High costs, boiloff issues challenge India's LNG trucking expansion

It has been 17 months since Indian Oil's Sriperumbudur outlet began operations but it receives no more than five to 20 trucks a day, for sales of around 80 tonnes of LNG a month

An attendant at Indian Oil’s fuel retail outlet on the outskirts of Chennai slips on a pair of cryogenic gloves and an apron as a 55-tonne Volvo-made LNG-fired truck carrying a black Delhivery container snakes its way into one of the country’s first LNG dispensing stations for a refill — the insulated gloves protect the attendant from cold burns, while discharging chilled, liquefied natural gas into a cryogenic tank fitted onto the side of a Rs 1.2 crore truck, a pump official explains.

 

The station has a single dispensing unit connected by insulated pipes to a 56-kilolitre cylindrical, cryogenic LNG storage tank standing on its head. The entire process takes 20 minutes, more than what it would take to refuel a diesel vehicle. One of the dispensing pipes is used to reduce pressure in the truck’s tank and the other releases the liquefied fuel.

 

Vehicles in India will now roll on four kinds of fuels — petrol/diesel, pressured natural gas or CNG, biofuels like ethanol derived from grains or waste, and the latest where natural gas is chilled to a liquid at -161 degree centigrade. LNG in transport is a $29 billion market opportunity if it completely displaces diesel, industry officials say.

 

It has been 17 months since Indian Oil’s Sriperumbudur outlet began operations but it receives no more than 20 trucks a day, for sales of around 80 tonnes of LNG a month, an industry official says. That is insufficient to cover the expenses for a station that takes several months to build and costs Rs 5-Rs 8.5 crore, excluding land — several-fold pricier than a typical petrol pump.

 

Indian Oil saw worse when the outlet started in mid-2023. There were no customers for weeks before two or three retrofits came calling. The action began in December, after Blue Energy Motors, an Essar affiliate, sold 40 trucks to state-run container company Concor, which then awarded a bid to Indian Oil for refueling. 

 

Fuel economics

 

The economics of the fuel are alluring. At current levels, LNG, at Rs 78.84 a Kg, costs less than half of diesel. “If per kg of LNG is at Rs 84 and it gives 3.2 km per kg, the running cost is Rs 26.25 per km. For diesel, at Rs 92 per kg, the operating expense is Rs 35.38 per km,’’ said Maqsood Shaikh, CEO of Ultra Gas & Energy, an Essar company.

 

Of course, that is assuming you run the trucks for more than 20 hours a day to contain boiloffs — a technical limitation of the fuel where gas gradually escapes from LNG lying stored and unutilized in tanks — an industry official says. But, emissions are lower, the cabin is air conditioned, and pilferage of the fuel, common to diesel vehicles, is impossible.

 

For long-distance trucking, LNG is cheaper, the mileage is higher, emissions are 30 per cent lower, and it improves energy security through lower oil imports. “The future of LNG is retail LNG,’’ said Yiyong He, founder at LNG Easy, in a Linkedin post. “Go to China to see LNG regas and refueling stations.” The current liquid-to-gas model is something that Europe and Japan did in the past.

 

But LNG fuel sales are negligible in India because of the scarcity of trucks running on this fuel. There are only 24 pumps today across the country (compared to 93,115 petrol and diesel pumps and 6,373 CNG outlets) catering to around 650 trucks, concentrated on certain routes. Both state and private players, including Ultra Gas, Indian Oil, Petronet LNG, Hindustan Petroleum, Bharat Petroleum, and Baidyanath LNG plan to add 73 outlets in the next few years, according to an industry document. At least 17 are ready to start once the authorities give the green signal. 

 

Indian Oil has seven stations operational across the country, with another 13 likely to start in 2025 once the vehicle fleet improves. In addition, it is developing 50 stations in the golden quadrilateral and north-south highways — one every 300 km, a company official says. Supplies to these retail outlets, in case of Chennai, come from Indian Oil’s Ennore LNG import terminal from, where they are despatched in 14-17.5-tonne cryogenic containers loaded on trucks.

 

India imports nearly half of its gas needs in the form of LNG. “The government can support LNG trucking by increasing the number of LNG refuelling stations, providing subsidies and tax breaks,’’ said Darshan Ghodawat, CEO, AVA Global Logistics. “Speedy clearances will encourage use of LNG in heavy vehicles industry.’’  

 

Private players complain of 40 levels of approvals in districts, with most states oblivious to Petroleum & Explosives Safety Organisation’s (PESO) regulations governing LNG in transport. The trucks are expensive because they require specialised tanks and technology, which could be a turn-off for fleet operators and refuelling stations are too few to be practical, Ghodawat said.

 

LNG ecosystem

 

The scarcity of fuel stations is reflected in New Delhi-based think tank Teri’s prognosis that LNG use in transportation in India is a slow burn. Volumes are projected at just 0.4 million tonnes by 2030-31, from virtually nil now, but could rise to 7.4 million tonnes within two decades, around a quarter of today’s total LNG imports. Combining CNG and LNG, India will need around 10 million tonnes of LNG alone for use in transportation in a decade, and more than 50 million tonnes by 2050. India’s overall LNG imports in the current fiscal year, ending March 2025, may be around 27 million tonnes, industry officials say.

 

Ultra Gas is creating an ecosystem. Blue Energy, an Essar associate company, supplies trucks to Greenline Logistics, also an Essar outfit, which deploys these trucks for customers and refuels them at Ultra outlets. Where there is no Ultra Gas outlet, Shaikh enables refuelling at outlets run by rivals. 

 

Greenline, which signed up Flipkart as a customer this month, is deploying 25 LNG-powered trucks, each equipped with 46 feet containers. Captive customers have helped offer predictability to Ultra Gas’s revenue stream.

 

Ultra currently operates two outlets but “we are almost ready with around six stations, aiming to close the fiscal with 10, and scale it up to 100 by December 2027,” said Shaikh, who was earlier with Gujarat Gas. An Ultra outlet in Chennai, located near Indian Oil’s outlet, serves 180-200 trucks a month. The fuel costs Rs 84 a kg, higher than Rs 78 a kg that Indian Oil charges at its outlet. Also, private sector outlets cost more than Rs 8 crore to build, much more than what an Indian Oil spends.

 

Besides high capital costs, boiloff is one of the key reasons why an LNG retail outlet or a truck must be utilised to the maximum. Unlike other liquid fuels, LNG stored in a tank will escape in gaseous form at 1-3 per cent a day. Fewer the trucks visiting the outlet, the more Indian Oil or Ultra loses in boiloff. If an LNG-fired truck is left standing for lack of business, boiloff will empty the entire tank in a few weeks.

 

The refiner uses some of the boiloff to operate a gas-fired generator at its pump, but the cost of this power is more than that of utility-supplied electricity. To minimise losses, outlets must sell at least 7 to 8 tonnes of LNG a day, enabling a refill of their storage every three days.

 

“Between seven and 30 days, there is an exponential rise,’’ Shaikh said. “If the boiloff problem is not solved through a regulatory mechanism, it will be very difficult for stations to come up.”

 

The simple method is to compress the boiloff (methane gas) and sell it as CNG, eliminating the damage to the environment from methane emissions. But regulation bars selling of the CNG to a third party. PNGRB gave a mandate of licensing through selling of natural gas through pipeline, but people have expanded that to the level that even without a pipeline, nobody can sell gas in their area, an industry source says.

 

Big logistics players such as Amazon, Delhivery, and Flipkart must adopt LNG-fired trucks for the sector to grow, says Raunak Modi, ratings agency CareEdge’s logistics analyst.

 

A pickup may be possible after big logistics and ecommerce players started embracing the fuel. Delhivery has deployed Volvo trucks, which cost twice as much as Indian-made ones and run on both diesel and LNG. Blue Energy, the biggest supplier of LNG trucks with more than 500 units, supplied Concor. Greenline Logistics signed up Flipkart and Tata Motors and has released around 100 trucks in the market, industry officials say. Ashok Leyland is another potential manufacturer. But a key obstacle looms in the lack of cryogenic fuel tanks, largely supplied by INOX India, and a few by Cryogas India.