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Small-scale LNG Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Small-scale LNG Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

  • August 2022
  • 198 pages
  • ID: 6106026
  • Format: PDF
  • Mordor Intelligence LLP

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The small-scale LNG market was estimated to be USD 8.3 billion in 2021, and it is expected to reach USD 14.6 billion by 2027, registering a CAGR of 10.38% during the forecast period of 2022-2027. The COVID-19 pandemic has severely impacted the market due to disruption in the supply chain, reduction in energy consumption, and discouraging investments in newer technologies. However, with increasing pressure on large-scale LNG plants to showcase returns to investors, the operating companies are increasingly backing small-scale LNG initiatives. The small-scale LNG plant with a capacity of less than 1 MTPA can be constructed within three years, compared to large-scale LNG plants, which can take up to 10 years. Moreover, factors, such as increasing demand for LNG in bunkering, road transportation, and off-grid power, are expected to drive the small-scale LNG market in the coming years. However, factors such as the high operation cost of small-scale LNG and lack of supporting infrastructure in the regions such as the Middle East and Africa, and high CAPEX requirements, along with a long payback period of more than 12 years, are expected to hinder the growth of the market studied.

Key Highlights
Transportation application is expected to dominate the small-scale LNG market, owing to the increasing demand for LNG as a fuel source for ships and heavy-duty trucks.
Owing to the high capital expenditure required for a small-scale LNG infrastructure, the development of cost-efficient small-scale LNG infrastructure is expected to provide significant opportunities to the small-scale LNG technology providers and transporters in the future.
Asia-Pacific dominated the market across the world, with the majority of the demand coming from countries such as Japan, China, and South Korea.

Key Market Trends

Transportation Segment Expected to Dominate the Market

LNG is primarily used to fuel trucks and ships, mainly due to its economic and environmental benefits, as compared to diesel and fuel oil. Since LNG is non-corrosive and non-toxic in nature, it can extend the life of a vehicle by up to three times. Moreover, since LNG has an extremely low boiling point, very little heat is required to convert it into a gaseous form at high pressure, with negligible mechanical energy. This makes LNG an efficient fuel for transportation. ?
Handling LNG is an immense task since even a slight difference in the temperature can lead to the boiling and vaporization of fuel, which, in turn, leads to fuel wastage. Therefore, it makes passenger cars far less viable than heavy vehicles, such as commercial trucks. This has limited the application of LNG in the transportation segment.?
The use of LNG as a transportation fuel is gaining momentum across the world. China, the United States, and Europe have already started deploying LNG-powered trucks, mainly for long-distance freight carriage. This is mainly due to the government policies and regulations on decarbonizing and emission control, such as China VI and European Green Deal. ?
Formed in 2019 by the European Commission, the European Green Deal is a set of policy initiatives with an aim to make Europe carbon-neutral by 2050. The policies briefly underline the importance of LNG in reaching the aim, and they emphasize the usage of LNG as fuel for trucks and marine vessels.?
According to SEA-LNG, as of 2020, there were 75 LNG-fueled ships in operation, and 155 LNG-fueled ships were on order.?
In January 2020, the International Maritime Organization began implementing a new regulation by placing a 0.5% global sulfur cap on marine fuels. Thus, LNG has become a more viable option as a marine fuel since it emits almost 90% lower NOx and virtually no SOx and particulate matter in comparison to the existing petroleum-based marine fuel oils. Therefore, in this clean air initiative, LNG will play a key role. This will also have a significantly positive impact on the small-scale LNG market. ?
New emerging economies are also planning to lay foundation for the future of LNG for transportation. For instance, in 2020, the Indian government, announced the commencement of construction for 50 new LNG fueling stations on the Golden Quadrilateral highway connecting Delhi, Mumbai, Chennai and Kolkata. Additionally, India will also see an investment of INR 10,000 crore from the private and public sector for setting up of 1,000 LNG stations by 2023.?
Hence, owing to the above-mentioned factors, the demand for small-scale LNG infrastructure for the transportation segment is likely to grow and significantly dominate the market during the forecast period.?

Asia-Pacific to Dominate the Market

Asia-Pacific, in recent years, has been a pioneer in the implementation of small-scale LNG projects across the globe. Interest in the use of small-scale LNG (SSLNG) has increased in recent years, as the demand for natural gas continues to increase in countries like China, India, Singapore, Japan, and others.
As of 2021, China is one of the major countries in the world that led to the growth in LNG demand. The LNG import was around 12 million tons in 2020, which increased to 79 million tons in 2021. Due to this surge in demand, China became the world’s largest LNG importer, surpassing Japan. The increased demand is due to Chinese LNG buyers signing long-term contracts for more than 20 million tons a year. China’s natural gas market includes domestic production and import via pipelines and LNG terminals. ?In China, the rising demand for small-scale LNG is from industrial, residential, and power generation sectors, with the highest potential being in the transportation sector. As of 2020, China has around 113 thousand units of LNG trucks, and with a growing focus on having an alternate low carbon emission fuel for heavy truck transportation, LNG as a fuel would be the best substitute for diesel-fueled engines. Growth in the number of LNG trucks due to the higher price of diesel, as compared to natural gas, is expected to be the prime reason for which small LNG facilities are growing in China. ?
While in India, Small-scale LNG is in a very nascent stage, however, there are a few LNG stations, for which LNG transportation through LNG trucks is taking place. With the intention of increasing the share of natural gas to 15% in its energy mix by 2030, India is likely to construct small-scale LNG facilities for natural gas supply to remote places, with no pipeline infrastructure. For instance, in June 2022, GAIL Limited, a government-owned natural gas explorer and producer company, aimed to set up small liquefaction facilities for areas not connected to LNG pipelines. Furthermore, GAIL is likely to set up two small-scale liquefaction plants on a pilot basis.
In May 2021, the port of Yokohama expanded its LNG bunkering facilities for cruise-ship owned by NYK Cruises. Further to boost the LNG bunkering facility in the port, Ecobunker Shipping is likely to commission an LNG bunker vessel named Ecobunker Tokyo Bay at the port of Yokohama. The LNG bunker vessel is likely to provide ship-to-ship LNG bunkering at the end of 2021. Additionally, to boost LNG bunkering facilities, the Yokohama port waved off port entry fees for LNG-fuelled and LNG bunkering vessels as an incentive to expand the use of LNG as a marine fuel in Japan.?
Small-scale LNG business in Singapore is majorly driven by the LNG bunkering facilities in the ports of Singapore. Singapore has one of the leading trade ports and is one of the global leaders in international marine shipping. In May 2021, FueLNG and the Maritime and Port Authority of Singapore (MPA) completed Singapore’s first bunkering of an LNG-fueled oil tanker, Pacific Emerald. Further, FueLNG announced its plans to provide 30 to 50 ship-to-ship LNG bunkering operations in 2021.
Therefore, owing to the above points, Asia-Pacific is expected to dominate the growth of the small-scale market during the forecast period.

Competitive Landscape

The small-scale LNG market is moderately fragmented. Some of the major players include Linde plc, Wartsila Oyj ABP, Shell PLC, Engie SA, and PJSC Gazprom.

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