Global energy giant Shell will foray into retailing LNG for long-haul transportation like trucks, with its first filling station coming up in Gujarat this year as it bets big on the Indian gas market, a senior company official said.
Shell operates a 5 million tonnes a year liquefied natural gas (LNG) import facility at Hazira in Gujarat and has a small network of petrol pumps. It is now looking at the LNG for trucks/buses market as a growth avenue.
“We are looking to develop our own LNG sites and retail stations in the country,” Nakul Raheja, country head of Shell Energy India, told PTI.
“So we are working now on our own expansion plans in this place and if things go to plan, then within this calendar year we should have our first site ready selling LNG as a transport fuel to heavy duty vehicles in the state of Gujarat and we are going to follow that up with a few more sites next year,” he added.
While the first site is likely to be an exclusive LNG retail outlet, the company may in the future look to co-locate the LNG refuelling facility within petrol pumps.
“We are starting off with Gujarat in the vicinity of Hazira. Of course, as a very natural place to first start with around Surat and then logically expand, you know, further into Western India to begin with and then working on plans beyond that,” he said, adding the company may have three-four sites in next 12 to 18 months.
The government is pushing the use of LNG as fuel for long-haul transportation. It is targeting 50 stations in Gujarat, Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Rajasthan in next three years and ultimately 1,000 outlets.
LNG, which is natural gas super-cooled to liquid form, has much less carbon footprint than diesel. Besides environmental benefits, it is also cheaper on long-haul routes.
China consumes 12 to 13 million tonnes of LNG in this segment annually. This is half of all LNG that India imports for use in power plants, fertilizer units, city gas and other industries.
“I look at India as being one of the few markets around the world where actually we can replicate the kind of size and scale that China has achieved. Of course, this takes time because you have to start side by side, truck by truck, fleet by fleet, customer by customer.
“But if you kind of fast forward 10 or 15 years, you can absolutely get this to become very material. Potentially, double digit million tonnes of LNG by that time frame,” he said.
Shell will be the first private firm to foray into LNG retailing for long-haul transport. As of now, state-owned oil giants Indian Oil Corporation (20 stations), Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation (11 stations each), GAIL India (six stations) and Petronet LNG (two stations) have announced LNG stations.
LNG for long-haul transportation is part of the government’s plan to raise the share of natural gas in the primary energy basket to 15 per cent by 2030 from the current 6.7 per cent.
Raheja said to reach 15 per cent share, gas consumption has to grow to 500 million standard cubic metres per day from current 161 mmscmd.
With domestic production of gas barely meeting half of the current consumption, import of gas in the form of LNG will have to grow.
“We are projecting India to be one of the fastest growing markets for LNG in the world. We are seeing nearly 35 to 40 million tonnes of LNG demand growth in India alone in the period between 2020 to 2040,” he said.
Asked about expansion plans for Hazira, he said there is room to expand the capacity depending on market growth.
“But again we think about expansion in a very linear sense. After we bought out Total’s (26 per cent) stake at Hazira (LNG terminal) about three years ago, one of the first investment decisions we made was to set up a truck loading unit at Hazira. That has now been operational for more than a year and that has already added more capacity,” he said.
For the share of natural gas in India’s energy basket to grow, the pace of rollout of trunk pipeline infrastructure must continue and the gas must be included in GST.
“We need to continue to bring new markets into the fold that includes inter-state transmission, and also potentially intra state transmission infrastructure,” he said, adding the city gas distribution network should continue to grow as it will fuel replacement of liquid auto fuels with gas (CNG) and piped cooking gas to household kitchens and industries.
“I think there is also a scope for us to kind of create a bit of a national level energy road map as a whole because we are talking about green hydrogen, we are talking about ammonia, we are talking about gas, we are talking about coal, we are talking about number of energy sources and each of them kind of is going to be on their own journey through this energy transition, bringing it all together to then say that, OK, this is the role that gas will play in these different segments.
“Again, helps create the confidence for various industry sector participants to make those long term commitments,” he said.
Natural gas, just like petrol, diesel, ATF and crude oil, is out of the purview of the Goods and Services Tax (GST), which means tax paid on inputs cannot be set off with that on output.
Raheja said gas is at a disadvantage to coal and this creates artificial barriers.
“You can’t create a credit for the tax you pay on gas today for, for example, all of which is kind of completely avoidable. So bringing it under the ambit of GST will make, I think, a big difference in the use of gas in the country.”
Bringing gas under GST will also make it affordable.
“It will also make it more tradable across states and so on. And it will just make the ease of doing business also in this space a lot easier,” he noted.
“India is an incredibly exciting energy market. We have for the last two decades played an important role in the gas market, in the LNG market in the country and we certainly want to grow along with it.
“So as the need and demand for gas grows, we want to play our role in it. So whether it’s creating more supply infrastructure, whether it’s providing LNG as a transport fuel, all of those areas are certainly of our interest,” Raheja added.