The global demand for liquefied natural gas (LNG) is experiencing rapid growth, reaching over 360 million tons in 2020, a significant 48% increase compared to 2015. This surge is driven by the emergence of newer applications for LNG at a smaller scale in industries such as agriculture, industrial boilers, and as a bunkering fuel for vessels.
The abundance of affordable LNG supply has resulted in benefits such as emissions reduction, energy security, diversity, and cost savings, further boosting the demand for LNG. According to Royal Dutch Shell, the demand for natural gas is expected to reach over 4,500 billion cubic meters by 2035, from 3,600 billion cubic meters in 2018.
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Increasing Interest in Small-Scale LNG (SSLNG)
With the rising demand for natural gas, interest in SSLNG has grown significantly. SSLNG refers to LNG-related facilities, including receiving terminals, storage units, and vessels, but on a smaller scale compared to conventional LNG infrastructure. SSLNG production plants have capacities lower than 1 million tons per annum (MTPA) or 100 million. In 2020, SSLNG held more than 8-9% of the global LNG trade share. It serves small or isolated demand centers without pipeline infrastructure and caters to the growing demand for LNG as a transport fuel.
Factors Driving SSLNG Capacities
- Low Capital Costs and Stringent Emission Regulations: SSLNG facilities offer lower initial investment costs compared to conventional LNG, enabling quicker supply availability and logistical flexibility. Import terminals are economically viable for nations transitioning to LNG as an alternative fuel.
- Growing Investments in Small-Scale Export Terminals: Small-scale LNG export terminals are cost-effective and require less environmental clearance than large-scale terminals. They are developed to monetize small gas fields that might not be economical for large-scale terminals. These export terminals help utilize gas from associated fields or prevent gas flaring.
- Environmental Potential and Price Diversions: SSLNG has gained traction due to its ability to reduce greenhouse gas (GHG) emissions and sulfur dioxide (SOx). Price diversions between crude oil and LNG, government policies promoting gas use, and strategies by major oil and gas companies are also driving SSLNG growth.
LNG Satellite Stations Point to Higher Growth Prospects
LNG satellite stations, with their various components, are extensively used in the US, Europe, and China. These stations play a crucial role in supplying LNG as fuel to transportation and industrial sectors, particularly mining and power generation.
Asia Pacific Remains an Attractive Investment Region
Asia Pacific dominates the global small-scale LNG market, accounting for more than 68% of LNG demand in 2020. Singapore, with proactive policies and LNG bunkering facilities, aims to become a major LNG hub. Europe captured almost 25% of global LNG demand, with increasing environmental awareness driving the use of lower carbon energy, including SSLNG.
Investment Opportunities in India
INOXCVA's partnership with Mitsui Group in India in April 2021 highlights the growing investment opportunities in the country's nascent small-scale LNG infrastructure. Royal Dutch Shell also launched its first small-scale LNG supply project in India in January 2021, contributing to the growth of gas-based economy in the country.
Key Players
Prominent players in the small-scale LNG market include Mitsui Group, BP plc, Wärtsilä Corporation, Siemens AG, Total SA, Linde plc, GE, Petronas, Royal Dutch Shell plc, Equinor, Eni S.p.A, and Black Veatch.
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