The Hazira liquefied natural gas (LNG) terminal in Gujarat will have an LNG truck-loading unit by 2019 for distribution of the fuel in off-grid areas where there are no gas pipelines and one of the promoting companies of the terminal, Shell India, also plans to enter LNG downstream business in the country. “It (LNG) has got potential in India because energy supply reliability is a big issue and for a lot of off-grid demands which typically rely on diesel at the moment, LNG could be a very economical alternative. There has not been much supply infrastructure in place but terminals are now putting truck loading facilities in place. So both LNG as truck fuel and LNG transported through trucks are options,” said Steve Hill, executive vice-president, Shell Energy during the LNG Discovery Programme 2018 here on Friday. While Shell Gas, part of Royal Dutch Shell, owns a 74% stake in the Hazira terminal, the rest is owned by Total Gaz Electricite France, a unit of Total. Shell had earlier set up a team in Singapore to promote the gas market in India. Hill said while it is hard to predict the timing but ultimately Shell sees a rapid growth in gas demand in India. The Indian government is committed to promote natural gas in the country and increase the fuel’s share to 15% in the energy mix from around 6.5% at present. The company plans to supply LNG loaded on trucks to industrial units such as power plants, fertilisers and petrochemicals, among others.
In terms of LNG as a vehicle fuel, China has already started using LNG as fuel for trucks and buses with 300,000 using such heavy vehicles using the fuel. “China is clearly the fastest-growing LNG market right now and I think India has a lot of potential to be the next biggest growth market. I think a lot of the factors that we look at that drive LNG growth are present in both these countries. “Both the countries have huge population, rapidly growing economies, air quality challenges with low gas penetration in the energy mix. So, all the factors that have been behind the gas demand growth in China also exist in India,” said Hill. Talking about the investment it will take to set up LNG facilities in India, Hill said the big investment has already been made through Hazira and the truck loading facility will be quite a small investment comparatively. However, the retail fuelling business will require material investment. In total, there are over 2,000 LNG fuel stations in China. “LNG truck fuelling option is a part of our gas reach-out business in India,” said Hill. Hill believes that growing gas business in India is not a function of capital investment as a lot of infrastructure, including pipelines, already exist, but it is a function of taking commercial risks and going for the LNG downstream and making different types of deals with different types of industrial customers. Shell recently launched its LNG Outlook 2018 which says that customers are now seeking short-term LNG contracts instead of long-term contracts which is affecting the investment scenario. When asked how does renegotiation of long-term contracts, as done by India in the recent past, affect the confidence of suppliers, Hill said situations change over the life of a long-term contract and if buyers and sellers can sit down together and come up with better solutions which works for both parties, then that is a good thing. “The LNG industry has always been able to solve problems even though it has been underpinned by long-term contracts. The renegotiation by India may have been more transparent than others in the industry but it is not unprecedented. The important thing is that renegotiations should happen in a manner in which both parties are happy,” Hill added.
(Travel for this report was sponsored by Shell)