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Plan To Operate LNG Barges Along Ganga A Non-Starter

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India may have lost an opportunity to operate boats that run on cleaner fuel even as Prime Minister Narendra Modi is expected to receive the first container vessel on an inland waterway in Varanasi on Nov. 12.

Petronet LNG Ltd., which was tasked with providing liquefied natural gas for barges—or small freight vessels— along the National Waterways-1, said that the project was rendered unviable after the government scaled down requirements. “They have virtually demolished the economics of the project,” Prabhat Singh, chairman and managing director of Petronet LNG, told BloombergQuint. “The number of LNG barges, which the Shipping Ministry (initially) specified was 100. They later reduced it to 40 and then to 6.”

The Ministry of Shipping signed an agreement with the state-run LNG importer and Inland Waterways Authority of India to promote the usage of LNG barges in April 2016 along the National Waterways-1 (from Allahabad to Haldia along the Ganga). The efforts to introduce LNG as barge fuel, the ministry said in a release dated Sept. 12, 2016, is to promote transport on inland waterways and coastal shipping.

LNG is a cleaner alternative compared with fuels such as diesel, ship oil and methanol. It emits nearly 25 percent lesser carbon dioxide, in addition to reducing nitrogen oxide and sulphur oxide emissions by over 90 percent. And countries are embracing the fuel to conserve their ecology. Norway, Bloomberg News reported, has become the biggest operating area of ships using LNG as an alternative. The country is also an early mover on international rules to curb shipping pollution that’s expected to start in 2020.

The IWAI had asked Petronet LNG to prepare a feasibility report to set up facilities for unloading, storage, bunkering and reloading on the NW-1, which would commence navigation in Dec. 2018. The LNG importer was to set up a base depot at Haldia in West Bengal and fuelling stations at Sahibganj in Jharkhand; Patna in Bihar; and Ghazipur in Uttar Pradesh; apart from converting existing diesel barges to LNG.

Singh said that the cost of conversion from diesel—the incumbent fuel in ships—to LNG was so prohibitive that no shipping company was opting for it. “In a barge or small vessel, the conversion cost is nearly 100 percent,” he said. “Business wasn’t seeing light of day.”

Lack of coordination between various departments may also have led to the project’s failure.

An official from Shipping Ministry told BloombergQuint on the condition of anonymity that the Oil Industry Safety Directorate and Petroleum & Explosives Safety Organisation failed to approve draft regulations for the barges. This, the official said, followed a meeting between the IWAI and the project’s stakeholders in Jan. 2017, when responsibilities were assigned to different agencies to chalk out a plan. The directorate, according to the official, had asked the IWAI to meet the stakeholders and prepare draft regulations around three weeks ago.

LNG is highly inflammable and needs to be cooled to temperatures lower than -150 degrees Celsius so that it can be compressed and stored in cylinders. That can pose logistical woes to ship and boat operators.

Hemant Bhatt, chief executive officer of HMSA Consultancy Services, said the absence of a framework could have hindered plans. “The non-availability of an established framework for risk management is the key challenge that seems to be impeding the manufacture, procurement, deployment and operation of such barges,” Bhatt told BloombergQuint in an e-mailed response.

Government departments vacillating on the fuel, too, didn’t help matters. The official cited earlier said that the Shipping Ministry may have shelved LNG bunkering plans because of subsequent proposals that favoured methanol, mooted by Union Minister for Road Transport, Highways and Shipping Nitin Gadkari in 2017. Gadkari has since said the government was conceiving plans to adopt the alcohol as marine fuel.

Bhatt said the fuels need to be compared over factors such as operational perspectives and viability.

“Feasibility must exist for both the bunkering terminal operator and the LNG ship operator,” said Bhatt. “This is expected to be a function of operating volumes, costs and service pricing.”

. Read more on Business News by BloombergQuint.