400 LNG stations can come up by CY30, matching the 2-3mmtpa demand: Emkay Global Financial Services
According to a report from Emkay Global Financial Services- Oil & Gas, LNG for transport – In germination mode, 400 LNG stations can come up by CY30 which could service 50,000 trucks that will entail the LNG demand of ~2.3mmtpa. Emkay Global Financial Services believes that a benign medium-term LNG pricing environment can be conducive for the LNG retail market (for heavy trucking-vehicle sector) to take shape in India.About 4mn trucks-heavy vehicles are operating in India currently, out of which Emkay Global Financial Services estimates 1.0-1.5mn to be diesel MHCVs (>25 metric ton). Through channel checks made by Emkay Global Financial Services, 3-5% of this can potentially be converted to/replaced by LNG by CY30, which roughly implies ~50,000 trucks, which Niti Aayog has also forecast (Emkay’s auto team expects the total universe to grow slowly). Assuming 150kg/day fill (450km/day running), this translates into a demand of ~2.3mmtpa.
Demand-supply dynamics of LNG retail for heavy trucking-vehicles in India in CY30
Competitiveness to diesel is reasonable now, but can be better
At current diesel and LNG prices, cost economics place TCO of an LNG truck at 10-20% discount to diesel, which could be good enough to start with. However, network development remains a key precursor to scale.
Detailing this, the report explains that assuming USD80/bbl oil and 12.5% LNG slope as base case, USD10/mmbtu of DES LNG price implies Rs59/kg as gas cost for the station, while Emkay’s channel checks imply Rs10- 12/kg of opex, which may include transport cost and some retailer margins. A ~20% RoCE per station implies a Rs3.5/kg of additional margin, under which scenario, retail LNG can be priced at ~20% discount to diesel while TCO could be ~10% lower. However, mileage and maintenance of an LNG vehicle could be better (we have assumed same as diesel based on Niti Aayog’s report though OEMs claim better rates), under which scenario LNG TCO can be 20% lower than diesel. In terms of storage requirement, each LNG retail station could use one tank of 56kl (or 25 ton or 2 days cover) capacity (same could be two also if the station is bigger). GAIL’s small scale LNG in Vijaipur has two tanks with 56kl capacity each. Cost of a 56kl tank is ~Rs10mn.
TCO analysis of CVs/trucks (ex-loans)
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