Gujarat, a state in Western India renowned for its diversity of enterprise and business acumen, has been a determined leader for gas-fuelled energy diversification. It is home to 469 CNG filling stations and 1 million natural gas vehicles.
This is the second and concluding article about Gujarat and India’s transition to natural gas for transportation.
PART 2: INDIA – AN OCEAN OF OPPORTUNITIES IN NATURAL GAS & RNG
Under leadership of Prime Minister (PM) Shri Narendra Modi, the Government of India (GoI) has envisioned “India as a gas-based economy” and aims to increase the share of natural gas in primary energy from the present 6.2% to 15% in the coming decade.
According to NGV Global statistics, India is ranked third worldwide for gas-powered vehicles, behind China and Iran.
The government’s determination to fully embrace natural gas as a fuel will help the country meet COP 21 commitments to curb climate change and pollution, contribute to the government’s target of 10% reduction in the cost of crude oil imports and help alleviate pressure on the current account deficit (CAD).
City Gas Distribution Licenses
Through the Directorate General of Hydrocarbons (DGH) and Petroleum and Natural Gas Regulatory Board (PNGRB) under the Ministry of Petroleum and Natural Gas (MoPNG), a significant push for indigenous production and consumption of natural gas respectively is occurring. Before the 9th round, PNGRB has proactively addressed major industry concerns by revising City Gas Distribution (CGD) regulations. These included:
- Incentivising investors by extending the marketing exclusivity period from 5 years to 8 years (up to 10 years);
- Removing an additional bid bond evaluation on the basis of infrastructure creation; and
- Providing sufficient checks like tariff floors to discourage unviable bidding and penalties so as to meet minimum work program commitments by the CGD bidder in which 20% weightage is given to CNG stations.
In April 2018, PNGRB launched the 9th CGD bidding round for 86 geographic areas (GA). 406 Bids were received from 38 companies in July and in August LOI / licenses were awarded for 82 GA to 22 gas companies. In November 2018, PNGRB launched the 10th CGD bidding round for 50 GA, with licenses to be awarded in February 2019.
The objectives for the next decade are massive and mirror the rapid rise of natural gas for transportation evidenced in Gujarat:
- 70% of India’s population and 53% area (27 states and UT) will be connected through more than 113,000 km of natural gas pipeline
- CNG stations will rise to more than 10,000 compared to 1,491 stations today
- The NGVs population will rise from present 3.2 million to more than 15 million.
In October 2018, PM Modi inaugurated India’s 5th and Gujarat’s 3rd R-LNG terminal in Mundra. Liquefied Natural Gas (LNG) supply is forging ahead on both coasts with 10 new R-LNG terminals (5 on west and 5 on east coast) coming up. Together with the four existing terminals, overall capacity will reach 72.5 MMTPA.
Petronet LNG Limited, which set up the country’s first LNG receiving and regasification terminal at Dahej, Gujarat, and another terminal at Kochi, Kerala is implementing a 3-phase plan to establish a nationwide LNG refuelling network. IndianOil, BPCL and other companies will join Petronet to establish more than 20 LNG stations on five national highways as a first stage. Licensing body PESO has notified the regulation for LNG fuelling stations.
The Ministry of Road Transport and Highways under Central Motor Vehicle Rules has approved LNG as an automotive fuel for long haul trucking and agricultural tractors for farming. It is estimated that using LNG will reduce fuel costs for truck owners by about 25%. As a pilot program, GoI plans to run 5,000 trucks on LNG in 2019. Thereafter and based on the outcomes of that trial another 5000 trucks will be converted to LNG in 2020.
The LNG focus is not just on road transportation. India has already bunkered passing vessels with LNG, the first in February 2015, and more bunkering facilities are planned as international operators respond to the demand for cleaner shipping.
The Ministry of Shipping and Inland Waterways Authority of India (IWAI) is making efforts to promote liquefied natural gas (LNG) as an environment friendly fuel for transport thru inland waterways and marine.
Additionally, State-owned Indian Railways, through its Indian Railway Organisation for Alternate Fuels (IROAF) is trialling LNG for its locomotives as a much cleaner alternative to diesel. There are already several Diesel Electric Multiple Units (DEMU) that have been converted to Compressed Natural Gas (CNG) operation. GAIL (India) Limited and Indian Railways have recently partnered to pave the way for supply of natural gas to railway workshops, integral coach factories, loco workshops, DEMU sheds, etc., located along the existing and upcoming pipeline networks of GAIL.
Small scale R-LNG solutions are also widely accepted both by bulk gas industrial consumers and CGDs where pipeline is not available. This will add further impetus to NGV growth by introducing L-CNG stations in areas where pipeline gas is not available.
Renewable Natural Gas – BioCNG
India is largely an agricultural country and 65% population lives in rural areas. India produces approx. 450-500 million tonnes of biomass per year. To deal with pollution caused by stubble and agro waste burning, encourage entrepreneurship in waste-to-energy (WTE) and help farmers diversify their income, in May 2018 GoI launched National Biofuel Policy 2018 to promote Bio Fuel and Compressed Bio Gas (CBG / RNG / Bio-CNG).
In September 2018, MoPNG took CBG under their purview and in October it launched Sustainable Alternative Towards Affordable Transportation (SATAT), a scheme that targets 5000 CBG plants, for which it is inviting applications till March 2019. Under SATAT, MoPNG through their oil marketing companies (OMCs) assures 100% offtake and offers good rates for purchase of CBG. Licensor PESO has amended Gas Cylinder Rules (GCR) in 2018 to include storage and handling of CBG.
Gujarat has been a model state and leader in natural gas and RNG for transportation and distribution in India. It will continue to lead by example as the national Government strives to meet its COP21 goals.
The initiatives by GoI in natural gas production and distribution, supply security, biofuels and CBG are fuelling ample challenges. That’s where opportunities lie for NGVs and gas distribution in India across the value chain: from skilled manpower to efficient and innovative technologies to affordable and sustainable funds to innovative business models.
This two-part article has been prepared in consultation with Mr. Darshan Soni, CEO and Founder, Neet-Vasant Pvt Ltd. The company has been formed to serve the Renewables and Conventional energy sectors in India.
Part 1 of this article is available here: Gujarat Leads India’s Efforts to Become a Natural Gas Based Economy (Part 1)
(Supporting bibliographical references are available on inquiry.)