing eight LNG satellite stations across the country.
  • BPCL, through its subsidiary Bharat Gas Resources Limited, is planning to set up LCNG facility in Aurangabad, Maharashtra. Once commissioned, the facility will supply gas to CNG stations and fulfil PNG demand of the industrial sectors in the city. LNG dispensing provision is also planned at the station.
  • Indian Oil is developing a fuel complex, including LNG/LCNG facilities, at Thiruvananthapuram, Kerala. The construction has commenced in October 2019.
  • In 10th round, Atlantic, Gulf & Pacific Company (AG&P) bagged nine CGD licenses and is planning to invest Rs 100 billion in developing six LCNG stations for fuelling its CGD projects. The company has already initiated the construction of its first LCNG station at Jodhpur in Rajasthan.
  • Think Gas Limited is coming up with five LCNG stations in GAs allocated to them, wherein pipeline connectivity is not feasible. One facility is currently under implementation in Bhopal, where LNG will be supplied through LNG tankers from Dahej terminal.
  • Petronet LNG, the country’s oldest and largest natural gas importer and distributor, has big plans to set up LNG dispensing infrastructures on major national highways. The company is installing around 1,350 stations in three phases. 50 stations will be installed in the first phase by 2021. Further, 300 and 1000 stations will be set up in the second and third phase respectively.

Challenges ahead

There is demand for LNG as an alternative energy source in various sectors, including CGD and transportation. Besides, sufficient storage capacity for import and storage is available on the coastal regions of the country. The lack of distribution is currently pushing development of SSLNG and transportation through other modes. This development is in its nascent stage and has potential for greater investment for the model to reach its maturity. However, some challenges need to be collectively and collaboratively addressed and overcome, before LNG really finds its place in the country’s energy transition. The availability of land continues to be one of the major challenges faced by CGD companies in setting up LCNG stations as SSLNG stations require higher land parcels compared to CNG station. Hence, problems associated in land acquisition can delay the installation of LCNG facilities. Further, the companies interested in setting-up such SSLNG stations need to obtain multiple approvals and clearances and the process is time consuming. In addition, the cost competitiveness of LCNG stations depends upon the availability of LNG at a cheaper rate. However, LNG transportation through tankers, trailers or semi-trailers can be capital intensive. Lack of uniform taxation is another concern in transportation of LNG through trucks. Currently, natural gas comes under value added tax regime, which ranges between 3-20 per cent across different states. This variable taxation makes interstate transportation less profitable from states having higher tax slabs. SSLNG is a relatively new mode of distribution of natural gas, hence, it is important to train and develop a skilled workforce in operating and maintaining the stations fully in compliance with safety standards and protocols.

Conclusion

Although SSLNG in India is still at a nascent stage, it offers immense potential to meet the growing demand of the CGD sector. The SSLNG route eliminates right-of-way, difficult terrains, crossing water bodies and other issues related to laying of pipelines and developing associated support infrastructure, resulting in faster project implementation and substantial cost savings compared to conventional CGD networks. Going forward, the SSLNG model will surely gain momentum in line with country’s commitments to reduce carbon emissions and increase share of cleaner fuels in the energy mix. However, the challenges need to be overcome by all the stakeholders involved in the LNG sector. The statutory bodies, codes and standards need to establish clear guidelines on compliance and acceptance criteria in making the gas economy a reality in coming years. However, supply of natural gas through the SSLNG can be economical for shorter distances between 500-750 km from LNG import terminals, beyond which pipelines are still an economical and safer choice.

By Shireesh S Swami

Shireesh S Swami is currently heading the Mechanical Engineering group at Tata Consulting Engineers Limited (TCE) as Technology Principle. In this role, he is responsible for adopting emerging technologies and driving innovation in designs. With more than 25 years of industry experience, Shireesh has performed various roles such as Specialist Engineer in material handling and static equipment, Project Engineer, Project Manager and Group Head –Static Equipment. He also has extensive experience in basic & detailed engineering in Oil & Gas, Petrochemicals, Fertiliser, Specialty Chemicals, Industrial, food and pharmaceutical industries.

Feature image Picture credits: Galileo Technologies