Japanese consulting firm, Nomura Research Institute (NRI Consulting & Solutions) recently released a study on India’s CNG (compressed natural gas) infrastructure and its future, titled ‘Transforming Mobility Through Natural Gas’.
The report finds that the existing volume of oil import is posing a monetary as well as a strategic burden on the Indian economy leading to an imminent need to reduce import dependence. It says that while EV adoption can be a potential solution to this issue, the pace of adoption and financial viability still raises many questions.
“NGV’s (Natural Gas Vehicles) can play a big role in transforming mobility in India, as an automobile fuel, natural gas is a proven technology in terms of providing better air quality, sustainability and eco-friendliness. A favourable policy is required for promotion of natural gas vehicles (NGVs) through development of CNG infrastructure to increase customer acceptance and provide cost competitiveness,” said Ashim Sharma - Partner and Group Head, NRI Consulting & Solutions India.
It says that the primary energy consumption in India is largely dependent on coal and imported crude oil, the report further highlights the transport sector as one of the major contributors to the crude oil burden as it makes up for around 53 percent of demand of petroleum products.
On the other hand, globally the natural gas resources is available in abundance (796 TCM) and is geographically dispersed, where India holds around 4 TCM of gas reserves. While, global production of NG (natural gas) has risen steadily over the years, in India the production has declined since 2011 due to reduced production from KG basin. It says although around 50 percent of natural gas is imported, the per unit energy import cost is 44 percent cheaper than crude oil and is expected to remain the same.
CNG and LPG as alternate fuel
The CNG vehicle in the country has risen over the years. The CNG infrastructure acts as the main driver for CNG vehicle demand, which has led to OEMs increasingly offering CNG variants in passenger, commercial and goods vehicle segments. In addition, CNG retro fitment technology can be leveraged to convert existing vehicles running on conventional fuels. This will help as many as 7 states benefited after 10th round of CGD (City Gas Distribution) making up for 55 percent of the total vehicle sales in the country as of FY2018. After the 9th and 10th round, CGD infrastructure will cover 52 percent area and 72 percent population and will make natural gas accessible across the country.
Nomura's finding predicts that the cost competitiveness, infrastructure development and domestic manufacturing will make LNG a promising alternative for long-haul trucks and intercity buses. Due to the higher energy density of LNG, these vehicles will have longer driving range than that of CNG and will require cryogenic tanks to store the fuel at -162 degree C.
The mono-fuel LNG trucks from leading OEMs are available in the European and US markets and OEMs are also developing dual fuel LNG trucks. The increase in use of LNG worldwide as an economically viable and environmental friendly fuel for trucks is encouraging LNG vehicle development in India too. The report says that different configurations of the LNG stations are available which can be deployed according to requirements.
Nomura says that the upcoming LNG terminals will bring natural gas supply to underserved states, while LNG infra on the major highways is needed for LNG adoption. The increase in LNG production and export capacity, along with flexible contracts will lead to increased competition among LNG suppliers, which will make natural gas prices attractive for the end-consumers in the short term.
The report by NRI Consulting concludes with an outlook that CNG infrastructure development is expected to complete in a timely manner thereby giving boost to CNG vehicle sales and a similar boost to LNG infra will lead to added benefits. The demand push resulting from countrywide infrastructure will incentivise OEMs to launch dedicated NGV platforms leading to better economies of scale and efficient products. Localisation of NGV components such as LNG cryogenic cylinders and certain CNG powertrain components will reduce the acquisition cost for the customer boosting their TCO savings. Also, implementation of BS-VI emission norms will increase price differential between CNG and diesel vehicles, making CNG vehicles more attractive.