Small-Scale LNG For Expanding Natural Gas Access in India: Centre For Energy Finance

Small-Scale LNG for Expanding Natural Gas Access in India
Centre for
Energy Finance
Small-Scale LNG for Expanding

Natural Gas Access in India
Sabarish Elango and Hemant Mallya
Issue Brief April 2021

Small-scale LNG utilises scalable and flexible

infrastructure.
Image: Shutterstock
Centre for
Energy Finance
Small-Scale LNG for Expanding

Natural Gas Access in India
Sabarish Elango and Hemant Mallya
Issue Brief
April 2021
ceew.in
Copyright © 2021 Council on Energy, Environment and Water (CEEW).
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Suggested citation: Elango, Sabarish, and Hemant Mallya. 2021. Small-Scale LNG for Expanding Natural Gas Access in India.
New Delhi: Council on Energy, Environment and Water.
Disclaimer: The views expressed in this study are those of the authors and do not necessarily reflect the views and
policies of the Council on Energy, Environment and Water.
Cover image: iStock.
Peer reviewers: Gautham Babu Dasari, India Energy Advocacy and Regulations Advisor, Shell India; Swati D’Souza,
Research Lead – Climate Change, National Foundation for India; Karthik Ganesan, Fellow, and Deepak
Yadav, Programme Associate, Council on Energy, Environment and Water.
Publication team: Alina Sen (CEEW), The Clean Copy, Twig Designs, and Friends Digital.
Acknowledgments: First and foremost, our thanks go to Mr Gautham Babu Dasari, India Energy Advocacy and Regulations
Advisor at Shell India, for extending his expertise on the policy aspects and framing recommendations
for different stakeholders. We wish to thank Swati D’Souza, Research Lead, Climate Change at National
Foundation for India, for her thorough review of the brief and relevant suggestions.
We wish to acknowledge our intern Aishwarya Sharma, for her research on gas transmission access
issues; this facilitated the issue brief’s conceptualisation. We appreciate the contributions made by Nitin
Maurya, in the initial scoping of the subject and contacting relevant stakeholders for information and
clarifications on the calculations. We are thankful to Tirtha Biswas for his critical inputs in formulating the
analysis, as they helped improve the accuracy of the data.
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The authors
Sabarish Elango Hemant Mallya

[email protected] [email protected]
Sabarish is a Research Analyst at CEEW Hemant Mallya, a Senior Programme Lead

working on industrial energy transitions and at CEEW, leads The Council’s Industrial
decarbonisation. His work at The Council Sustainability and Competitiveness team.
revolves around developing accelerated His interests include the industrial transition
natural gas adoption pathways for the Indian to low and no-carbon fuels, integrated
industries. Sabarish holds a master’s degree sustainability solutions, and small business
in Sustainable Energy Engineering from KTH issues. Hemant holds a dual master’s degree
Royal Institute of Technology, Sweden. in Industrial Engineering and Operations
Research from Pennsylvania State University,
USA.
“Leveraging the scalability, flexibility, and “Scaling up ssLNG will be essential to fill the
movability of of the small-scale Liquefied access gap for India to reach the 15 per cent
natural gas (ssLNG) infrastructure will be vital natural gas total primary energy share target.”
for providing competition for lower delivered
price in India’s natural gas markets.”
Small-scale LNG distribution is made possible

through truck-loading bays in LNG terminals
across the country.
Image: Shell LNG Terminal in Hazira (Surat), Gujarat

Contents
Executive summary i
1. Introduction 5
2. What is an ssLNG system? 7
2.1 The ssLNG supply chain 7

2.2 Opportunities for ssLNG 9
2.3 Who should invest in ssLNG? 10
2.4 Benefits and challenges of ssLNG 11
2.5 Small-scale LNG across the world 12
3. The economics of ssLNG 13
3.1 Methodology 14
3.2 Baseline delivered prices and sensitivities 18
3.3 Different potential applications of ssLNG 22

4. Recommendations 24
References 26
Tables
Table 1 Key assumptions of road transport costs 14

Table 2 Road transport costs 15
Table 3 Key assumptions of rail transport costs 15
Table 4 Rail transport costs 16
Table 5 Costs of a satellite plant 16

Table 6 Configuration 2 delivered prices for different LNG import prices and transport distances 18
Table 7 Price spreads for early paybacks are small 20

Table 8 Effect of lifetime on delivered price is marginal 20
Table 9 Effect of loading charge on delivered price is modest 20

Table 10 Effect of discount rate on delivered price is negligible 21
Table 11 Effect of VAT on delivered price can be significant 21
Table 12 Case studies for ssLNG show its competitiveness 23
Figures
Figure ES1 Limited coverage of natural gas pipeline network in India i
Figure ES2 The delivered price of ssLNG compares favourably with several other fuels iii
Figure ES3 VAT, loading charges, and transport costs contribute significantly to the delivered price iii
of ssLNG
Figure ES4 VAT has the highest impact among the considered sensitivity variables iv
Figure 1 Small-scale LNG systems use road, rail, or waterways instead of transmission pipelines 7
Figure 2 Major components of the satellite plant 8
Figure 3 Delivered price formulae for the four configurations 17
Figure 4 Build-up of the delivered price for the average case 19
Figure 5 Changes in delivered prices according to sensitivity variables 21
Figure 6 The delivered price of regasified LNG compares favourably with several incumbent fuels 22
Acronyms
CAPEX capital expenditure
CGD city gas distribution
CNG compressed natural gas
CUF capacity utilisation factor
GST goods and services tax
HP high pressure
ISO International Organization for Standardisation
LNG liquefied natural gas
LP low pressure
LPG liquefied petroleum gas
mmBtu metric million British thermal unit
mmscmd million metric standard cubic metres per day
MoPNG Ministry of Petroleum and Natural Gas
MSME micro, small, and medium enterprises
mtpa million tonnes per annum
OPEX operating expenses
PESO Petroleum and Explosives Safety Organisation
PNG piped natural gas
PNGRB Petroleum and Natural Gas Regulatory Board
scm standard cubic metres
scmd standard cubic metres per day
tkm tonne-km
VAT value-added tax

Potential gas consumers without pipeline access

can be serviced using LNG container trucks.
Image: Shutterstock
Small-Scale LNG for Expanding Natural Gas Access in India i
Executive summary
Natural gas has played an important role in However, access to pipelines is limited in several
mitigating emissions from several hard-to-abate southern and eastern states. Even the planned
sectors to address climate change in major global 15,000-kilometre (approximate) addition to the
economies. However, natural gas has yet to contribute transmission network will not reach several potential
significantly to the primary energy supply in India, gas consumers (Figure ES1). Transmission pipelines
with only a 5.7 per cent share (IEA 2018). Distribution are expensive to construct and often require
of natural gas in India relies primarily on a significant funding from the government to make
17,000-kilometre network of pipelines for transmission them viable. Lengthy commissioning times and low
from liquefied natural gas (LNG) terminals and capacity utilisation in the initial years of operation
domestic production locations to consumers across (as demand builds), experienced historically, are
different sectors. additional profitability stressors.
Figure ES1 Limited coverage of natural gas pipeline network in India
Existing gas pipeline
Authorised gas pipeline
Planned gas pipeline
Existing GAs upto eighth round
GAs covered under ninth round
GAs covered under tenth round
Part district covered under ninth round
Part district covered under tenth round
Existing LNG terminals
Up-coming LNG terminals
Source: PNGRB 2020a

ii Small-Scale LNG for Expanding Natural Gas Access in India
Small consumers of natural gas rely on city gas managed ssLNG system, with a local micro-grid
distribution (CGD) companies to deliver natural gas network for gas delivery. Third-party companies could
from transmission pipelines. CGDs have infrastructure engage in volume aggregation of small consumers’
exclusivity in the areas allocated to them. Depending demand and provide doorstep delivery of LNG from
on the CGD pipeline network’s reach, consumers may terminal to consumer site, providing natural gas
not have access if they are located outside the CGD access to the small consumers.
network’s range. Also, since the CGDs are allocated
entire districts for gas distribution development, it Supply chain configurations for
takes much longer for low-density areas to receive a ssLNG
connection. The gas price charged by CGDs is often
Small-scale LNG can be delivered to consumers in
uncompetitive with incumbent fuels, considering
four configurations —by the LNG importing terminal,
the investments needed to be made by consumers to
the consumer’s own fleet of vehicles, a third-party
switch over to gas. Such issues have prevented the
logistics service provider, or a third-party aggregator.
natural gas market from growing as anticipated.
We evaluated the cost of moving ssLNG from the
terminal to the consumer location and subsequently
Opportunities for ssLNG regasifying it for the second configuration. For the
Small-scale LNG (ssLNG) systems transport LNG in other configurations, there are increased efficiencies
cryogenic containers and regasify the LNG at the resulting from servicing multiple consumers. The
consumer site. Delivering natural gas as ssLNG could marketing margins for these configurations are not
be advantageous for those consumers available in the public domain. Hence, the cost
of ssLNG is difficult to quantify. For this study, we
I. who are yet to be connected by gas pipelines,
calculated the prices for gas delivered through ssLNG
II. whose location lies outside of any proposed systems for a 0.1 million metric standard cubic metres
coverage area of gas transmission or CGD pipelines, per day (mmscmd) regasification capacity over 20
years at different LNG import prices, for delivery
III. or who cannot procure CGD gas at economical distances from 200 to 1,000 km.
prices.
Small-scale LNG could provide potential consumers

Economics of ssLNG
with temporary access to gas, thus helping build To estimate the delivered price of ssLNG, we
demand for pipelines. It could also serve as the considered the 2017–18 average LNG import price of
primary source of gas if no pipeline connection is 7.39 USD (INR 542) per million British thermal units
expected. Small-scale LNG would serve certain users (mmBtu) (PPAC 2020b). For this import price, the
such as large construction sites, mines, and quarries delivered price of regasified ssLNG was estimated at
better than piped gas due to their fluctuating fuel 11.11 USD/mmBtu (815 INR/mmBtu) for a one-way
needs. Small-scale LNG could also complement distance of 200 kilometres, and 11.98 USD/mmBtu
existing CGD connections for consumers to diversify (843 INR/mmBtu) for a one-way distance of 1000
supply options and optimise procurement costs. The kilometres. The price range of ssLNG is competitive
use of LNG as a transport fuel for heavy-duty vehicles with incumbent fuels such as liquefied petroleum
is being encouraged and supported by the Ministry of gas (LPG), diesel, and certain petcoke and furnace oil
Petroleum and Natural Gas (MoPNG). Small-scale LNG grades as shown in Figure ES2. Gas delivered through
systems are essential to supply LNG to the numerous ssLNG systems could potentially also be cheaper than
refuelling stations being planned across the country. CGD gas in many locations due to the high CGD selling
price/margins. The price spreads between ssLNG and
Business prospects for ssLNG diesel/LPG are high enough to ensure short payback
periods for transport and regasification infrastructure
The ssLNG market could support investments from
investment.
several stakeholders. LNG terminal operators could
benefit by providing the transport and regasification
service to enhance their reach and improve their The price range of ssLNG is
capacity utilisation. Micro, Small and Medium competitive with incumbent fuels.
Enterprises (MSMEs) could gain from a commonly
Small-Scale LNG for Expanding Natural Gas Access in India iii
Figure ES2 The delivered price of ssLNG compares favourably with several other fuels
30
26.84
25
22.56
21.83
Delivered price (USD/mmBtu)
20 21.23
15.46
15
11.98 11.74
10 9.10 11.40
10.11
8.66
7.98
3.09 3.09
0
ssLNG Coal Petcoke Furnace oil PNG LPG Diesel
Source: Authors’ analysis

Note 1: Prices for states in proximity to terminals - Tamil Nadu, Kerala, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Odisha, Jharkhand,
Chhattisgarh, West Bengal, Gujarat, and Rajasthan.
Note 2: 10th and 90th percentile of prices considered to remove outliers.
Note 3: 2017-18 average LNG import price considered for ssLNG range due to lack of data on individual import cargoes.
The break-up of price for one-way distance of 200 contributors are the truck-loading charges levied by
kilometres is shown in Figure ES3. The break-up the terminal, the value-added tax (VAT) applied on gas
suggests that, apart from the LNG import price, major in the state of sale, and the cost of transporting LNG.
Figure ES3 VAT, loading charges, abd transport costs contribute significantly to the delivered price of ssLNG
12
0.45 11.11
0.72
1.26
10
0.14 0.15
0.80
Price (USD/mmBtu)
8 7.39 0.20
0
LNG Import Truck GST on Interstate State sales Transport Regasification Delivered
import duty + loading loading tax VAT cost cost cost
price surcharge charge charge

iv Small-Scale LNG for Expanding Natural Gas Access in India
We conducted a sensitivity analysis to understand the flexibility, and movability of ssLNG infrastructure
impact of varying discount rates, the ssLNG system could be very beneficial for improving gas access.
lifetime, terminal loading charges, and VAT (results in
Figure ES4). The analysis shows that changes in the Challenges for ssLNG
discount rate on the capital expenditure (CAPEX) of
There are some challenges associated with ssLNG
setting up an ssLNG system do not significantly impact
systems, such as the possibility of transport
the delivered price of ssLNG. The delivered price
disruptions (caused by inclement weather, accidents,
of natural gas through ssLNG increases for shorter
etc.) and the limited LNG volume that can be supplied.
project lifetimes - those setting up a temporary ssLNG
Costs of retrofitting or re-engineering equipment
system must pay a marginally higher delivered price.
for consumers to use gas, and the logistical and
Still, the increase is not significant as the salvage
managerial constraints in the case of small industrial
value of the equipment has not been accounted for
consumers, also pose some challenges. However,
in this analysis. The delivered price of ssLNG varies
sound system design, resource management, and
proportionally with the changes in terminal loading
policy support can address these issues.
charges. However, it is still not significant. Finally,
reducing the VAT from 14.5 per cent (as in Kerala) to
3 per cent (as in Maharashtra) reduces the delivered The low initial costs; competitive
price of LNG significantly, by 8–10 per cent. delivered gas prices; and scalability,
flexibility, and movability of ssLNG
Our analysis suggests that the low initial costs;
infrastructure could be very
competitive delivered gas prices; and scalability,
beneficial for improving gas access.
Figure ES4 VAT has the highest impact among the considered sensitivity variables
4%
3.30%
2.90%
2%
0.78%
Base: 13.2% Base: 14.5%
0%
Change in delivered price
Base: 20 years Base: 0.8 USD/

-0.65% mmBtu
-1.03%
-2%
-2.90%
-3.44%
-4%
-6%
-7.26%
-8%
-8.79%
-10%
8% 10% 5 years 10 years 0.6 USD/ 1 USD/ 3% 5% 10%
mmBtu mmBtu
Discount rate Lifetime Truck loading charge VAT

Note: Sensitivities shown for an LNG import price of 6 USD/mmBtu and 200 km one-way distance.
Small-Scale LNG for Expanding Natural Gas Access in India 5
Policy recommendations for ssLNG in Maharashtra) while awaiting the transition of

petroleum fuels to the goods and services tax (GST)
Several regulatory and policy actions can provide an system. States can selectively reduce VAT for small
impetus through ssLNG for the increased access and customers, such that the states’ revenue collection
utilisation of natural gas. Such actions will allow India is not significantly impacted. Still, small industrial
to move towards the Ministry of Petroleum and Natural customers will be able to access natural gas.
Gas’ (MoPNG) stated goal— to increase the share of
natural gas in the country’s total primary energy supply 6. The Sagarmala initiative should promote and
(TPES) to 15 per cent by 2030. support the use of natural gas as fuel for inland
and coastal waterways transport. Using gas
1. MoPNG and PNGRB should clarify that ssLNG can eliminate fuel spillages from diesel engines in
does not infringe on the infrastructure and waterways and reduce air pollution in ecologically
marketing exclusivity of CGD on its own networks sensitive areas; ssLNG will play a crucial role by
(in the geographic area allocated to that CGD), which supporting the natural gas refuelling system along
will result in gas-on-gas competition and better the waterways.
price discovery, providing natural gas access at
competitive prices to the consumers.
2. PNGRB should consider introducing a clause in 1. Introduction

the PNGRB Regulation G.S.R.198(E) that provides
pipeline infrastructure exclusivity to CGDs Natural gas plays a significant role as a transition fuel
for an exception to pipeline/distribution network in various sectors as economies shift away from coal
connectivity within an industrial cluster. This will and petroleum fuels (International Energy Agency [IEA]
allow MSME clusters to source ssLNG, regasify it 2019). In India, the share of natural gas in the primary
at a single location in the cluster, and distribute it energy mix is only 5.7 per cent (IEA 2018). The Ministry
through a pipeline network strictly limited to the of Petroleum and Natural Gas (MoPNG) has set a target
cluster without infringing on the exclusivity rights of of increasing this to 15 per cent by 2030, underscoring
the CGDs. the significant potential for a fuel transition in the
Indian economy.
3. A vital benefit of the ssLNG system is its standardised
and modularised equipment, especially cryogenic Natural gas is currently distributed through a
tanks. The nodal agency for approving cryogenic 17,000-kilometre network of transmission pipelines
tank design, the Petroleum and Explosives from various production locations and LNG import
Safety Organisation (PESO), should approve terminals to residential, commercial, power generation,
the use of the International Organisation of and industrial consumers (Petroleum and Natural Gas
Standardisation’s ISO 1496/3 design, which allows Regulatory Board [PNGRB] 2020b). The existing network
for the containerisation of tanks for the intermodal primarily covers Maharashtra, Gujarat, Madhya
transport of LNG. PESO should also approve the Pradesh, Uttar Pradesh, Haryana, and the National
transport of these containers on railway wagons. Capital Region in the north and Karnataka and Kerala
in the south. Additionally, more than 15,000 kilometres
4. India’s railway network is extensive and can
of pipelines are under construction and scheduled for
potentially reach customers in locations with no
completion by 2023 (PNGRB 2020b). However, even
existing or planned pipelines. The Dedicated Freight
with these additions, the gas network will be unable
Corridors with faster travel times can significantly
to service large areas in several states, including Tamil
reduce the delivered cost of ssLNG. Therefore, the
Nadu, Andhra Pradesh, Odisha, Chhattisgarh, and
Indian Railways should develop specific tariffs
Jharkhand (PNGRB 2020a). These states have significant
for LNG transport and provide the necessary
industrial bases that can potentially switch to natural
infrastructural support to haul LNG freight
gas. Still, coverage depends on the construction of spur
containers, both of which do not currently exist.
lines and CGD networks to connect to critical demand
5. The VAT on natural gas sales varies widely across nodes, which could take up to a decade.
states. States can choose to reduce VAT on natural
gas consumption (such as the three per cent rate
6 Small-Scale LNG for Expanding Natural Gas Access in India
Gas pipelines have a large CAPEX outlay for delayed access for the remaining areas. Therefore, a
construction; the upcoming Jagdishpur-Haldia-Bokaro- CGD may not build a network up to individual demand
Dhamra pipeline (JHBDPL) is estimated to cost USD nodes located far from the primary grid, leaving the
0.69 million (INR 5 crore) per kilometre (PNGRB 2019b). latter without access. The ssLNG system could supply
Therefore, pipeline projects are unprofitable in many gas to such demand nodes.
cases, especially without significant viability gap
funding from the government (40 per cent of CAPEX for The transport sector could see a large uptake of LNG
JHBDPL) and the uptake of gas at expected volumes. for heavy-duty vehicles due to its cost-competitiveness
Low capacity utilisation factors (CUF) further diminish with diesel. To promote the use of LNG-fuelled trucks,
the profitability of pipelines, as is the case in the MoPNG plans to install a large number of refuelling
existing network, which has a CUF of approximately stations along major highways in the country. These
48 per cent (Petroleum Planning and Analysis Cell stations will require a regular LNG supply, which
[PPAC] 2020a). These issues can restrict the rapid natural gas pipelines cannot provide.
development of pipeline infrastructure, thus limiting
access to potential customers. Given these challenges, Small-scale LNG (ssLNG) could help increase demand
a solution is necessary to build demand for pipelines for gas and provide sustainable access. By utilising
while under construction to ensure their profitability scalable, modular, and movable assets to target small
when completed and to service those demand nodes demand nodes, ssLNG can diversify the natural gas
that will not be connected by pipeline networks in the consumer base. Doing so can help build demand
near future, or ever. for future pipeline networks such that the CUF of
the network is higher than expected in the initial
Access to natural gas depends on the reach of the years. Small-scale LNG can deliver gas to demand
gas transmission pipelines and access to city gas nodes located away from existing and future pipeline
distribution (CGD) pipeline networks that provide last- networks. Small-scale LNG could complement existing
mile delivery to customers. CGDs have infrastructure CGD connections to diversify supply options and
exclusivity over their network in the geographic area optimise procurement costs. LNG refuelling stations
allocated to them. Geographic areas are being allocated across highways will need to be serviced by ssLNG.
to CGDs at a district level, which have varying densities Short-term flexible demand requirements of large
of demand. Typically, CGDs prioritise networks in high constructions, mines and quarries could be met through
demand density areas within a district, resulting in ssLNG systems.
This brief aims to provide an understanding of ssLNG Small-scale LNG could complement
and the various configurations under which it can existing CGD connections to
operate. It offers a snapshot of the status of ssLNG
diversify supply options and optimise
usage across different countries. We discuss the
procurement costs.
opportunities for utilisation of ssLNG systems and who
should invest in such systems. We also discuss the
benefits and challenges of deploying ssLNG systems. 2. What is an ssLNG
system?
The brief includes the economics of delivered prices of
ssLNG for various distances and LNG import prices so
that end users can determine the viability of ssLNG for
their specific cases. Finally, we make recommendations In an ssLNG system, LNG is transported from one point
to transcend barriers and explore new avenues for to another using road, rail, or waterways instead of
scaling up ssLNG in India. pipelines. It is then regasified before the point of end-
use.
In this brief, we do not look at the dynamics of demand
realisation, which primarily rely on competing fuel 2.1. The ssLNG supply chain
prices and switching costs (i.e., retrofitting or replacing)
The typical supply chain for an ssLNG system consists
of end-user equipment. The rationale is that once
of the LNG liquefaction terminal, LNG receiving
the gas is accessible, market forces will resolve these
terminal, transport system, and regasification station.
issues. Since ssLNG is scalable, demand realisation can
In India, however, all LNG is imported to LNG terminals,
happen incrementally, and a priori large-scale demand
which form the starting point of the supply chain
realisation is not necessary as in the case of pipelines.
depicted in Figure 1.
Figure 1 Small-scale LNG systems use road, rail, or waterways instead of transmission pipelines
Gas pipeline
Regasification
facility (large) Demand cluster Demand node
Terminal
LNG storage
LNG tanker
Road
Regasification
facility
Filling (small)
station
Rail
Domestic
shipping

ssLNG system boundary
2.1.1 LNG receiving terminal can either access coastal locations or utilise inland
waterways. This solution, too, is limited by the location
Tanker ships carrying LNG arrive at the receiving of the infrastructure. The transport system can be
terminal’s offloading jetty, where a transfer system scaled up or down depending on demand and hence
offloads the LNG into large cryogenic storage tanks. is more suited than pipelines for developing demand
The storage tanks usually contain a buffer of 3–4 days’ clusters or meeting peak-shaving demand. In general,
supply to compensate for any supply disruptions. the cryogenic conditions of LNG storage in the tanks
Stored LNG can be regasified to a high pressure onsite permit hold times of 60–65 days, with boil-off losses of
and supplied to long-distance gas pipeline networks around 0.2 per cent per day (Chart 2013).
that feed large demand clusters. In the case of ssLNG,
the LNG is loaded at the terminal from truck loading For all the three means of transport, the LNG can also
bays into cryogenic containers for transport. As natural be used as fuel for the prime mover (especially for road
gas is imported in a liquid state, liquefaction systems and waterways). LNG use instead of diesel in trucks
are unnecessary; instead, the LNG is transported can improve engine efficiency by approximately 15 per
directly from the terminal to the consumer’s cent (Unilever et al. 2017). LNG purchased from the
regasification facility. In specific scenarios, small-scale importing terminal also costs significantly less than
liquefaction of natural gas from pipelines for delivery diesel available at fuel stations. The extended range
to remote areas in the form of ssLNG might be feasible; that LNG offers also minimises the need for fuel stops.
however, this will require a small liquefaction facility
that can be expensive. 2.1.3 Satellite storage and regasification
plant
2.1.2 Transport
LNG is transported to satellite storage and regasification
Transporting LNG for small-scale consumers is possible plants located at or near the demand node being
via road, rail, or waterways. Road-based transport is supplied. The satellite plant has the following major
common, with trucks hauling LNG containers (20–40 components.
ft long, approximately 16-34 tonnes gross weight,
approximately 20-48 kilolitres capacity) from the LNG
terminal to the satellite plant. Rail-based transport of
The transport system can be scaled
LNG using cryogenic tank wagons can help improve up or down depending on demand
efficiency, provided the rail network can connect the and hence is more suited than
LNG terminal and the demand node. Similarly, LNG pipelines for developing demand
can be transported by small LNG tanker ships that clusters.
Figure 2 Major components of the satellite plant
High pressure
High pressure consumer
Road vaporiser
HP pump
LNG storage
LP unloading
pump
LP pump
Rail
Low pressure Low pressure

vaporiser consumer
Domestic
shipping
Source: Authors’ adaptation from IGU (2015)

Satellite storage tanks transport and deliver LNG to the consumer’s

The transported LNG is offloaded (pumped) into small doorstep. The terminal charges a bundled price for
storage tanks at the satellite facility. Satellite storage the LNG, including the LNG and transport costs.
tanks sizes vary according to daily demand (referred to The consumer bears the CAPEX and OPEX of the
as ‘send-out’); in addition, a buffer amount equivalent regasification equipment.
to 3–4 days’ supply compensates for transport ii. Configuration 2: In the second configuration,
disruptions. Storage systems can be scaled up or down the consumer purchases the LNG at the terminal
to meet demand and be designed to be movable. (referred to as ‘ex-terminal’) and arranges their
own transport to move the LNG to their site and
Pumps subsequently regasifies it for end-use.
The stored LNG is pumped into vaporisers for
regasification using cryogenic pumps. Depending on iii. Configuration 3: In the third configuration, the
the demand, low-, medium-, or high-pressure pumps consumer purchases the LNG at ex-terminal prices
may be used. and contracts a logistics service provider to arrange
LNG transport to their site.
Vaporisers iv. Configuration 4: In the fourth configuration, a third
Vaporisers regasify the LNG to a suitable delivery party buys the gas from the import terminal and sells
pressure—low, medium, or high. In the regasification it to the end-use consumers. This third party may
process, the LNG is heated from cryogenic to also lease out regasification equipment to consumers.
atmospheric conditions through a heat exchange The difference between Configurations 3 and 4 is
process, typically with ambient air. Low-pressure gas that in Configuration 4, the third party owns the
is suitable for co-located consumers; medium-pressure gas, whereas in Configuration 3, the third party only
gas for commercial and residential gas networks; and provides transportation as a service.
high-pressure gas for compressed natural gas (CNG)
stations and dense pipeline networks. The first configuration is more common among
Indian consumers, as they can avoid subcontracting a
There are several variations in the design of satellite logistics service or maintaining a fleet of vehicles. The
plants, depending on demand duration and volume. second configuration is feasible for mostly mid-sized
long-term customers willing to invest in a logistics
i. Stationary systems are semi-permanent structures system. The third configuration is a classic logistics
mounted on rigid substrates, meant to supply service relevant for irregular or one -time deliveries.
medium- to long-term demand nodes. The fourth configuration is in a nascent stage, but the
ii. Skid-mounted systems utilise compact storage and most promising as it will allow for bundling of smaller
regasification units mounted on skids to meet low- demand nodes, which terminals may not be willing to
volume, short-term demand; these systems allow for serve. In Configurations 1-3, the consumer owns and
easy relocation. operates the satellite plant for regasifying the LNG.
iii. Containerised systems use small tanks and A CGD can rely on ssLNG (in Configuration 2) to cater to
regasification units that can be hauled by trucks. demand in the early days of infrastructure development
These can supply remote demand nodes or while waiting for access to a transmission pipeline. This
exceptional use cases, such as mines, on a one-time will also help CGDs prioritise grid development to areas
basis or an irregular schedule. when the built-up demand exceeds a certain economic
threshold. Finally, CGDs can use ssLNG to service areas
2.1.4 ssLNG supply configurations which cannot economically be connected by pipelines.
There are four prominent configurations possible for the
sale and transport of LNG from terminal to consumer 2.2 Opportunities for ssLNG
site. The techno-economic assessment in Section 3
considers these options: Small-scale LNG systems are applicable in several areas
and sectors, and the prominent ones are discussed
i. Configuration 1: In the first configuration, the
below,
terminal operator uses its fleet of vehicles to
i. Areas without pipeline access: While several public cheaper and more efficient LNG fuel delivered by
and private stakeholders are involved in increasing ssLNG systems.
gas pipeline coverage, numerous states and districts
will remain without pipeline access in the next iv. Consumers seeking competitive and diversified
decade. Despite extensive trunk pipeline construction supply source: Several consumers, specifically in
(in states like Chhattisgarh, Jharkhand, Tamil Nadu, the industrial sector, are currently buying expensive
Andhra Pradesh and Karnataka), spur lines and city CGD supplied gas (with high marketing margins).
gas networks are yet to materialise. Even in those These consumers can consider ssLNG as a viable and
regions with piped natural gas (PNG) availability, potentially cheaper alternative to CGD supplied gas
the delivered price of gas is often very high due to or to supplement their CGD volumes.
high selling prices (unregulated end-customer prices
& marketing margins) on CGD supplied gas. Thus, 2.3 Who should invest in ssLNG?
significant demand exists for more expensive fuels
Sections 1 and 2.2 show the potential of ssLNG to be an
such as furnace oil, diesel, LPG and CGD gas (see
effective means of distributing gas for various end-use
Figure 7). Small-scale LNG could spur industries and
cases. As such, different stakeholders can consider
small commercial and industrial clusters to switch
investing in ssLNG systems.
from these fuels to natural gas. The gas demand
equivalent to LPG use by industries is significant, at i. Industrial consumers: Industries consuming
41 mmscmd (as calculated from Petroleum Planning expensive fuels such as petcoke, diesel and LPG
and Analysis Cell [PPAC] 2020b, 2020c) for states that could have a net benefit by investing in ssLNG
can access terminals through ssLNG. Further, there is systems for sourcing natural gas. Section 3 shows
a demand of 144 mmscmd gas equivalent for diesel the economics of ssLNG and compares prices of gas
in power generation and transport in industries. (delivered through ssLNG) with incumbent fuels
However, this requires retrofitting or replacement, (see Figure 6). The techno-economic assessment
the economics of which are difficult to quantify. shows that investing in and managing transport and
regasification systems (as in Configuration 2) could
ii. Fuel stations: Heavy-duty transportation could provide a net cost-benefit to the consumer depending
benefit greatly from switching to LNG from diesel on gas demand. Large industrial consumers can also
– the lower fuel costs and potential increase in utilise ssLNG as a temporary arrangement while
fuel efficiency would allow increased margins for pipelines get built.
logistics companies or lower transportation costs
for consumers. The MoPNG expects a demand of ii. Service providers: Logistics companies could
25-30 mmscmd by 2035, with 10 per cent of trucks explore the ssLNG business for transporting gas
switching to LNG (Ministry of Petroleum and Natural between the LNG terminal and the consumer. They
Gas [MoPNG] 2020b). The Ministry has already could operate in Configuration 3 as a logistics
planned a network of 50 LNG refuelling stations provider or in Configuration 4 as an aggregator, thus
along the Golden Quadrilateral network of national commanding higher margins on the gas delivered.
highways, targeting an increase to 1,000 stations in
iii. CGD operators: Existing CGD network operators
the next three years (MoPNG 2020b). Using ssLNG
could expand the reach of their network within
systems to service these stations with fuel could
a geographic area using ssLNG, thereby avoiding
become the norm, similar to conventional fuel
the need to rely on pipelines for areas which do
stations. This provides an excellent opportunity for
not have a significant gas demand. CGDs can also
third party operators to aggregate fuel station and
develop ssLNG systems to supply gas to their pipeline
consumer gas demand to optimise their systems.
networks that are still waiting for connections to a
iii. Mines, quarries and large construction sites: trunk transmission pipeline.
Certain locations such as mines and construction
sites could benefit from ssLNG distribution systems
since such sites are usually not suited to pipeline The gas demand equivalent to LPG
connections. A large quantity of energy is consumed used by industries is significant,
in the form of diesel by heavy-duty machinery at 41 mmscmd for states that can
operating at such sites, which could benefit from access terminals through ssLNG.
2.4 Benefits and challenges of ssLNG Small-scale LNG can compete in

many cases with CGD delivered
As mentioned in Section 2.2, there is a distinct market
piped gas because of high CGD
for ssLNG distribution owing to the limitations and
marketing margins.
issues with pipeline distribution. However, certain
circumstances compromise the reliability of ssLNG.
viii. Facilities that have a pipeline connection and
Here are some benefits and challenges associated with
fixed contract volumes can be supplied with ssLNG
ssLNG.
for peak-shaving demand. There are sections of
pipelines currently running at near-full capacity, so
Benefits
ssLNG distribution will have to deliver additional
i. Small-scale LNG can compete in many cases with volumes.
CGD delivered piped gas because of high CGD
marketing margins that result in a higher delivered ix. Small-scale LNG better serves consumers with
price of natural gas. intermittent, irregular, or seasonal requirements.
ii. An ssLNG system allows demand centres (such as x. Piped gas relies primarily on long-term contract
mines and factories, typically located away from prices; however, ssLNG can exploit the spot market
populated areas) that are not connected to pipeline and leverage dips in short-term prices.
networks to access natural gas.
xi. Opting for ssLNG to supplement their existing PNG
iii. It is cost-competitive with various incumbent connections would allow consumers to optimise their
fuels such as LPG and diesel (see Figure 6) despite supply chain and procurement costs better.
the lower efficiency of ssLNG transport vis-à-vis
pipelines. Challenges
i. As ssLNG systems rely on road, rail, or waterway
iv. Multiple ssLNG players servicing the same area will
transport, they are susceptible to disruptions
bring about competition and better price discovery
to any of these modes of transport resulting
for end users.
from natural events (flooding, cyclones, and
v. CAPEX requirements for an ssLNG system earthquakes); accidents that delay travel; or human-
are significantly lower than the costs of pipeline made events such as strikes or public disorder. Such
development. Multiple operators can serve the same disruptions can be mitigated to a large extent by
area, leading to CAPEX distribution among multiple maintaining a sufficient LNG inventory that covers
entities, thus de-risking systemic CAPEX allocation. consumption or send-out for 3–5 days without
Therefore, ssLNG systems can expand more quickly needing replenishment.
than pipelines.
ii. Small-scale LNG primarily benefits end-users
vi. Pipelines typically experience low demand in the who require only a small volume. However, such
initial years of operation, reducing the project’s end users typically do not have the sophistication to
overall profitability. Such a lack of demand visibility manage their own fuel supply chain, as discussed
also hinders future expansion. An ssLNG system in Configuration 2. Even if the end-user relies on
can be utilised to build anchor demand while the Configuration 1 approach (where the terminal
pipelines are in the development phase, thereby supplies the LNG), they may not be able to secure
improving their overall viability and profitability long-term contracts. Thus, they will become
when completed. susceptible to price movements in international
markets and price changes in the terminal’s LNG
vii. Since pipelines are fixed, non-scalable assets, supply contracts. However, this is not significantly
they must be sized appropriately to have sufficient different from piped natural gas, which is susceptible
capacity to meet any increases in demand for a few to the international LNG market’s vagaries.
decades. However, there is the risk of demand
stagnating at a lower capacity and pipeline assets iii. Utilising natural gas in existing industrial
getting stranded. Small-scale LNG systems can or commercial facilities often requires some
mitigate this risk, as it is movable and scalable. retrofitting of equipment or re-engineering of
processes. This warrants some upfront capital hundreds, of small units. In such cases, there is no
investment to enable the switch from the incumbent single entity that can be held responsible for the
fuel to natural gas. Also, industrial operations logistics, common storage and regas infrastructure
are designed to use a specific fuel which provides and management of gas supply. Also, because
process stability. Changes in fuel type and the multiple units are involved, a microgrid distribution
associated uncertainty is undesirable. These issues pipeline network is necessary to move the gas
may dissuade consumers in the industrial sector from from the common receiving site for storage and
switching to LNG. regasification and the end consumers’ sites.
iv. Stakeholders misinterpret the regulation of

PNGRB offering marketing exclusivity to CGD
2.5 Small-scale LNG across the world
operators (exemption from permitting third-parties Small-scale LNG is still a developing system, with
to use CGD pipeline network) to include natural gas an estimated global capacity of only 30 mtpa in 2020
supply through ssLNG. Some CGD operators hold and (PricewaterhouseCoopers [PwC] 2017). However,
propagate the view that small-scale LNG storage and ssLNG capacity could double or triple by 2030, owing
regasification infrastructure (even for consumers’ to its significant potential in remote power generation
captive consumption) is an integral part of the applications and the transport sector (PwC 2017).
CGD network and hence eligible for infrastructure Typical ssLNG markets include countries with a vast
exclusivity, implying that ssLNG sourcing is illegal. spatial distribution of populations/industrial activity
Therefore, consumers are hesitant to contract ssLNG (e.g., China, India, and the United States of America
and invest in regasification equipment – they would [USA]) or challenging geography that limits the
prefer certainty on the policy/regulatory position potential for pipeline construction (e.g., Indonesia and
before committing investments to avoid potential Japan).
legal disputes with the CGD operators in the
respective authorised areas, if already licensed. 2.5.1 ssLNG in India
v. Several clusters of micro, small and medium Small-scale LNG presently has very little penetration
enterprises (MSMEs) in the industrial sector could in India. As the natural gas market is comparatively
potentially be good candidates for ssLNG. However, small in India, a paucity of information, visibility, and
these clusters often comprise of dozens, if not policy support compound the nascency of ssLNG. Major
gas consumers are traditionally supplied by pipeline transport) is on the rise because they are more fuel-
networks, the development of which the government efficient (Unilever et al. 2017) and LNG costs less than
continues to prioritise. diesel.
Small-scale LNG was pioneered in India by Indian Oil LNG is distributed predominantly by trucks; an
Corporation Ltd in 2007 (Indian Oil Corporation Ltd estimated fleet of 1,300 LNG delivery trucks was
[IOCL] 2020). In 2019, the company sold 36.12 thousand functional in China in 2016. The country has adopted
tonnes of ssLNG (IOCL 2019) and was the market leader waterway transport using small LNG tankers (which
in the supply of LNG by trucks (IOCL 2015). deliver LNG from large terminals to smaller ones) at a
limited scale; only two such ships were in operation
Small-scale LNG could precede pipeline construction as of 2018. There are more than six million natural gas
to build demand for the latter; Gail (India) Limited has vehicles in China, of which around 200,000 are heavy-
established this configuration in India. To enhance duty trucks (APEC Energy Working Group 2019). Strong
demand in the city of Bhubaneswar, where Gail has governmental intervention and control of prices have
been allocated the development of CGD, the company ensured the prevalence of ssLNG in the Chinese market
is transporting LNG from Dahej on the west coast (1,700 (International Gas Union [IGU] 2015).
kilometres away) using trucks. The LNG is regasified
to low pressure for city gas users and high pressure 2.5.3 Other markets
for CNG vehicles (Press Trust of India 2020). This Countries such as the USA and Japan consume large
configuration intends to create demand and make quantities of natural gas and are developing ssLNG
the upcoming long-distance pipeline more profitable. infrastructure. In both Japan and the USA, ssLNG is
Similar systems could supplement future city gas partially transported by train, using either cryogenic
networks catering to smaller towns so that distributors railway wagons (in the USA) (Levy 2020) or intermodal
can use ssLNG systems instead of relying on third-party ISO containers (in Japan) (JAPEX 2020). Iran is also
pipeline development. developing its ssLNG distribution network; moreover,
the low price of domestic gas enables the country to
Currently, the LNG import terminals (Dahej, Hazira, meet demand in remote regions (Shirazi et al. 2019).
Kochi and Ennore) supply ssLNG to a small number of Similar developments are taking place in South
industrial consumers. A lack of awareness and a limited America, with limited small-scale distribution in
supplier base which can offer flexible and customised countries like Argentina (Garcia-Cuerva and Sanz
price constructs to manage volatile gas prices also limit Sobrino 2009). Small-scale LNG is used in Indonesia
such applications. Expanding such ssLNG systems to support gas power plants, and in Europe to reach
through third party or terminal networks will help remote demand centres, CNG stations, and ship
increase the CUF of underperforming LNG terminals refuelling (APEC Energy Working Group 2019).
(such as the one in Ennore), where a lack of demand
and pipeline construction delays affect handling and
loading charges.
3. The economics of ssLNG
2.5.2 ssLNG in China
We assessed the techno-economic feasibility of ssLNG
China is by far the largest market for ssLNG, with an
distribution by comparing the delivered prices of LNG
estimated capacity of approximately 20 mtpa (in 2020),
with those of other fuels such as coal, petcoke, LPG,
predominantly in the northern and western provinces
and diesel, as well as that of gas delivered through
(IGU 2015). Drivers of ssLNG in China include policy
pipelines. We considered a baseline demand of 0.1
concerns surrounding air pollution, which prompted
million metric standard cubic metres per day (mmscmd)
coal-to-gas switching in 2017 (APEC Energy Working
for one-way distances between 200 and 1,000
Group 2019). Various sectors consume ssLNG; however,
kilometres (the total distance is double for the return
transport demand will be significant in the future. The
trip of empty containers). This volume represents the
use of LNG and CNG vehicles (especially for heavy-duty
demand of a small township or a mid-sized industrial
cluster or individual unit (using fuel for process heat).
Small-scale LNG presently has very
little penetration in India.
3.1 Methodology vi. Transport margins: In Configurations 3 and 4,

the price paid to the service provider or aggregator,
Depending on the delivery configurations mentioned respectively, for transporting LNG from the terminal
in Section 2.1.4, the delivered price for the consumer to the consumer location will include a margin (on an
includes the following components: average at 20 per cent).
i. LNG landed cost: The price at which the terminal vii.GST on transport cost: A GST of five per cent
i.
imports the LNG. We considered a range of 4‒10 USD/ (without input tax credit) is applied to the transport
mmBtu for the landed cost of LNG, which can be cost in Configurations 1, 3 and 4 (and rail transport
either a spot price or long-term contract price. in Configuration 2), as it is a service provided to the
ii. Import duties and other surcharges: Imports of consumer.
LNG carry an import duty of 2.5 per cent, with an viii.Central sales tax: If LNG is sold in a different
additional surcharge of 10 per cent applied on the state, a two per cent central sales tax is levied on
duty component. the LNG import price. Our analysis included this tax
iii. Loading charges: The terminal levies a charge to for distances greater than 600 kilometres, assuming
load the LNG into cryogenic or ISO containers; this is such distances mean that ssLNG is delivered in a
a typical tolling charge in LNG sales comparable to different state from the one in which the terminal is
the regasification charge levied for pipeline injection. located.
We considered a charge of 0.8 USD per million British ix. State taxes on natural gas: For Configuration 1, the
thermal units (mmBtu), including a 0.2 USD/mmBtu value-added tax (VAT) is applied in the state in which
(typical) margin. the terminal delivers the LNG. In Configurations 2
iv. GST on loading charges: The loading charges are and 3, the sales VAT is applied in the state in which
liable for a goods and services tax (GST) of 18 per the terminal is located. In Configuration 4, VAT is
cent, as a tax on service that the terminal renders. paid at the terminal (by the service provider) and
the delivery state (by the consumer). The VAT varies
v. Transport cost: This is the total cost in USD/mmBtu among different states (e.g., 5 per cent in Tamil Nadu
of transporting the LNG (by road or rail) from the and 14.5 per cent in Kerala).
terminal to the consumer site (Section 3.1.1). In
Configurations 1, 3 and 4, the taxable delivered price x. Satellite plant costs: This refers to the USD/mmBtu
of gas includes this cost; in Configuration 2, the for installing and operating a satellite storage
consumer bears this cost, which is not taxed. and regasification plant at the consumer site (see
Table 1 Key assumptions of road transport costs
Assumption Value Reference
Availability 0.9 Authors’ assumption
Fuel consumption 35 litres (l)/100 km (loaded) (International Council on Clean Transport [ICCT] 2017)
(diesel truck)
30% less (empty) (Maynus and Sheckler 2009)
Fuel consumption 15% less than that of diesel trucks (Unilever et al. 2017)
(LNG truck)
Average speed 40 km/hr (ICCT 2017)
Loading/unloading 1 hour each Authors’ assumption
Lifetime 10 years Authors’ assumption
Working hours 12 hrs/day Authors’ assumption
LNG capacity 48,000 l (tank trailer) (Chart 2021)

Section 3.1.2). The consumer bears this cost in all the iii. We estimated the cost of diesel based on average
configurations. prices in June 2019.
3.1.1 Transport cost iv. We assumed the cost of LNG as fuel for trucks to be
the same as the LNG price ex-terminal.
Road transport
Transportation costs involve the cost of purchasing and v. We considered 40-foot tank trailers to transport the
operating trucks (fuelled by diesel or LNG) and trailers. LNG from the terminal to the consumer.
Table 1 shows the key assumptions. Table 2 gives the cost of road-based transport.
i. We calculated the operating expense (OPEX) of trucks
based on typical costs such as maintenance, wages, Rail transport
and tolls per tonne-km (tkm) (Transport Corporation The Indian railway system is not yet equipped to
of India [TCI] and IIM Calcutta 2016). The costs were transport LNG via intermodal containers or railway
scaled (to the tonnage/mileage of a specific case wagons. We estimated rail transport costs by assuming
from those of the base case) and inflated (from 2015 that intermodal ISO containers would be transported
values) (Reserve Bank of India [RBI] 2020). as Class 180 cargo (Indian Railways Conference
Association [IRCA] 2012) under the assumptions in
ii. Freight rates were scaled based on distance (Rivigo Table 3. The rail transport costs are provided in Table 4.
2019) and LNG price (for LNG trucks).
Table 2 Road transport costs
Component CAPEX OPEX
Truck (diesel) USD 32,732 (INR 2.4 million) each (IndoTrux 2020) 0.03–0.04 USD/tkm (2.12–3.02 INR/tkm)
Truck (LNG) 30% more than diesel truck CAPEX (Barnett 2018) 0.013–0.026 USD/tkm (0.98–1.92 INR/tkm)
(Configuration 2)
Truck (trailer) USD 136,836 (INR 10 million) each (industry sources) 5 per cent of CAPEX/year (assumed)
Table 3 Key assumptions of rail transport costs
Assumption Value Reference
Availability 90% Authors’ assumption
Average speed 23.20 km/hr (Indian Railways 2020)
Loading/unloading 8 hours each Authors’ assumption
Lifetime (container) 10 years Authors’ assumption
Working hours 24 hrs/day Authors’ assumption
LNG capacity 43,500 l (ISO container) (Chart 2013)

Table 4 Rail transport costs
Train Not applicable 0.025–0.03 USD/tkm (1.82–2.22 INR/tkm) (Ministry of Railways 2020)
ISO container USD 122,748 (INR 9 million each) 5 per cent of CAPEX/year (assumed)
3.1.2 Satellite plant cost delivered cost. However, one can approximately
calculate the cost by considering an applicable
The satellite plant costs primarily include the cost of
transport tariff, a transport margin (of approximately
the storage tanks and regasification system (pump,
20 per cent) and a goods-and-services tax (GST) on
vaporiser, and piping) to meet the consumption or
transportation.
send-out requirement of 0.1 mmscmd. We made the
following assumptions:
Using a simple discounted cash flow method, we
i. The vaporiser operates at a CUF of 80 per cent. determined the cost per mmBtu of transporting and
ii. The storage system includes a buffer of regasifying ssLNG. The expenses (or cash outflow)
approximately two days’ demand (Shirazi et al. 2019, consist of (a) the capital investment for the satellite
numbers scaled to 0.1 mmscmd). station, LNG containers, and trucks in the case of
road transport, and (b) the operating costs for the
iii. A factor of 1.94 is applied to convert equipment costs
satellite station and truck or rail tariff as applicable.
to engineering, procurement, and construction costs
We estimated the tariff by setting the net present
(Shirazi et al. 2019).
value of the cash flows to zero, such that the expenses
iv. We considered a lifetime of 20 years for the satellite break even with the corresponding transport and
plant. regasification tariffs. We made all calculations on a real
currency basis.
3.1.3 Delivered price calculation method for
ssLNG Our tariff calculations include determining the right
Figure 3 gives an overview of the price build-up for all number of containers and trucks in the case of road
four configurations. The delivered price of regasified transport, and the size and costs of the satellite
ssLNG considers import costs, terminal charges, station based on the daily natural gas demand. The
transport costs, regasification costs and all applicable calculations also scale the cost of transport based on
taxes and duties at each stage. The calculation does the round-trip distance involved in LNG delivery. We
not include profit margins for the transport of LNG. developed all estimates using real currency values (with
This assumption is valid for Configuration 2, in which 2019 as the base year) and a discount rate of 13.2 per
the end-user owns and operates the transport system. cent (State Bank of India [SBI] 2019). We assumed the
Therefore, we presented the results for Configuration satellite station and trucks’ lifetimes to be 20 years and
2 only. For Configurations 1, 3 and 4, since the 10 years, respectively.
transport system’s utilisation is dependent on multiple
consumers, it is not easy to calculate a representative
Table 5 Costs of a satellite plant
Satellite plant USD 2.14 million (INR 156.7 million) USD 0.24 million (INR 17.8 million) per year (Garcia-Cuerva
(Shirazi et al. 2019) and Sanz Sobrino 2009)
Source: Authors’ interpretation of given references (numbers scaled to 0.1 mmscmd)

Figure 3 Delivered price formulae for the four configurations
CONFIGURATION 1 CONFIGURATION 2 CONFIGURATION 3/4
LNG landed cost LNG landed cost LNG landed cost

A A A
@ terminal (A) @ terminal (A) @ terminal (A)
Basic customs Surcharge D= A+(AxB%) Basic custom Surcharge D= A+(AxB%) Basic custom Surcharge D= A+(AxB%)
duty (B%) (C%) +(AxB%xC%) duty (B%) (C%) +(AxB%xC%) duty (B%) (C%) +(AxB%xC%)
Loading Loading Loading

charges at F = D+E charges at F = D+E charges at F = D+E
terminal (E) terminal (E) terminal (E)
GST on GST on GST on

loading H = F+(ExG%) loading H = F+(ExG%) loading H = F+(ExG%)
charges (G%) charges (G%) charges (G%)
Transport Central sales Sales VAT at

J = H+I J = H+(AxI%)
cost (l) tax (l%) collection state J = H+(AxI%)
(I%)
GST on Sales VAT at

transport cost L = J+(IxK%) collection L = J+(AxK%) Transport
(K%) state (K%) cost (K) L = J+K
Central sales Transport cost Transport

N = L+(AxM%) N = L+M
tax (M%) (M)# margins (M%) N = L+KxM%
Sales VAT at Satellite GST on

delivery state P = N+(AxO%) storage and P = N+O P = N+
transport cost
(O%) regasification (K(1+M%))xO%
(O%)
cost (O)
Satellite
Central sales
storage and Delivered R = P+(AxQ%)
R = P+Q tax (Q%)
regasification cost (P)
cost (Q)
Sales VAT at
delivery state T = R+(AxS%)
Delivered
(S%)
cost (R)
Satellite
storage and
regasification V = T+U
cost (U)
#
Transporting through rail will incur a GST on the rail freight charges
---- Line represents additional costs for Configuration 4; I is zero for Configuration 3
Delivered
Source: Authors’ analysis cost (V)
3.2 Baseline delivered prices and Configuration 2

sensitivities In Configuration 2, the transport fleet serves only the
consumer who owns it. Therefore, we can calculate
We made base case calculations for a natural gas the cost of owning and operating the vehicles as a part
send-out of 0.1 mmscmd. We estimated the delivered of the tariff. Table 6 shows the delivered prices of LNG
price of gas for various transport distances between for various import prices and transport distances. The
200 and 1,000 kilometres (one-way) and import prices cost of owning and operating the transport system
in the range of 4–10 USD/mmBtu (282–704 INR/ and the satellite storage and regasification plant is
mmBtu). Taxation for natural gas is still based on the included in the delivered gas price, as mentioned in
value added tax system; a basic customs duty of 2.5 Section 3.1.3.
per cent with a social welfare surcharge of 10 per cent
currently applies to imported LNG (IANS 2019). We Configuration 3
considered the highest state sales VAT of 14.5 per cent The Configuration 3 tariff and delivered price would
(of Kerala) for states with an LNG terminal (MoPNG be similar to Configuration 2, except that since a third
2020a). We assumed a truck-loading charge of 0.8 party would carry out the logistics, there will be a GST
USD/mmBtu (59 INR/mmBtu) at the terminal, with 18 component on the customer’s transport charge. The
per cent GST on this service. GST has a minor impact on the overall delivered price
of gas, and hence we did not calculate this component
Configuration 1 separately.
We have not presented the tariff and delivered price
calculations for Configuration 1 in this analysis. Configuration 4
The costs and margins for the transport of LNG by Similar to Configuration 1, an aggregator can
the terminal are not in the public domain. Each optimise the number of customers it can service
terminal in the country has a portfolio of long-term and the margins it can charge in this configuration.
LNG contracts that influence the price they charge Hence this configuration was also not evaluated
consumers. The volume uptake by consumers and the separately. However, typical margins of aggregators
duration of supply can also influence margins. Finally, are in the range of 20 per cent over the price of gas
the terminal’s transport fleet would have a higher (as calculated for Configuration 2) – one can use this
utilisation factor if it serviced multiple consumers; it is amount to approximate the incremental cost over the
challenging to consider this in the analysis. Therefore, Configuration 2 estimate of the delivered price of gas.
any estimated delivered prices for Configuration 1
would not reflect reality and the wide range possible.
Table 6 Configuration 2 delivered prices for different LNG import prices and transport distances
One-way Import prices (USD/mmBtu)

distance
(km) 4 6 8 10
Diesel LNG Rail Diesel LNG Rail Diesel LNG Rail Diesel LNG Rail
truck truck truck truck truck truck truck truck
200 6.95 6.72 6.59 9.30 8.66 8.96 11.66 11.04 11.32 14.01 13.42 13.67
400 7.19 6.89 6.71 9.54 8.85 9.09 11.89 11.24 11.44 14.24 13.62 13.79
600* 7.40 7.09 6.88 9.80 9.10 9.30 12.20 11.53 11.70 14.60 13.97 14.10
800* 7.74 7.34 6.98 10.14 9.36 9.40 12.54 11.81 11.80 14.94 14.25 14.20
1000* 7.91 7.47 7.04 10.31 9.50 9.46 12.71 11.95 11.86 15.11 14.41 14.26

*Distances for which a central sales tax of two per cent is applied.
Table 6 shows that tariffs and delivered costs are Considering a one-way distance of
lowest for rail transport. Such low costs are because
200 kilometres and the average
transporting via trains does not require capital
2017–18 import price of 7.39 USD/
investment for vehicles as in road transport. Also, rail
transport is generally more cost-efficient, although it
mmBtu (542 INR/mmBtu) the
is not necessarily more time-efficient. Transport using delivered price amounts to 11.11
LNG trucks is inherently cheaper (see Section 2.1.2). USD/mmBtu (815 INR/mmBtu).
Finally, the tariffs and delivered prices increase non-
linearly with the increase in the import price of LNG. between the delivered price of incumbent fuel and
This is due to the cascading effect of taxes levied on natural gas required to recover the investments in the
the LNG through the value chain. regasification equipment (and trucks if needed) in a
certain time frame.
Figure 4 shows the build-up of the delivered price
of regasified LNG for a typical case. Considering a We calculated the required price spread between the
one-way distance of 200 kilometres and the average delivered incumbent fuel and gas procured as ssLNG
2017–18 import price of 7.39 USD/mmBtu (542 INR/ for specific target payback periods of two, three, four
mmBtu) (Petroleum Planning and Analysis Cell [PPAC] and five years for any equipment purchased. Table
2020b), the delivered price amounts to 11.11 USD/ 7 gives the required price spread in USD/mmBtu for
mmBtu (815 INR/mmBtu). Evidently, for a given import different targeted payback periods. For Configurations
price, the state sales VAT forms a significant part of 1, 3 and 4, the consumer would purchase only
the final delivered price, as in this case with a VAT of the satellite unit’s equipment (storage and
14.5 per cent as applied in Kerala. The transport cost regasification). Thus, the price spreads are smaller
will double if the one-way distance increases to 1,000 since transportation costs would be included in the
kilometres. fuel’s delivered price. In this case, the price spread is
independent of the consumer’s distance from the LNG
3.2.1 Payback periods terminal. For Configuration 2, the consumer would
purchase equipment for both the satellite unit and
A critical decision for consumers of ssLNG is whether
the transportation (trucks and tank trailers). Here,
to invest in the regasification equipment (and trucks
the spreads are larger for a 200-kilometre one-way
as well, in the case of Configuration 2) and more
distance as the transport systems’ added cost affects
importantly, how long it will take to recover the
the payback period.
investment. One easy way to evaluate the recovery
is to determine the price spread (or difference)
Figure 4 Build-up of the delivered price for the average case
12
0.45 11.11
0.72
1.26
10
0.14 0.15
0.80
Price (USD/mmBtu)
8 7.39 0.20
0
LNG Import Truck GST on Interstate State sales Transport Regasification Delivered
import duty + loading loading tax VAT cost cost cost
price surcharge charge charge

Table 7 Price spreads for early paybacks are small Table 8 Effect of lifetime on delivered price (%) is
marginal
Payback Price spread required (USD/mmBtu)
period LNG import price 10 years 5 years
(years) Configuration 1, Configuration 2 (USD/mmBtu)
3 and 4 (distance (200 km one-way)
independent)
4 +1.04 +4.42
2 0.71 1.04 6 +0.78 +3.30
3 0.50 0.74 8 +0.62 +2.63
4 0.40 0.59 10 +0.52 +2.19
5 0.34 0.50
the LNG terminal in the delivered price. We varied
3.2.2 Sensitivity analyses the loading charge from 0.8 USD/mmBtu (59 INR/
mmBtu) in the base case to 0.6 and 1 USD/mmBtu (44
To understand the effect of certain variables on
and 73 INR/mmBtu) to determine the impact on the
the delivered price of regasified ssLNG, we carried
delivered price of LNG. Table 9 shows the resulting
out some sensitivity analyses using the base case
percentage increases. The delivered price significantly
parameters. Figure 6 summarises the effects of these
increases only at lower LNG import prices, and when
parameters.
the loading charge is a substantial part of the overall
delivered price.
Effect of the project lifetime
In the base case analysis (an import price of 7.39 USD/ Table 9 Effect of loading charge on delivered price
mmBtu and a one-way distance of 200 kilometres), (%) is modest
we considered a lifetime of 20 years for the ssLNG
infrastructure. However, to understand the economics LNG import price 0.6 USD/ 1 USD/
(USD/mmBtu) mmBtu mmBtu
of shorter lifetimes, we conducted sensitivity analyses
for lifetimes of ten years (for future gas transmission 4 -3.89 +3.89
pipeline access) and five years (in case transmission
6 -2.90 +2.90
pipelines are already under consideration). Table
8 shows the comparison; the increase in costs is 8 -2.32 +2.32
consistent across different distances.
10 -1.93 +1.93
Halving the lifetime to ten years results in a Source: Authors’ analysis

negligible difference in the delivered price. As the
cost of vehicle fleet replacement is avoided in the Effect of discount rate
tenth year, transport costs remain constant, and
We applied a discount of 13.2 per cent in our base case
only regasification costs increase. However, a five-
analysis to calculate the delivered price of LNG (SBI
year lifetime produces a noticeable increase in both
2019). A reduction in the discount rate is likely in the
transport and regasification costs. Note that the
current economic circumstances; hence, we carried
analysis considers all costs as sunk costs; we did not
out sensitivity analyses on lower discount rates of ten
include any salvage values. However, in reality, all
per cent and eight per cent. Table 10 gives the results
equipment has resale potential and could significantly
of these analyses.
mitigate the increased delivered price resulting from a
shorter lifetime.
Effect of truck-loading charges

Loading charges differ between terminals and are a
function of capacity utilisation. Figure 5 illustrates
the significant share of the loading charge levied by
Table 10 Effect of discount rate on delivered price Table 11 Effect of VAT on delivered price (%) can be
(%) is negligible significant
LNG import price 8% 10% LNG import price 3% 5% 10%

(USD/mmBtu) (USD/mmBtu)
4 -1.38 -0.87 4 -8.36 -6.91 -3.27
6 -1.03 -0.65 6 -8.79 -7.26 -3.44
8 -0.82 -0.52 8 -9.04 -7.47 -3.54
10 -0.68 -0.43 10 -9.21 -7.61 -3.60
Source: Authors’ analysis Source: Authors’ analysis
Effect of VAT The magnitude of effects of lifetime, truck loading

charge, discount rate, and VATs can be observed in
The VAT that the state applies to LNG price accounts Figure 5, for an import price of 6 USD/mmBtu and
for more than 11 per cent of the delivered price in the 200-kilometre one-way distance.
base case (see Figure 4). The base case assumes a
14.5 per cent VAT, which is the highest among states
with currently operating LNG terminals. Due to the
large disparity in VATs on natural gas among different
states, we tested lower VAT rates of ten per cent and
five per cent. Table 11 shows the effect of the lower
VATs—lowering VAT can significantly impact LNG’s
delivered price.
Figure 5 Changes in delivered prices according to sensitivity variables
4%
3.30%
2.90%
2%
0.78%
Base: 13.2% Base: 14.5%
0%
Change in delivered price
Base: 20 years Base: 0.8 USD/

-0.65% mmBtu
-1.03%
-2%
-2.90%
-3.44%
-4%
-6%
-7.26%
-8%
-8.79%
-10%
8% 10% 5 years 10 years 0.6 USD/ 1 USD/ 3% 5% 10%
mmBtu mmBtu
Discount rate Lifetime Truck loading charge VAT

Note: Sensitivities shown for an LNG import price of 6 USD/mmBtu and 200 km one-way distance.
3.2.3 Comparison of delivered prices of case of PNG, coal, petcoke, and furnace oil, ssLNG
regasified ssLNG and other fuels is competitive depending on the fuel quality and
location. LNG prices are expected to remain tepid, so it
The overall economic benefit of using natural gas
may be feasible for consumers of the incumbent fuels
depends on the cost of retrofitting/replacing existing
to switch to regasified LNG.
equipment. However, regasified ssLNG can compete
on a delivered price basis with other petroleum
3.3 Different potential applications
fuels such as furnace oil, diesel, liquefied petroleum
gas (LPG), petcoke (mostly imported grades), and
of ssLNG
higher grades of coal. To provide a comparison on We tested the applicability of ssLNG by calculating
an equitable basis, Figure 6 shows a plot of ranges the delivered price of gas to existing facilities of
of 2017–18 prices of regasified ssLNG and other different industries that are not presently serviced
petroleum fuels delivered to industrial consumers by gas pipelines. Then, we compared this price with
across the country (Ministry of Statistics and that of the incumbent fuel(s) being used (MoSPI
Programme Implementation [MoSPI] 2018). For 2017– 2018). We employed the 2017-18 average LNG import
18, we used the actual average price of imported LNG, price of, 7.39 USD/mmBtu (542 INR/mmBtu) (PPAC
7.39 USD/mmBtu (542 INR/mmBtu) (PPAC 2020b), 2020b). MoSPI’s Annual Survey of Industries 2017–18
to estimate the delivered price of ssLNG for a range provided the volumes and prices of incumbent fuels.
of distances, from 100 to 1,000 kilometres. Figure 6 We compared these prices with the delivered price of
displays the resultant ranges of delivered prices for ssLNG in the historic year 2017–18. Table 12 provides
LNG and competing fuels. The lowest and highest some examples of ssLNG applications in real-world
state VATs (for Maharashtra and Kerala) for states cases. We estimated the payback periods for the ssLNG
having LNG terminals were considered for estimating equipment needed in each case based on the price
the ssLNG price range. spread between ssLNG and the incumbent fuels.
One can observe that the delivered price of ssLNG

is competitive with that of LPG and diesel; in the
Figure 6 The delivered price of regasified LNG compares favourably with several incumbent fuels
30
26.84
25
22.56
21.83
Delivered price (USD/mmBtu)
20 21.23
15.46
15
11.98 11.74
10 9.10 11.40
10.11
8.66
7.98
3.09 3.09
0
ssLNG Coal Petcoke Furnace oil PNG LPG Diesel

Note 1: Prices for states in proximity to terminals - Tamil Nadu, Kerala, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Odisha, Jharkhand,
Chhattisgarh, West Bengal, Gujarat, and Rajasthan.
Note 2: 10th and 90th percentile of prices considered to remove outliers.
Note 3: 2017-18 average LNG import price considered for ssLNG range due to lack of data on individual import cargoes.
Table 12 Case studies for ssLNG show its competitiveness
Category Case 1 Case 2 Case 3 Case 4 Case 5
Facility type Manufacture Manufacture Cutting, shaping, Manufacture of Manufacture of

of articles of of non-metallic and finishing of glass and glass basic chemicals
concrete, cement, products stone products
and plaster
Expected Erode, Tamil Nadu Jalgaon, Palakkad, Kerala Sriperumbudur, Ernakulam, Kerala
location Maharashtra Tamil Nadu
Nearest LNG Ennore LNG Dahej LNG Kochi LNG Ennore LNG Kochi LNG terminal
terminal terminal terminal terminal terminal
Distance from 400 km 430 km 150 km 75 km 50 km

terminal
Demand 0.013 mmscmd 0.004 mmscmd 0.016 mmscmd 0.16 mmscmd 0.043 mmscmd
equivalent gas equivalent equivalent equivalent equivalent
Incumbent High-speed Diesel and High-speed diesel Furnace oil LPG and furnace oil
fuel(s) diesel, furnace furnace oil
oil, and other oil
products
State sales 5% 3% 14.50% 5% 14.50%

VAT on
natural gas
Weighted 21.99 USD/ 22.37 USD/ 22.32 USD/ 10.96 USD/ 13.01 USD/mmBtu
average mmBtu mmBtu mmBtu mmBtu
incumbent
fuel price
Delivered 10.51 USD/ 12.50 USD/ 11.28 USD/ 10.17 USD/ 11.00 USD/mmBtu
price of gas mmBtu mmBtu mmBtu mmBtu
as ssLNG
Payback <1 year <1 year <1 year 3 years 1 year

period
for ssLNG
equipment
Annual 4.72 million USD 1.56 million USD 5.65 million USD 27.73 million USD 9.05 million USD
expenditure
on incumbent
fuels
Annual 2.25 million USD 0.87 million USD 2.85 million USD 25.72 million USD 7.65 million USD
expenditure (2.46 million USD (0.69 million USD (2.79 million USD (2.01 million USD (1.40 million USD
on ssLNG saved) saved) saved) saved) saved)
Source: Authors’ analysis; MoSPI 2018

From the case studies, it is clear that ssLNG can be as Lack of competition to the
competitive as, or cheaper than, incumbent petroleum
unregulated CGD supplied gas keeps
fuels. However, it is worth noting that there could be
gas prices at an uncompetitive level.
costs involved in retrofitting combustion equipment
necessary to switch from a liquid or solid fuel to natural
gas. One must evaluate these added costs against the Legal issues regarding the use of ssLNG, such as the
savings and reduced maintenance resulting from using case of Saint Gobain India Private Limited vs Gujarat
cheaper natural gas instead of coal and petroleum Gas Limited where the latter has asserted that the
fuels. former’s use of ssLNG violates their exclusivity rights,
could significantly limit investment in ssLNG systems
(PNGRB 2018). The risk of legal disputes and challenges
4. Recommendations regarding the clarity of existing regulations would turn

away potential gas consumers, leaving CGD operators
with the position of a monopoly. The MoPNG and
Small-scale LNG systems can significantly increase
PNRGB should put out a public note clarifying that
natural gas usage in the Indian economy. However,
the exclusivity of CGD networks is limited to their
mentioned below are some measures to enable access
own pipeline infrastructure and that ssLNG does not
to natural gas through ssLNG systems.
impinge upon this exclusivity. Such clarity on the
regulations would instil confidence in the consumers
Misinterpretation of CGD exclusivity and potential third party ssLNG suppliers to invest in
The regulation of PNGRB titled ‘Petroleum and Natural ssLNG.
Gas Regulatory Board (Exclusivity for City or Local
Natural Gas Distribution Network) Regulations, 2008’ Use of ssLNG by MSMEs
provides infrastructure and marketing exclusivity to
The MSME sector consumes 30 per cent of the energy
CGD operators. The PNGRB Act and related regulations
consumed by the industrial sector. Much of this is
do not mention LNG transport by road, rail, or ships
coal, furnace oil, diesel, and petcoke, which are ideal
and ssLNG infrastructure. But some CGD operators
candidates for replacement by natural gas. Many of
contend that ssLNG infrastructure (storage and
these MSMEs are ripe candidates for utilising natural
regasification) at the consumer end should also be
gas through ssLNG as they are not connected to any
considered a part of the authorised CGD infrastructure,
pipeline grid. Many of the MSME clusters with access
thereby under the exclusive domain of CGD operators.
to piped natural gas are unwilling to switch due to
This discourages the industrial consumers interested
uncompetitive gas pricing. Hence, MSMEs can benefit
in developing ssLNG storage and regasification
from ssLNG.
infrastructure at their sites for captive consumption.
However, in most cases, MSME units are small

Additionally, the regulation on marketing exclusivity
consumers of natural gas and may not be able to source
(i.e., exemption from permitting access to third-party
and store LNG at a unit level. One option is to source
marketers/consumers to use the CGD pipeline network
LNG through ssLNG and regasify it collectively at a
for a certain number of initial operational years as
cluster level and distribute it to all the units through
decided by PNGRB) is often misinterpreted to mean
pipelines. However, such an arrangement will violate
that only CGDs can supply gas to consumers (with a
an existing CGD network’s exclusivity or the exclusivity
consumption of less than 50,000 scmd) if the CGD has
rights of a yet-to-be-built CGD network. PNGRB could
a pipeline network in their area. The ssLNG consumers
consider making an exception to pipeline connectivity
do not breach the CGD marketing exclusivity as ssLNG
within an MSME cluster in the CGD exclusivity
is transported using roads, rail, or ships up to the
regulation, thus allowing MSME clusters to source
consumer gate without using the CGD pipeline network.
ssLNG collectively.
This perception of the extent of CGD exclusivity has
somewhat impeded the expansion of ssLNG systems.
The resulting lack of competition to the unregulated
CGD supplied gas keeps gas prices at an uncompetitive
level.
tariffs for flatbed wagons suitable for ISO container

Utilising the modularity of ssLNG
transport as it does for hydrogen and petroleum liquids.
equipment Therefore, the Indian Railways should develop specific
A vital benefit of the ssLNG system is its modular tariffs for LNG transport and provide the infrastructural
equipment. For example, the tanks used to transport support necessary for hauling LNG freight containers.
LNG can also act as storage units at the regasification
site. The ISO 1496/3 standard provides specifications Reduction of VAT to promote natural
for a modular standalone tank to be used as a freight
gas
container. This containerised design allows for tank
prefilling while the truck is en route to the LNG The timeline for the introduction of GST to replace VAT
receiving site. Then, the tank can be offloaded at the on petroleum fuels (including natural gas) remains
regasification site and used as a storage unit. The elusive since state governments rely heavily on VAT
containerised tank is also intermodal – the transporter collected from petroleum fuels for revenue. Hence,
can transfer the tank from one mode, say rail, to until GST is applied, states can consider reducing the
another, say a truck, for road transport. VAT on natural gas to promote its usage. For example,
the VAT on natural gas “as a raw material or fuel in
The nodal agency that approves such containerised the manufacture of goods” is only 3 per cent as per
LNG tanks in India is the Petroleum and Explosives Schedule A of the Maharashtra Value-Added Tax
Safety Organisation (PESO). Indeed, the Static and Act. However, Kerala applies a 14.5 per cent VAT on
Mobile Pressure Vessels (Unfired) Rules, 2016 has natural gas. To limit the revenue shortfall from VAT
a reference to ISO 20421 as an option for cryogenic reduction, states may provide a concessional VAT to
pressurised tank specifications (Petroleum and end consumers,
Explosives Safety Organisation [PESO] 2016). However, a. Using less than a stipulated volume of natural gas
ISO 20421 is not meant for containerised tanks; it (for instance, less than 0.01 mmscmd), or
generally deals with cryogenic vessels with a capacity
b. generating a lower turnover than a particular
greater than 450 l, without referring to an upper limit
threshold amount. This will support the growth
on the volume. ISO 1496/3 compliant containers have a
of MSMEs while lowering the effect of air pollution
capacity of over 20,000 l for 20-ft long containers and
from this sector.
over 40,000 l for 40 ft long containers. We recommend
that PESO approve and include the reference to ISO States can also consider reducing the GST on the
1496/3, or equivalent, in its rules for pressure vessels following to make ssLNG attractive.
and, specifically, LNG transport and storage. a. On service charges of third-party ssLNG suppliers
(Configuration 3 and 4)
Development of rail tariffs specific to b. On purchase of LNG-fuelled trucks for ssLNG
LNG containers transport
The current and planned natural gas pipeline networks c. On purchase of regasification equipment by MSMEs
still leave several demand pockets without access.
Meanwhile, the Indian Railways comprehensively Small-scale LNG for waterways
covers much of India’s geography. In fact, the
The Ministry of Shipping’s Sagarmala national initiative
Dedicated Freight Corridors (DFC) will significantly
intends to unlock the potential of coastal ports and
reduce the time, and hence the cost of ssLNG delivery.
inland waterways by promoting the transport of
In combination with intermodal ISO containers, the
goods via waterways. It also aspires to reduce the
railway network can efficiently supply LNG (and hence
CO2 emissions from the transport sector by 12.5 mtpa
natural gas) to demand nodes without pipeline access.
(Ministry of Shipping 2019). Natural gas is cleaner than
However, the Indian Railways does not have specific
diesel in terms of criteria pollutants and greenhouse gas
emissions. Also, since it is a gaseous fuel, there is no
The Indian Railways should develop possibility of water contamination. Therefore, natural
specific tariffs for LNG transport gas is much better suited to power water transport.
and provide infrastructural Fuelling infrastructure of inland waterways can utilise
small-scale LNG systems. We recommend that the
support.
Sagarmala initiative make provisions for the use of https://iocl.com/download/GasBrochure.pdf.

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LNG terminals could benefit from increased

capacity utilisation through ssLNG without
depending solely on pipeline connections.
Image: Shell
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Small-Scale LNG for Expanding Natural Gas Access in India

Small-Scale LNG for Expanding

Issue Brief April 2021

Small-scale LNG utilises scalable and flexible

Small-Scale LNG for Expanding

Copyright © 2021 Council on Energy, Environment and Water (CEEW).

Cover image: iStock.

Sabarish Elango Hemant Mallya

Sabarish is a Research Analyst at CEEW Hemant Mallya, a Senior Programme Lead

Small-scale LNG distribution is made possible

Image: Shell LNG Terminal in Hazira (Surat), Gujarat

2. What is an ssLNG system? 7

2.1 The ssLNG supply chain 7

3. The economics of ssLNG 13

Table 1 Key assumptions of road transport costs 14

Table 3 Key assumptions of rail transport costs 15

Table 4 Rail transport costs 16

Table 5 Costs of a satellite plant 16

Table 7 Price spreads for early paybacks are small 20

Table 9 Effect of loading charge on delivered price is modest 20

Table 12 Case studies for ssLNG show its competitiveness 23

Figure 5 Changes in delivered prices according to sensitivity variables 21

CAPEX capital expenditure

CGD city gas distribution

CNG compressed natural gas

CUF capacity utilisation factor

GST goods and services tax

ISO International Organization for Standardisation

LNG liquefied natural gas

LPG liquefied petroleum gas

mmBtu metric million British thermal unit

mmscmd million metric standard cubic metres per day

MoPNG Ministry of Petroleum and Natural Gas

MSME micro, small, and medium enterprises

mtpa million tonnes per annum

OPEX operating expenses

PESO Petroleum and Explosives Safety Organisation

PNG piped natural gas

PNGRB Petroleum and Natural Gas Regulatory Board

scm standard cubic metres

scmd standard cubic metres per day

VAT value-added tax

Potential gas consumers without pipeline access

Figure ES1 Limited coverage of natural gas pipeline network in India

Existing gas pipeline

Authorised gas pipeline

Planned gas pipeline

Existing GAs upto eighth round

GAs covered under ninth round

GAs covered under tenth round

Part district covered under ninth round

Part district covered under tenth round

Existing LNG terminals

Up-coming LNG terminals

Source: PNGRB 2020a

Small-scale LNG could provide potential consumers

Source: Authors’ analysis

Source: Authors’ analysis

Base: 20 years Base: 0.8 USD/