The small-scale LNG market is expected to register a CAGR of greater than 21.34%, over the forecast period 2020 - 2025. With increasing pressure on large-scale LNG plants to showcase returns to investors, the operating companies are increasingly backing small-scale LNG initiatives. The small-scale LNG plant with a capacity of less than 1 MTPA can be constructed within three years, compared to large-scale LNG plants, which can take up to 10 years. Factors, such as the ability to enjoy profits in a shorter time, coupled with the growing consumption of LNG as a primary energy fuel are expected to drive the small-scale LNG market in the coming years. However, factors such as lack of supporting infrastructure in the regions such as the Middle-East and Africa and high CAPEX requirement, along with a long payback period of more than 12 years are expected to hinder the growth of the market studied.
- Transportation application is expected to provide a significant boost to the small-scale LNG market, owing to the increasing demand for LNG as a fuel source for ships and heavy-duty trucks.
- Owing to the high capital expenditure required for a small-scale LNG infrastructure, development of cost-efficient small-scale LNG infrastructure are expected to provide significant opportunities to the small-scale LNG technology providers and transporters in the future.
- Europe dominated the market across the world, with the majority of the demand coming from countries, such as Norway, Spain, and the United Kingdom.
Key Market Trends
Rising Number of LNG-fueled Fleet Supplementing the Demand
- A gradual shift to LNG for propulsion is being considered more advantageous when compared to the traditional method of fuelling ships with heavy fuel oil, marine gas oil, marine diesel oil, and others. Similarly, LNG-based propulsion reduces carbon footprint significantly and increases the ship’s operational efficiency.
- The regulatory environment encompassing the use of shipping fuel is expected to become more stringent as climate change initiatives build momentum. From January 2020, a new global emissions cap will reduce allowable emissions of sulfur in regions that are not emission control areas (ECAs) from 3.5% to 0.5%. These limits are pushing the maritime industry to implement measures to incorporate more significant use of LNG, which has a far lower sulfur content than diesel as bunker fuel.
- In 2018, the number of LNG-fuelled ships in operation increased to 121, while 51 ships are on order. The number of ships on order is expected to reach 126 by 2024, representing an increase of almost 147% compared to the 2018’s level.
- Additionally, to promote LNG fueled vehicles, the governments in various nations are providing grants and other financial aids. For instance, NOx fund by the Norwegian government offers financial cover by the government for the cost of high investment faced by companies for investing in LNG fuelled ships. Other countries, such as France, have also pledged to consider similar financial incentives, which is expected to increase the number of LNG-fueled ships.
- Therefore, with the increasing demand from the maritime industry for LNG as fuel source along with different initiatives taken up by the governments across the world to promote LNG fueled ships are expected to drive the small-scale LNG market over the forecast period.
Europe to Dominate the Market
- Europe has always been a pioneer in the implementation of small-scale LNG projects across the globe. The majority of the LNG supply locations across the world are present in Europe. As of 2017, approximately 75% of the operational small-scale LNG infrastructures were in countries that have large scale regasification terminals, mainly in Western Europe.
- Despite sustained low oil prices and market uncertainty, there has been a significant increase in small-scale LNG projects in the region. Stricter regulations on the marine sector and huge subsidies on the use of LNG are stimulating the use of small-scale LNG as a bunker fuel in Europe.
- France, Italy, Spain and the United Kingdom have been driving the growth in small-scale LNG infrastructure, increasing the number of their operational facilities by 133% over 2016-2017. This trend in Western Europe is expected to continue in the coming years owing to the number of projects under construction or planning stage.
- With LNG becoming increasingly cost competitive, the drive for cleaner fuel gathering pace and the desire for energy companies to expand and diversify their LNG businesses, investors in the European region are becoming aware of the potential for small-scale LNG projects.
- Therefore, factors such as increasing demand for LNG as a fuel source for ships as part of the IMO regulations to reduce the sulphur emissions by 2020 and increasing investments in the gas infrastructure across the region along with the upcoming small-scale LNG projects are expected to drive the small-scale LNG market over the forecast period, as the small-scale LNG facilities consume considerably less amount of time for construction in comparison with large-scale LNG facilities.
The small-scale LNG market is moderately concentrated. Some of the major small-scale LNG technology providers include the Linde Group, Wartsila Oyj Abp, Baker Hughes Company; small-scale LNG Marine Transporters include Anthony Veder Group NV, IM Skaugen SE, and Evergas A/S; and small-scale LNG operators include Royal Dutch Shell PLC, Engie SA, Gazprom PAO, and Gasum Oy.
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