In recent years, the small-scale LNG market has made a quick comeback. Small-Scale Liquefied Natural Gas (SSLNG) is one of the nascent areas in the LNG industry. Natural gas is always a better choice than fossil fuels from an environmental perspective. They emit lower greenhouse gases and offer better air and water quality than their peers. However, LNG domestic supply is ample and cost-effective, making the market more stable in the years to come. Furthermore, the demand for the LNG market has experienced a consistent growth rate at 6.6% per annum, since 2000, and abundant opportunities await the players in the supply chain of this industry.
The global small-scale LNG market boasts significant potential with the proliferated demand to serve as a transport fuel, especially for marine and heavy trucking industries. These plants are developed to address the industry-specific demands in contrast to the large industrial-scale LNG plants. As SSLNG is quite environment-friendly than its peers, oil, and diesel, it is widely accepted by the shipping and trucking industries for fuel. Owing to this significant demand from its end-user industries and benefits compared to its peers, the global Small-Scale LNG Market size was expanding and attained a value of $29.65 billion in 2018. Furthermore, the opportunities are poised to rise with a CAGR of 6% during 2019-2025.
A Glimpse into Investment Patterns and its Trends in the Small-Scale LNG Industry
Around the world, the technology costs are reducing, and the process implementation policies in the industries are reinforced owing to government and other environmental organizations’ initiatives towards the implementation of stringent environmental emission policies. Along with that, the operating models are shifting towards decentralization to simplify the overall supply-chain and allowing the companies to enjoy the perk of delegation and profits incurred. Besides, the governments of several countries, such as the United States, Japan, and China, are taking measures to increase the energy level independence by developing alternative energy supplies within the country. These initiatives are promoting the operations within a country is leading to operating models such as BOOT (Build-Own-Operate-Transfer). With the implementation of the BOOT model in Indonesia and other European countries, government and private sectors are coming together to build and operate the SSLNG plants on a local level. Bilfinger and Wartsila companies are few examples following this model. Initiatives as such are driving the investments in the small-scale LNG market. Besides, unlike large-scale industries, these small-scale LNG projects demand relatively less money, which is attracting new players in the market. With these lower investments and sufficient demand from remote applications, the players are gaining significant profits in the small-scale LNG market.
APAC Dominating the Small-Scale LNG Market – Indonesia Accelerating to Gain Ground
Emerging economies are experiencing massive demand for the small scale LNG market. The proliferated need for electricity and energy are key enablers to drive the sustainable growth of this market. By unlocking the potential of natural gas resources, the developing countries are significantly enhancing their countries’ prosperity. For the developing countries, small scale LNG is a cost-effective and innovative approach, to enable gas for stranded consumers. These countries are progressing in SSLNG and distributions to compensate for the absence of energy delivery infrastructure. Subsequently, smart IoT-enabled residential and commercial environments demand the need for high-efficiency, cost-effective, and responsive energy solutions. This can be effortlessly achieved by natural gas with comfort. Besides, the connected industrial and smart residential environments that are growing with the initiatives such as “Society 5.0” of Japan and 13th 5-year plan of China are increasing the demand for the small-scale LNG market in the APAC countries. China is the largest importer in the LNG industry, and the import value increased by 15.8MT in 2018. South Korea, Pakistan, and India together experienced a rise of 12.8 MT of import value in the same year. With all these growth prospects, APAC region occupied about 40% of share in the global small-scale LNG industry.
Indonesia is gaining ground and has got the dynamic potential to emerge as a prominent player in the small-scale LNG market. An archipelagic country with over 18,000 islands, is facing challenges for the infrastructure and distribution of LNG because of its geography. Other than Sumatra and Java, the rest of the consumption centers are isolated and has a limited pipeline network. SSLNG is a lucrative solution for this scenario, offering less duration to get the projects running. This allows the investors of small-scale LNG to reap potential profits, immediately reducing the uncertainty of execution. Besides, the geographical conditions allow location flexibility for the investors to move from one area to another, depending on the demand required for LNG. On the whole, Indonesia is emerging as a dominant country in the small-scale LNG market with substantial investments.
Heavy-Duty Vehicles is rising in the Small-Scale LNG Market with the Environmental Demand
The transportation industry is a dominant user of small-scale LNG for fuel. Availability and accessibility of the LNG make the heavy-duty vehicles such as trucks to incline towards LNG usage. The overall truck performance is accelerated along with the competitive pricing offered when compared to diesel and petrol. The local tax regime in road transport plays a significant role in the tipping point of gas from diesel. Few countries in Europe levy taxes that work in favor of LNG transport. For instance, the Netherlands prohibits regular-sized diesel trucks from entering into the city premises. This country implements ‘lorry low emission zone national framework’ to lower the greenhouse gases emissions and actively promotes the small scale LNG businesses. Initiatives such as “Wadden and Rhine Green Deal” and operating bodies such as “National LNG Platform” are supporting the small-scale LNG markets in the heavy-duty vehicle industry. Not only European countries, other countries such as China and Mexico, are mandating stringent energy-consumption regulations on the heavy-duty vehicles market. Thus, energy consumption, a predominant factor driving the heavy-duty vehicles of the transportation industry, boosts the usage of LNG fuel. Therefore, these growth prospects are fueling the demand for LNG-powered heavy-duty vehicles. Furthermore, the heavy-duty vehicles segment of the global small-scale LNG market is growing at a CAGR of 6.2% during the forecast period.
Key Players Perspective in the Small-Scale LNG Industry
The foremost players dominating the small-scale LNG market are the Linde Group, Wartsila Oyj Abp, General Electric Company, Black & Veatch Corp., Anthony Veder Group, Honeywell International Inc., Royal Dutch Shell PLC, Engie SA, Gazprom PAO, Total SA, Chart Industries Inc., N.V., IM Skaugen SE, Evergas A/S, and Skangas AS. To succeed in the SSLNG businesses, companies are developing efficient business models to excel in all the segments such as production, distribution, and transportation of this market. The winning players in the market are pacing with the right strategies and building successful partnerships in this industry. Furthermore, enabled by significant technological developments, there is a large scope to strengthen the integrated operations effectively and competitively in this small-scale LNG business.
Few advancements by the industry players are as follows:
• In 2019, BP Energy Partners LLC acquired Cryopeak LNG Solutions Corp, a British Columbia-based Company offering small-scale LNG "virtual pipeline" services to North American countries. With this acquisition, BP Energy Partners is expanding its portfolio of SSLNG.
• In 2019, DNV GL collaborated with Keppel to advance the uptake of LNG as a marine fuel. Entering into this agreement, the companies look forward to building new projects which include small-scale LNG carriers, floating storage regasification units (FSRUs), LNG bunker vessels, and other LNG assets that use hybrid technologies.
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