Small-Scale LNG Market

Updated on : September 10, 2024

Small-Scale LNG Market

The small-scale LNG market was valued at USD 46.4 billion in 2023 and is projected to reach USD 92.8 billion by 2028, growing at 14.9% cagr from 2023 to 2028. The market dynamics of small-scale LNG have experienced significant growth and transformation in recent years.  The demand for small-scale LNG has been driven by several factors, including the increasing need for cleaner energy sources, and the development of innovative liquefaction and regasification technologies. Furthermore, the rising adoption of LNG as a marine fuel and the expansion of remote and off-grid industries have contributed to the market's expansion. As a result, the small-scale LNG market has witnessed the emergence of new players, the establishment of specialized infrastructure, and the formation of strategic partnerships across the LNG value chain. Going forward, the market dynamics of small-scale LNG are expected to continue evolving as technology advancements, regulatory frameworks, and shifting energy demand patterns shape the industry landscape.

Attractive Opportunities in the Small-Scale LNG Market

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Small-scale LNG Market Dynamics

Driver: Rising demand for LNG in bunkering, road transportation, and off-grid power

The demand for small-scale LNG (liquefied natural gas) has been experiencing significant growth in various sectors, including bunkering, road transport, and off-grid power. Bunkering, which refers to the process of supplying fuel to ships, is increasingly adopting LNG as a cleaner alternative to traditional marine fuels. With stricter emissions regulations in place, LNG offers a solution that reduces sulfur and particulate matter emissions, contributing to cleaner maritime operations. In road transport, small-scale LNG is gaining traction as a viable option for heavy-duty vehicles, such as trucks and buses. It provides lower emissions, improved air quality, and enhanced fuel efficiency compared to diesel. Furthermore, in remote areas or regions lacking access to centralized power grids, small-scale LNG is emerging as a reliable and cleaner alternative for off-grid power generation. The flexibility and scalability of small-scale LNG infrastructure make it suitable for diverse applications, meeting the growing demand for cleaner energy solutions across these sectors.

Restraints: Depletion of natural resources and volatility in prices of raw materials

The depletion of natural resources and volatility in the prices of raw materials are indeed major restraints that significantly affect the growth of small-scale LNG (liquefied natural gas). The U.S. Energy Information Administration (EIA) estimates proved reserves by analyzing data collected from oil and gas companies each year. According to their latest report from the end of 2021, the total estimated proved reserves of natural gas in the United States, including liquid gases, was about 625.4 trillion cubic feet (Tcf) in 2021. When we exclude the liquid gases, the remaining dry natural gas reserves amount to about 589 Tcf. The production of LNG relies on the extraction and processing of natural gas, which is a finite resource. As the demand for natural gas and LNG continues to rise, the availability of easily accessible reserves becomes more limited, leading to increased exploration costs and diminishing production rates. This depletion of natural gas reserves poses a significant challenge for small-scale LNG projects, as they often operate with limited financial resources and cannot compete with larger players in securing long-term gas supply contracts. 

Moreover, the volatility in prices of raw materials, particularly natural gas, further exacerbates the challenges faced by small-scale LNG. The prices of natural gas are subject to various factors, such as supply and demand dynamics, geopolitical tensions, and weather conditions. Fluctuations in natural gas prices can significantly impact the profitability of small-scale LNG projects, as they typically lack the resources and flexibility to absorb sudden price spikes or negotiate favorable long-term contracts. These price volatilities create uncertainty and risk, making it difficult for small-scale LNG ventures to secure financing and attract investors.

Opportunity: Integration of new technology

The integration of new technologies presents a promising opportunity for small-scale LNG plants. By implementing innovative solutions, these facilities can significantly reduce costs and enhance various aspects of the value chain. For instance, the utilization of prefabricated tanks instead of large-capacity storage tanks can contribute to cost savings. Additionally, small-scale LNG terminals can opt for pressurized storage tanks instead of atmospheric storage tanks, which are readily available from multiple suppliers in smaller increments. One of the key advantages of pressurized storage tanks is their effective handling of boil-off gas (BOG). In small-scale LNG terminals, the generated BOG can be directly channeled into the gas pipeline or used for electricity generation to supplement utilities. This approach considerably reduces the cost associated with BOG handling by allowing the pressure to increase within the storage tanks. Subsequently, the high-pressure gas can be injected into the pipeline or burned for auxiliary power generation. In contrast to traditional LNG terminals, small-scale LNG facilities can achieve LNG vaporization through the use of atmospheric vaporizers utilizing ambient air, a technology that has long been employed in nitrogen facilities.

Furthermore, the adoption of nitrogen expansion technology in small-scale LNG liquefaction plants offers a valuable alternative to the liquefaction process. By utilizing nitrogen as a refrigerant, this approach provides a readily available and non-flammable gas, enhancing safety and environmental considerations. Nitrogen expansion technology also offers higher efficiency compared to other liquefaction methods, leading to lower operating costs.

Moreover, the generation of electricity using small-scale LNG proves beneficial for remote areas lacking access to the power grid. This application is particularly relevant in industries such as mining, oil & gas, and rural communities. Danish company Kosan Crisplant specializes in the design and manufacture of modular and scalable small-scale LNG liquefaction plants, making them suitable for various off-grid applications. Similarly, Norwegian company Siraga offers a range of solutions for small-scale LNG, including liquefaction plants, storage tanks, and refueling equipment. Their efficient and cost-effective systems make them an attractive choice for businesses and communities seeking to transition to LNG.

Challenges:Supply chain disruptions, limited supply, and retrofitting costs are the major challenges that can affect the growth of small-scale LNG

The small-scale liquefied natural gas (ssLNG) market faces several challenges that need to be addressed for its successful development. One significant challenge is the possibility of transport disruptions. Unlike large-scale LNG shipments that rely on specialized infrastructure and vessels, ssLNG relies on smaller vessels or trucks for transportation. This can make the supply chain vulnerable to disruptions caused by adverse weather conditions, road or port closures, or logistical challenges. These disruptions can lead to delays in deliveries, affecting the reliability of ssLNG supply to end-users.

Another challenge is the limited volume of gas that can be supplied through ssLNG. Small-scale LNG facilities have relatively lower liquefaction capacities compared to large-scale plants. This limited volume can be a constraint in meeting the growing demand for natural gas in certain regions or industries. It may require multiple small-scale facilities to operate in parallel to supply an equivalent volume of gas that a single large-scale LNG plant can deliver. Coordinating and optimizing these multiple facilities can be complex and costly.

Additionally, the costs associated with retrofitting or re-engineering equipment is another challenge in the ssLNG market. Converting existing infrastructure or equipment, such as storage tanks, terminals, and regasification facilities, to handle ssLNG can be expensive. Retrofitting involves modifications and upgrades to ensure compatibility with smaller-scale operations, such as adjusting storage and handling capacities, implementing specialized equipment, or integrating safety measures. These retrofitting costs can add to the overall project expenses and may pose a barrier to the widespread adoption of ssLNG infrastructure.

Additionally, the relatively higher costs of ssLNG production compared to large-scale LNG can be a challenge. Smaller liquefaction plants typically have higher unit costs due to economies of scale. The smaller volumes processed, coupled with the need for specialized equipment and operations, can result in higher per-unit production costs. These higher costs may affect the competitiveness of ssLNG in the market, particularly when compared to other energy sources or larger-scale LNG projects.

In conclusion, while the small-scale LNG market presents opportunities for providing natural gas to regions or industries that lack access to large-scale infrastructure, it also faces challenges. These challenges include the vulnerability to transport disruptions, limited supply volumes, the costs of retrofitting or re-engineering equipment, and the relatively higher production costs. Overcoming these challenges requires strategic planning, investment, technological advancements, and collaboration among stakeholders to ensure the successful development and growth of the ssLNG market.

Market Ecosystem

Based on type, the liquefaction segment is expected to be the most significant contributor in the small-scale LNG market during the forecast period.

The liquefaction segment is projected to have a higher market share during the forecast period. This is primarily due to the increasing export of liquefied natural gas (LNG) and the subsequent need for liquefaction before it can be transported from one port to another. LNG is natural gas that has been cooled to its liquid state for ease of transportation and storage. It occupies significantly less volume than its gaseous state, making it feasible to transport large quantities over long distances. However, to convert natural gas into LNG, it must undergo a liquefaction process. The demand for LNG has been steadily increasing worldwide. This is driven by various factors such as the shift towards cleaner energy sources, rising energy consumption, and the growing demand for natural gas in sectors such as power generation, industrial applications, and transportation. As a result, there has been a significant expansion in LNG trade and infrastructure, leading to the construction of liquefaction terminals.

Liquefaction terminals are specialized facilities that cool natural gas to extremely low temperatures, typically around -160°C (-256°F), to convert it into LNG. These terminals are crucial for the export of LNG as they enable the efficient production and storage of large quantities of liquefied gas. They play a vital role in meeting the rising global demand for LNG and facilitating its transportation across different regions. The establishment of liquefaction terminals has been on the rise globally to support the growing demand for LNG including small-scale. Many countries are investing in the construction of these terminals to capitalize on their natural gas reserves and gain a competitive advantage in the LNG market. This expansion of liquefaction infrastructure is expected to drive the demand for liquefaction services during the forecast period.

By application, the heavy-duty vehicles segment is expected to be the most significant contributor in the small-scale LNG market during the forecast period.

The heavy-duty vehicles segment is projected to hold the largest share of the market in 2022, and this growth is primarily attributed to the increasing adoption of liquefied natural gas (LNG) as a fuel in heavy-duty vehicles, particularly in China and European countries. LNG has emerged as the most viable option for long-haul LNG-fueled trucks worldwide. One of the key considerations in utilizing LNG as a fuel for heavy-duty vehicles is the density of LNG, which can vary significantly depending on saturation pressures and storage temperatures. To optimize the performance and efficiency of LNG-fueled trucks, the LNG vehicle fuel system is designed to deliver natural gas to the engine at the required supply pressure while maximizing the fuel density at vehicle tanks and fueling stations. By maintaining the optimal density of LNG, heavy-duty vehicles can benefit from enhanced fuel efficiency, extended driving range, and improved overall performance. These advantages have driven the demand for LNG as a fuel for heavy-duty vehicles, as they offer a practical and environmentally friendly alternative to traditional diesel fuels.

China and European countries have been at the forefront of adopting LNG as a fuel for heavy-duty vehicles due to their increasing focus on reducing greenhouse gas emissions and improving air quality. The use of LNG in heavy-duty vehicles helps to lower carbon dioxide (CO2) emissions, reduce particulate matter, and minimize nitrogen oxide (NOx) emissions, which are major contributors to air pollution.

The significant growth potential in the heavy-duty vehicles segment is driven by the increasing regulatory measures and incentives aimed at promoting the use of clean and sustainable fuels. Governments and regulatory bodies are implementing policies to encourage the adoption of LNG as a fuel in heavy-duty transportation, including tax benefits, subsidies, and infrastructure development for LNG fueling stations.

Furthermore, the advancements in LNG storage and fueling technologies have made it easier to handle and transport LNG, enabling the expansion of LNG infrastructure for heavy-duty vehicles. The development of a well-established LNG supply chain, including production, storage, and distribution infrastructure, has played a crucial role in supporting the growth of LNG as a fuel in the heavy-duty vehicles segment. In conclusion, the dominance of the heavy-duty vehicles segment in the market is driven by the increasing use of LNG as a fuel, particularly in China and European countries. The optimization of LNG density in the vehicle fuel system and the associated benefits in terms of fuel efficiency, extended range, and environmental sustainability are key factors contributing to the rising demand for LNG in heavy-duty vehicles.

By mode of supply  Trucks  is expected to be the largest market during the forecast period

Using trucks for LNG transportation offers a high level of flexibility and accessibility. LNG trucks can navigate various routes and deliver LNG to remote or challenging locations that may not have access to pipelines or other infrastructure. This flexibility makes trucking an attractive option for small-scale LNG distribution. For small-scale LNG operations, investing in pipelines or dedicated infrastructure can be expensive. On the other hand, using trucks allows for a more cost-effective approach, as it eliminates the need for extensive infrastructure development. This makes trucking a viable solution for small-scale LNG projects. Additronally, LNG trucks are well-suited for regional distribution, especially in areas where LNG consumption is concentrated in smaller volumes. They can transport LNG to various end-users within a specific region, catering to industries, power plants, or even individual consumers, efficiently meeting their energy needs.

Asia Pacific is expected to be the largest market during the forecast period

The Asia Pacific (APAC) region is currently experiencing remarkable growth in the small-scale liquefied natural gas (LNG) market, positioning itself as the largest and fastest-growing market in this sector. This expansion is driven by the escalating adoption of small-scale LNG across various applications, including heavy-duty vehicles, industrial operations, and the power sector. The demand surge can be attributed to several key factors that make this growth impactful and significant for the region. Firstly, the APAC region is witnessing a substantial increase in population, accompanied by rising disposable income levels. As more people enter the middle class and aspire for higher living standards, the demand for energy, particularly in the form of LNG, is escalating. Small-scale LNG offers a versatile and cleaner alternative to traditional fuels, making it an attractive option for meeting the energy needs of a growing population. Secondly, countries like China, South Korea, and Taiwan are experiencing robust economic growth. These nations have emerged as major players in industrial production, manufacturing, and infrastructure development. To sustain this economic momentum, reliable and efficient energy sources are crucial. Small-scale LNG provides a flexible and accessible solution, enabling these countries to power their industries and fuel their growth with cleaner and more sustainable energy.

Furthermore, the versatility of small-scale LNG plays a pivotal role in its market growth. It can be used in heavy-duty vehicles, reducing emissions and contributing to the transition towards greener transportation. Additionally, small-scale LNG finds applications in various industrial sectors, such as manufacturing, mining, and construction, where it serves as a reliable source of energy for machinery and operations. Moreover, small-scale LNG can be utilized in power generation, particularly in remote areas or regions with limited access to traditional energy infrastructure. The impact of this growth in the small-scale LNG market in APAC extends beyond immediate economic benefits. By embracing cleaner energy alternatives, the region can address environmental concerns and reduce greenhouse gas emissions. Small-scale LNG offers a pathway towards achieving sustainability goals, supporting initiatives to combat climate change and improve air quality.

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Key Market Players

The major key players in the small-scale LNG market include Linde plc (US), Wartsila Corporation (Finland), Honeywell International Inc. (US), Shell plc (UK), Air Products & Chemicals, Inc. (US), ENGIE S.A (France), Chart Industries, Inc. (US), Gasum oy (Finland), Sofregaz (France), and Excelerate Energy Inc (US).

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Scope of the Report

:

This research report categorizes the global small-scale LNG market based on Product Type, Application, Type, Packaging Type, and Region

On the basis of Type, the small-scale LNG market has been categorized as follows:

• Liquification
• Regasification

On the basis of applications, the small-scale LNG market has been categorized as follows:

• Heavy duty vehicles
• Marine Transport
• Industrial & Power
• Other Applications

On the basis of mode of supply, the small-scale LNG market has been categorized as follows:

• Trucks
• Trans-shipment & Bunkering
• Others

On the basis of region, the small-scale LNG market has been categorized as follows:

• North America
• Europe
• Asia Pacific
• Middle East & Africa
• South America

Recent Developments

• In June 2023, Wartsila Corporation has got the contract to increase the capacity of the regasification system on the floating storage and regasification unit (FSRU). This floating storage and regasification unit (FSRU) vessel is owned by LNG Hrvatska, based in Zagreb, and serves as an LNG terminal on Krk island. The Wartsila Corporation will work together with the existing regasification system on the ship and increase its capacity by 212 million standard cubic feet per day or 250,000 cubic meters per hour.
• In February 2021, Elengy, a subsidiary of ENGIE S.A, has entered into an agreement with Delta Rail, a transportation company. The purpose of this agreement is to introduce a new service for loading LNG containers from multimodal platforms in Europe. This agreement will allow customers to load LNG containers onto Delta Rail's wagons at Elengy's LNG terminals in France and Belgium, and then transport the containers to their final destinations by rail.This agreement is expected to reduce the cost and environmental impact of transporting LNG by making it possible to transport LNG containers by rail over longer distances.
• In July 2022, Snam and Edison entered into a collaborative agreement to work together on various initiatives spanning the entire small-scale LNG value chain. The partnership entails the joint identification and development of opportunities in areas such as road and ship transportation, liquefaction processes, and distribution networks within the small-scale LNG sector.
• In December 2021, Elengy, a subsidiary of ENGIE S.A, successfully launched Micro-LNG carrier loading service. This loading services enables micro-LNG carriers, upon loading at the terminal, to efficiently supply LNG-powered container ships, ferries, and cruise ships arriving at the port of Marseille-Fos.
• In March 2019, Chart Industries, Inc. and Indian Oil Corporation signed and MoU to promote the development of the LNG Market in India. Both the companies will be focusing on modular liquefaction, regasification, LNG bunkering for marine applications, LNG and LCNG vehicle fueling stations, alternative LNG transportation methods, LNG Micro Bulk systems. Their collaboration aims to tap into the growing demand for natural gas in India and promote its development in industrial and commercial sectors.

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