[NGW Magazine] India sees transport as major gas user

Transport will have to step up its use of gas if India is to achieve its goal of doubling the share of gas in the energy mix – a target set by concerns about the nation's health and its economy.

In India, the talk these days is all about LNG: specifically, about the infrastructure and the potential for demand to grow as the present government aims to take the share of gas in the national energy mix from about 7% at present to 15% in next five years. Not only is the government looking to reduce the chronic pollution plaguing Indian cities by promoting a cleaner fuel, but it also is aiming to save money by reducing imports of liquid hydrocarbons like petrol and diesel.

With the global LNG market expected to remain in surplus till at least the early part of next decade and a number of LNG import terminals expected to appear along the east and west coasts of India, supply of the commodity is not likely to be an issue. The government is working on expanding the gas pipeline network in the under-served eastern states of India, while private players are working on providing small scale LNG solutions to cater to consumers who will remain beyond the reach of the pipeline grid.

However, the industry is struggling to make the demand side of the equation stack up in the next decade: which sectors of the Indian economy will be the big consumers of natural gas; and what needs to be done to harness that demand. A conference, NGV India Summit 2017 held in New Delhi August 10-11, tried to address these issues.

The head of the Energy and Resources Institute (Teri) Ajay Mathur argued that the power sector as a demand pocket for natural gas is completely ruled out because of the overcapacity and competition from coal and renewables. India’s total power generation capacity presently stands at 320 GW, of which 190 GW is coal based and 25 GW is gas based. The total offtake is 160 GW which points to a huge overcapacity.

“In the past couple of years, no new financial investment proposal in the power sector has been approved. For many more years there will be no power plant construction. We believe there will be no major investment in power sector until 2024-2025,” Mathur said.

Gas-based power generation is expensive vis a vis coal; and the recent drop in the price of solar power generation in India has made it cheaper than even coal. Mathur believes that the generation cost of solar power has still more room to fall in India. Solar power is of no use when peak demand is at night time but if there is a further fall in the cost of solar power generation, that would help to absorb the price of batteries or hydrogen fuel cells that can store the solar power being produced during the day.

“Say in the next three to five years, we may have a situation where the cost of solar power generation plus the cost of storage can still match coal-fired power. Going forward there will be no major investment in the traditional power sector,” he argued.

Pipeline gas

The way power sector is shaping up in India, therefore, is not very promising for gas. But according to Mathur there are new areas emerging that can be significant consumers of gas in India.

It is a well-documented fact that Indian urban clusters are facing severe challenge when it comes to air quality. Big cities like Delhi are among the most polluted cities in the world and one of the major causes of air pollution is burning of biomass in rural areas in the vicinity.

This is the case with other big cities in India as well. Biomass in all its forms – firewood, charcoal, animal dung and agriculture residues – is the primary source of fuel for poor households in the countryside, unable or unequipped to use other fuel types. To address the problem, the Narendra Modi government launched the Ujjawala Scheme, a welfare program, in 2016. The stated objective of the program is providing 50mn LPG connections to women from families below the poverty line. As of April 2017, 20mn LPG connections had been completed.

According to Mathur, while greater penetration of LPG is happening in rural areas, more and more cities in India are getting connected to pipeline natural gas supplies, a significant development when it comes to generating demand for natural gas in India's economy.

Cities like Mumbai, Delhi and Bangalore are already seeing the network expand at a fast clip; while more cities, especially those in the under-served eastern states of India, are expected to get mains gas in the next few years. India’s biggest gas marking company Gail is working on the ambitious $2bn Jagadishpur-Haldia-Bokaro-Dhamra Natural Gas Pipeline. The 2,539-km pipeline is expected to be fully completed by December 2020.

The first phase of the pipeline will be complete by end-2018 and the second phase by end-2019. This pipeline will connect the eastern states of Uttar Pradesh, Bihar, Jharkhand, West Bengal and Odisha. The government of India will partially fund the gas pipeline project. The project will also see city gas distribution networks set up by Gail in seven important towns in east India: Varanasi, Patna, Ranchi, Jamshedpur, Kolkata, Bhubaneshwar and Cuttack.

According to Mathur, the current economics too favour this. The price of LNG at ports in India is only a third or a fifth of what consumers pay for their gas, so there is a wide margin; and with economies of scale leading to a drop in the price that consumers pay, there would be enough of a margin. “So, there is a very large cushion to incentivise the creation of a wide piped gas network in India,” he says.

With such massive overcapacity in power sector, a scenario is emerging where more and more vehicles can be converted to electric powered ones, especially two- and three-wheelers. Electric rickshaws have already become very popular in cities like Delhi with the E-Rickshaw bill getting passed in Indian parliament in 2015. The pressure to reduce imports of automotive fuels like petrol and diesel will also be an enabling factor in sales of electric passenger vehicles.

“If we assume that future Indian power sector will be dominated by renewables, it takes us to a longer-term future where the vehicle industry could also become low or zero carbon as they use more and more electricity. However, there will still be some sectors which will not be powered by electricity such as trucking. The only way we can have more efficient, lower carbon trucking by moving to LNG and not CNG. This will require creation of infrastructure of both filling stations and LNG powered trucks,” he said.

Chicken and egg 

The present situation in India is classic chicken and egg where oil and gas marketing companies are reluctant to set up LNG filling stations because there are no LNG powered vehicles, while vehicle manufacturers are not aggressive in offering LNG vehicles because there are no filling stations. Although the Indian government recently notified LNG as automotive fuel, Mathur believes that some kind of intervention will be required which simultaneously looks at creation of filling stations and LNG powered trucks.

“There will be a huge change in the Indian trucking industry with the move towards LNG. It will start in a small way, on few highways but over a period of time this will be the way forward,” Mathur said.

Indian Oil Corp's chief general manager for gas marketing, GSP Singh, quantified the potential LNG demand that can be created in the Indian heavy commercial vehicle space. According to latest government estimates, India consumed about 76mn metric tons/yr of high speed diesel in 2016-2017. Using the 2013 government data on the share of diesel consumed by trucks and buses, Singh told the conference that in 2016-2017 trucks consumed about 21.4mn mt/yr of high speed diesel while buses consumed about 7.26mn mt/yr, a combined total of 29mn mt/yr or about 24mn mt/yr of LNG equivalent.

“Even if we start switching to LNG at about only 10% every year, it translates into LNG demand of 2.4mn mt/yr. So, there are enough opportunities for all stakeholders,” Singh said.

SIDEBAR: Bringing gas into trains

Although LNG as transport fuel for the trucking industry in India has been well highlighted, another major demand centre could emerge in the shape of Indian Railways.  The state-owned transporter has in is recent times speeded up plans to use more gas, in either liquefied or compressed form. With the objective of reducing energy bill as well as carbon footprint, the national carrier has deployed the Indian Railway Organisation for Alternate Fuels (IROAF) to seek alternate modes of traction. Presently most of the railway engines are powered by electricity or diesel.

Speaking for the IROAF, the chief mechanical engineer GK Gupta told the conference that Indian Railways has started incorporating compressed natural gas into its dual-fuel fumigation technology on its diesel electric multiple units (20% substitution of diesel). Twenty diesel power cars (DPC) have been converted into dual fuel engines while five more DPCs are under conversion and process initiated for 30 more. Gupta said that 10 DPCs will be converted into LNG-based dual fuel DEMUs.

The plan is to further take dual fuel to all DEMs of Indian Railways and improve substitution to 40%. With current 20% substitution, IR has been able to save 8% on fuel costs and it expects to save 20% with 40% substitution.

Gupta said that the organisation is also moving towards adopting dual fuel technology in its mainline locomotives. IR is working on LNG mainline locomotive specifications for a dual fuel LNG locomotive. Initially 20 mainline locomotives are to be converted into dual fuel LNG locomotives. 

Fumigation allows the introduction of gas into the engine at the combustion air inlet, replacing some of the diesel, and need not imply any loss of engine power, availability, or reliability, according to engine manufacturer Woodward.