Fastest growing energy user sees clean fuel path on highways
Mumbai/New Delhi/Singapore: Gas guzzler might soon have a different meaning in India.
Companies from Royal Dutch Shell Plc to Petronet LNG Ltd are betting that a super-chilled form of natural gas, and not oil products like diesel, will increasingly be the highway fuel of choice for heavy-duty trucks that drive domestic trade in the world’s fastest growing big economy. They are hoping that lower emissions and cheaper natural gas will lead truckers to buy the more expensive rigs that burn the fuel.
Petronet, which operates a 15 million tonne-a-year LNG terminal on India’s west coast, is preparing to invest as much as Rs1,500 crore ($231 million) on a network of LNG filling stations on highways to promote the use of the fuel by trucks and buses, Petronet managing director Prabhat Singh said in an interview.
Shell plans to build a truck-loading station at its LNG terminal in Hazira in western India that will be used to service fuelling stations and small industrial customers, Steve Hill, the company’s executive vice president for gas and energy marketing and trading, told reporters Friday in Singapore.
The investments are coming as the country, which has some of the world’s most polluted cities, is seeking to cut emissions and its import bill by doubling the share of gas in the energy mix to 15%. Encouraging LNG as a transportation fuel is crucial for one of the top automobile markets in the world, where about 70% of vehicles still run on diesel.
“Gas replacing liquid is not only simple economics, but also a huge amount of convenience and comfort,” Singh said.
H-Energy Pvt. Ltd, a new entrant in the business that plans to start its first re-gasification terminal later this year, is also banking on trucks, buses and small industries to drive volumes.
India’s trucks can consume 12 million tonnes of LNG annually within seven to eight years if regulators support the move to the fuel for trucks, H-Energy chief executive officer Darshan Hiranandani said in an interview. His company plans to invest about Rs1,000 crore to create LNG retailing infrastructure in India, starting with refilling stations.
“There are two cases for LNG—one is environmental and the other is economic,” Hiranandani said. “LNG is cheaper than diesel. It is still cheaper when you count maintenance. Since it is cleaner, you need less lubricants, you need less engine oil and you need to spend less on wear and tear.”
Diesel cost about Rs67 per litre in Mumbai on Friday, while compressed natural gas for trucks in the same city sold for Rs42.63 per kilogram, according to retailers Indian Oil Corp. and Mahanagar Gas Ltd. That works out to an equivalent of about $28 per million British thermal units, a measure of heat, for diesel and around $13 per million Btu for CNG, calculations by Bloomberg showed.
Petronet plans to start with four LNG-fueled buses to ferry its employees at Dahej and Kochi terminals as early as April. It also will run some LNG buses as a pilot for state-run transport companies in Gujarat, Rajasthan and Kerala. The company has identified 4,000km of highways on India’s west coast to set up 20 LNG refilling stations.
That’s just a drop in the bucket compared with the approximately 60,000 retail pump stations that service gasoline and diesel vehicles throughout the country, Aman Verma, an oil researcher for Wood Mackenzie Ltd, said by email. India also lacks a mature supply chain to build on-board storage tanks for LNG, which needs to be chilled to minus 160 degrees Celsius.
“The biggest challenge is developing a network and supply chain for LNG refuelling stations,” Verma said. “The second key challenge is the lack of local on-board cryogenic storage tank manufacturers. This leads to high costs and has pushed up the total cost of ownership of LNG trucks.”
India isn’t the only country pushing for more LNG on its roads. In Beijing, the government banned older diesel trucks from parts of the city from 6am to midnight daily. About 70,000 LNG-fuelled trucks were sold in China last year, increasing the country’s fleet to about 200,000, Hill said. Worldwide on-road demand for LNG could rise from next to nothing a few years ago to 45 million tonnes by 2025, according to Paris-based research group Cedigaz. That would have been 15% of the global market last year, according to Bloomberg calculations based on Shell data.
To create a market for just 1 million tonnes of LNG in transportation, India may require investments of about Rs15,000 crore to create the infrastructure, according to Singh.
Replicating a rising trend in China of switching to gas for long-distance trucks can boost demand for the cleaner fuel in India, BP Plc’s Group chief economist Spencer Dale said in New Delhi on Tuesday. “In India, when you are thinking about where we can get even stronger growth for natural gas, my instinct would be to push within transport, within cars, within trucks.” Bloomberg