India on the Highway to Gas Era

India appears to be sprinting towards becoming the latest country to run long-distance trucks and buses on
LNG (natural gas imported in ships in liquefied condition and then re-gasified for domestic use) in order to
reduce air pollution from vehicular emission. After approving this green fuel for automotive use, the
government has now outlined changes in the gas norms to construct the way for LNG re-fuelling stations and
help start service in LNG vehicles.

The commerce and industry ministry has notified the rules governing the use of cylinders carrying gas under
pressure. This will help establish storage and supply chain for LNG stations through 'daughter trucks', just like
for CNG stations in cities. "Use of LNG as transport fuel highlights in the priority list of Modi Govt. Proposed
regulations will help in setting up the required infrastructure," Oil Minister Dharmendra Pradhan.

India's biggest pollution factory i.e. long-haul goods and passenger transport fleet is in for a green makeover as
truck and bus manufacturers such as Tata Motors, Ashok Leyland, Mahindra & Mahindra and Bharat Benz are
stepping on the pedal with LNG version of their vehicles. Some of these manufacturers are believed to have
already applied for vehicle 'type approval'.

The makeover is being driven by Petronet LNG, India's largest LNG importer. Petronet is on the verge of setting
up around 20 LNG stations at petrol pumps on highways along the west coast that connect Delhi with
Thiruvananthapuram covering a total distance of 4,500 km via Mumbai and Bangalore. They are going for a
head start with talks already started with oil marketing companies for LNG facilities at petrol pumps and
Petroleum and Explosives Safety Organisation for clearance.

Petronet, which operates a 15 million tonne-a-year LNG terminal on the west coast, is preparing to invest as
much as ₹1,500 crores on a network of LNG filling stations on highways to promote the use of the fuel by
trucks and buses. Petronet is eyeing 2.5 lakh new trucks and 85,000 buses that join the fleet every year.
Besides this, Gujarat and Kerala road transport corporations are also interested for running 20 and 10 LNG
buses, respectively, in the first phase. Altogether, potential of 8-9 million tonne of annual LNG sales in the
automotive sector can be seen annually.

In accordance to this, Shell plans to build a truck-loading station at its LNG terminal in Hazira in western India
that will be used to service fuelling stations and small industrial customers.

This will make the Indian transport sector the latest entrant behind a handful of nations led by the US and
China - to the LNG contingent. For a country where the transport sector gulps 40% of diesel sales, the
environmental benefit from LNG, in terms of reduced vehicular pollution will definitely be huge.

Globally, natural gas vehicles displace 1.5 million barrels a day of oil. That number could double by another 5.6
million barrels a day, equivalent to China's oil imports in 2015 - by 2021.

Home-grown Tata Motors has taken the highest interest in LNG, with the debut of country’s first LNG-powered
Tata Marcopolo LNG Bus (LPO 1613) in Kerala. In fact, the company was the first OEM here to come up with
gas-run heavy truck Prima 4032.S LNG, displayed at 2014 Auto Expo. Eco-friendliness and soft price make it a
compelling alternative fuel as LNG is also cheaper than diesel by nearly 40 per cent and almost 15 per cent
dearer than CNG as well. It is also reported that other domestic CV makers including Ashok Leyland, Mahindra,
and BharatBenz are developing LNG variants of their products. In the supply side of the LNG, India’s largest
importer of LNG while Petronet and Reliance Petroleum have expressed their interest in offering LNG at fuel
stations.

Companies extending from Royal Dutch Shell Plc to Petronet LNG are placing high bets that a super-chilled
form of natural gas, and not oil products like diesel, will definitely be the fuel of choice for heavy-duty trucks
that drive domestic trade in the world’s fastest growing economy. They are hoping that lower emissions and
cheaper natural gas will lead truckers to buy the more expensive systems that burn the fuel. These investments
are coming as the country, which has some of the world’s most polluted cities, is seeking to cut emissions and
its import bill by doubling the share of gas in the energy mix to 15 per cent.

So basically, encouraging LNG as a transportation fuel is crucial for one of the top automobile markets in the
world, where about 70 per cent of vehicles still run on diesel. Gas replacing liquid is not only simple economics,
but also a huge amount of convenience and comfort.

Interesting Pros

There are two cases for LNG — one is environmental and the other is economic. LNG is cheaper than diesel. It
is still cheaper when maintenance is to be counted. Since it is cleaner, so fewer lubricants are required, less
engine oil is used and less is spent on wear and tear.

Trailing Cons

Petronet plans to start with four LNG-fuelled buses to ferry its employees at Dahej and Kochi terminals as early
as April. It also will run some LNG buses as a pilot for State-run transport companies in Gujarat, Rajasthan and
Kerala. The company has identified 4,000 km of highways on the west coast to set up 20 LNG refilling stations.

That’s just a drop in an ocean compared with the approximately 60,000 retail pump stations that service petrol
and diesel vehicles throughout the country. India is also lacking a mature supply chain to build onboard storage
tanks for LNG, which needs to be chilled to minus 160 degrees Celsius. The biggest challenge is developing a
network and supply chain for LNG refuelling stations.

The second key challenge is the lack of local on-board cryogenic storage tank manufacturers. This leads to high
costs and pushes up the total cost of ownership of LNG trucks.

Yet, the LNG dialogues happening in India are solely related to conventional natural gas that are non-
renewable and only imported. There is a definite need for a much `cleaner´ approach to auto LNG, by
encouraging local and commercial production of Bio-methane. Both the government and the auto industry
have to work together in this regard, so as to extract the real eco benefits of using LNG in CVs.

Authors:

Anshul Gupta
Consultant – Energy Practice
Feedback Business Consulting Services Private Limited
aditya.r@feedbackconsulting.com I www.feedbackconsulting.com