• Small-scale LNG price competitive with diesel, LPG in India: CEEW study

    Small-scale Liquefied Natural Gas (LNG) could be delivered at prices competitive with diesel and Liquefied Petroleum Gas (LPG) used in the industry, according to a study released by Council on Energy, Environment and Water (CEEW).

    Small-scale LNG systems transport the gas from LNG import terminals in containers and re-gasify the fuel at consumer sites, instead of relying on transmission pipelines. The study said that in locations currently served by city gas distributors, who get infrastructure exclusivity and charge high prices, LNG can offer a cheaper alternative.

    It added that the distributors can enable new CGD networks in locations without existing gas transmission pipelines thereby accelerating the government’s mission to connect 100 new cities to natural gas.

    The study estimates the delivered price of natural gas to be USD 11.11 (INR 815) per million British thermal units (mmBtu), as compared to the average industrial prices of USD 24.04 (INR 1,764) per mmBtu for diesel and USD 16.62 (INR 1,219) per mmBtu for LPG.

    “Small-scale LNG could bridge gaps in natural gas coverage by catering to consumers without pipeline connections or those unable to procure gas from city gas distributors (CDGs) at economical prices,” Hemant Mallya, Senior Programme Lead, CEEW said.

    He added that small-scale LNG could help industrial MSME customers transition to a cleaner fuel to address air quality issues. As per the study, on the pricing factor, the biggest contributors to the delivered price of LNG are truck loading charges, transport costs, and the Value-Added Tax (VAT) levied by states.

    Here, VAT plays the biggest role in determining price and it varies greatly between states that currently operate LNG terminals. The report mentions that reducing VAT to 3 per cent (as in Maharashtra) from 14.5 per cent (as in Kerala) could bring down the delivered price of natural gas by up to 8-10 per cent.

    “As a scalable, flexible, price-competitive fuel alternative, small-scale LNG could contribute significantly to India’s plans to achieve a 15 per cent share for natural gas in its primary energy mix by 2030,” Sabarish Elango, Research Analyst, CEEW said.

    The study recommends measures for the promotion of small scale LNG use and the expansion of natural gas access in India including standards for intermodal containerised transport of LNG, special railway tariffs for LNG transport, provisions in the Sagarmala initiative for the use of small scale LNG as a fuel in waterway transport, and reduced VAT on natural gas consumption for small consumers.

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