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UNDERSTANDING PRESENT AND POSSIBLE FUTURE DIMENSIONS OF THE MARKET FOR NATURAL GAS AS A TRANSPORT FUEL GLOBALLY AND IN KEY REGIONAL/NATIONAL MARKETS

Introduction
Since the invention of the internal combustion engine in the 1800’s, the word transportation has been synonymous with one thing - “Oil”. Without it, modern transportation as we know it would not be possible, sectors such as aviation, aerospace, automobiles, shipping needless to say would look nothing like they do today. However with the looming environmental/energy crisis coupled with an ever increasing population size, several voices have been clamouring for a redefinition of the transport sector by seeking for alternative fuel sources.
Why Natural Gas
Even though natural gas is considered a fossil fuel it’s currently the cleanest fuel and most environmentally friendly fuel present today. Research shows that combustion of Liquefied Natural Gas (LNG) releases 6% to 11% CO2 less emissions than petroleum, 50% less than coal, and 20% less than diesel and while the price varies from region to region the general consensus is that natural gas is cheaper and delivers more energy per weight compared to other fossil fuels. Commercially available forms of natural gas include CNG(compressed natural gas) which is obtained by subjecting natural gas to extreme pressures of up to 3,600 psi, LNG(liquefied natural gas ) obtained by reducing the temperature to very low temperature of up to -1600c or -220 F, each with its own benefits and modes of storage. Compressed Natural Gas is the cheaper of the two fuels but occupies more space and weight than LNG..It is important to note that globally world consumption of natural gas is projected to more than doubles, from about 12 Trillion Cubic Feet in 2012 to 29 Trillion Cubic Feet in 2040 according to the US Energy Information Administration International Energy Outlook 2016 report. We now look at transportation fuelled by natural gas in different dimensions. 
Energy Content of some combustibles (in MJ/Kg)


 
In Private road vehicles

These refer to vehicles owned by individuals and are predominantly powered by Internal combustion engines (ICE’s) mostly using petrol or diesel. While recently the use of Electric and hybrid powered vehicles have recently been on the increase, the primary competitor remains petrol engines. Although Gas powered engines are also ICEs and operate the same way, the challenge lies in the cost of adapting existing vehicles to consume CNG or LNG which requires special storage. In the case of LNG the tank would have to provide the very low temperatures required and with CNG maintain and preserve pressure, the size, weight and complexity of the required tanks means additional overall costs to the consumer, bearing in mind that the primary objective for private owner is to maximise available space while minimizing cost. In addition strict safety regulations make the designing, use and even research costs further increase. Furthermore private vehicular use would require large investments in terminal and fuelling infrastructure such as LCNG (Liquefied & compressed natural gas) refuel stations which would also need underling supplychain infrastructure to be built which further increases the cost of adoption. Some countries such as In Italy due to its wide pipeline distribution has about 780,000 natural gas vehicles (According to a 2013 research paper “LNG as vehicle fuel and the problem of supply: The Italian case study”) of which less private car ownership is virtually non-existent, about 860 refuelling stations which accounts for 30% of European natural gas refuelling stations, this show that for private users adoption may not be impossible but perhaps not viable in the short term for countrieswithout the underlining infrastructure.

In Heavy Road Vehicles

These refer to large land vehicles such as public busses, trucks and even construction vehicles such as cranes ,Trucks, Compactors etc. which primarily run on diesel which produces more energy, mileage overall efficiency. For these category of vehicles, natural gas is a more viable option as space and weight constraints are reduced and negligible, and the reduced number of refuel stops makes natural gas a betteroption. But most importantly is the fuel saving advantage which according to the Shanghai 2019 LNG conference was $18,154 per 100000 Km for heavyduty trucks compared to diesel and $13,800 according to a 2019 Croatian study. However adoption heavily requires Government regulation and incentives, such as in china where 6.72 million metric tonnes of LNG in 2018 was consumed by the transport sector amounting to 25% of total LNG consumption. As of 2018 in China there were 343,933 LNG vehicles of which 236,265 are LNG Heavy duty trucks and the remaining107,668 where LNG buses and coaches with about 2552 LNG refuelling stations across the country, compared to Europe, where there are only4650 LNG trucks in Europe and 153 LNG refuelling stations by September 2018. This was possible due to policies such as deregulation ofthe LNG markets, massive investment in infrastructure and environmental friendly regulations such as the Three-Year Action Plan for Blue Sky issued in 2018.

 

In Aviation

As the world becomes more and more a global village more and more attention is being paid to the fastest means of transportationAir travel. This has contributed to about 2.5% of total greenhouse gas emissions worldwide as the IATA World Air Transport Statistics (2019 WATS)confirms that 4.4 billion passengers flew in 2018 and a 10% increase in 2019 with about 61.2 million tons of cargo being moved by air.Air planes are usually fuelled by mixtures of Kerosene which are referred to as Jet fuel with major research efforts to replace this with alternate fuels such as Biofuels, Electric energy and even Natural Gas. Historically LNG has been used in the Soviet Union as far back as 1988 by theTu-155 but was discontinued after the fall of the Union, today however the challenge for commercial flights lies in the space and weight of thestorage tank as well as the low temperature requirement. Air plane fuel already occupies about 20-25% of the take-off weight and increases based on the distance to be flown, advances in technology such as super conductors and material science has convinced several parties that natural gas couldbe the next Jet fuel. For instance Boeing announced in 2012 a program to develop planes fuelled by cryogenically frozen LNG and an AIR-LNG project was sponsored by Air Bus and the German Government.

In Rail transport

Due to the lower costs and emissions of natural gas several countries are working to provide gas powered trains, with estimates of 20-40% reduction in fuel costs and carbon emissions in comparison with diesel engines. Proponents of LNG technology argue that gas powered locomotives eliminate harmful emissions, greatly improve air quality, while the benefits of electric trains greatly depends on the sourceoftheir generated energy which they argue is not always as green. The Florida East Coast Railway (FECR) introduced its first LNG-powered locomotive in 2015 and had converted all 24 of its locomotives to dual fuel fuelled engines by 2017. In Europe, a consortium of European companies commissioned an LNG project to develop LNG-fuelled cargo vessels and locomotives, with The European Commission providing €16.5mn of the €33mn total project costs. Similarly, the Indian Railway Corporation has also announced plans to develop its own gas- powered locomotives and even Russia has signed a contract to deploy 24 LNG fuelled trains by 2024 and plans to start operations by 2022.

In Shipping

Maritime transport forms the main axis of international exchange, carrying ~90% of total traded tonnage globally with an estimated trade volume of over 10 billion tons. However according to the international Maritime Organisation this industry also accounts for nearly 33% of all traderelated emissions from fossil fuel combustion, and 2%- 3% of global greenhouse emissions which is predicted to increase up to 17% with continued increase in global trade via maritime transportation if left unchecked. Sea vessels use several fuel types which include mostly diesel, LNG (predominantly preferred over CNG due to higher energy per volume densities of LNG over CNG), Hydrogen fuel, Electric powered ships and even Nuclear energy. LNG fuel engines have been in use for many years according to the International Gas Union as at 2005 there were a total of 203 LNG fuelled ships in operation by 2018 there were 525. One reason for this is that the marine industry is uniquely positioned to be easily fuelled at port with the use of LNG bunkering at seaports, where LNG is provided to the ships for its own use and consumption, Currently

LNG fuel bunkering is available at seven EU sea ports and several ports in Norway, Singapore, China and other Countries. Another major driver is Government policy and regulations such as the EU Funding Support (Regulation No 1315/2013) that Specifies that LNG projects are eligible for funding from the Connection Europe Facility (CEF) Fund with 17 sources to co-fund LNG infrastructure development in the EU. Another

policy is the Alternative Fuels Directive (Directive 2014/94/EU) which includes creating a network of LNG fuelling points in major ports to facilitate LNG bunkering in Coastal ports by end of 2025 and Inland ports by 2030.Japan with its extensive infrastructure for LNG is positioning the Port of Yokohama as a model for developing LNG bunkering capabilities and is also coordinating its activities with Singapore which is one of the main global bunkering hubs, and the second largest container port in the world. 

 

 

 

Growth Outlook and Prospects for Africa

So what does this all mean for Africa, well Africa was thought to house about 7% of global reserves from the top four countries namely Libya, Egypt, Nigeria and Algeria, however recent discoveries of gas deposits in Mozambique, Tanzania, Senegal and Mauritania have revealed a total of 200 Tcf of gas reserves, enough to meet close to 70% of global demand for the next two decades. According to the African Energy Outlook 2020 report, there are currently nine oil projects under construction across the region with an investment total of $60.4 billion and in light of the recent discoveries, the East African countries could see $60 billion worth of investments. However it’s important to note that as far as consumption is concerned the figures aren’t encouraging while Sub Saharan Africa supplied 12% of global LNG production in 2018(over 250 Million Tons) approximately 70% of African Consumption was accounted for by Egypt and Algeria alone. According to the International Gas Union 2019 Report, no African Country is currently investing in Natural Gas as fuel for Heavy duty vehicles. The focus lies rather on increasing production, processing and bunkering facilities such as the Seventh Train expansion project at the Nigerian LNG facility in Bonny Island to increase production from 22 million tonnes per annum (Mtpa) to 30Mtpa per annum last year December and the planned $20 billion Natural gas liquefaction and export terminal in Anadarko Mozambique, the largest single LNG project ever sanctioned in Africa. On the marine scene however bunkering stations for LNG vessels are being built for instance in South Africa, LNG bunkering services have been licensed to begin in the Algoa bay this year by an 8,000 tonne LNG bunker barge, the largest built African vessel by weight. Egypt Also seeks to start LPG bunkering at the Damietta port but was halted due to complications legal and domestic issues. The path to LNG use for transportation on the African Continent is long but not impossible. The first hurdle being, how to increase the underlining local production and processing infrastructure something all governments are striving to do with plans such as Nigerian Gas Policy of 2017 developed by the Ministry of petroleum resources or Egypt’s Sustainable Development Strategy (SDS) Vision 2030 with regulations like a policy where no more than a third of the national gas reserves can be exported at any time to ensure domestic demands are met.

 

Conclusion

That Natural Gas is a visible alternative transport fuel across board isn’t in doubt. However it is not a viable option in every sphere. Scientific evidence shows that the bigger the vehicle the more viable it becomes. For personal vehicles it remains a Niche market and for aviation mostly a theoretical one at this point. However for Heavy road and Marine vehicles, Natural Gas has been established as a dominant option for fuel and is rapidly growing especially in the EU, Americas and Asian markets such as China and little patronage from African Countries such as South Africa and Egypt. It is interesting to note that the more natural gas is made available the faster the rate of adoption as seen in china, Simply put as more investments are made in supply the rational choice is adoption for safer, cheaper and greener transportation.

 

 

Thank you.

 
 

The Nigerian LPG Market is the next success story of the Global LPG industry, if you need a partner with a global perspective and local expertise in the Nigerian and African space, kindly book for a free session with our team of experts to help you http://www.kiakiagas.com/book-session

Or write us an email at advisory@kiakiagas.com or Whatsapp: +4915210247560, +2348085269328

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