Small-Scale LNG Market

Market Overview

The global small-scale LNG market size was valued at USD 972.2 million in 2023 and is projected to reach USD 1.5 billion by 2032, registering a CAGR of 5.1% during the forecast period (2024-2032). Growing transportation and power generation applications, rising energy demand, and increased investment in floating LNG are essential reasons for boosting the Small-Scale LNG Market share.

Small-scale LNG refers to producing, transporting, and distributing liquefied natural gas (LNG) in lesser amounts than conventional large-scale LNG projects. This segment of the LNG industry focuses on delivering LNG to markets that may need more pipeline infrastructure or where demand is insufficient to support large-scale LNG plants.

The small-scale LNG market has been steadily growing. One of the critical drivers of small-scale LNG sales is the rising use of fuel in transportation and power generation. There is a growing desire for LNG as an alternative to diesel in high-horse vehicular transportation applications such as heavy trucks, mining trucks, and fleet vehicles. Furthermore, higher oil prices and worries about decreasing emissions drive industry growth. Furthermore, increased use of LNG contributes to lower fuel and maintenance expenses for vehicles. Aside from that, LNG is frequently employed in power generation due to its low cost.

Highlights

• Liquefaction Terminal accounts for the largest share of the market by type.
• Transportation dominates the market by application.

Market Dynamics

Global Small-Scale LNG Market Drivers:

Energy Transition and Clean Energy Policies

Concerns about climate change and air pollution have fueled the global transition to cleaner energy sources, resulting in greater use of LNG as a cleaner alternative to traditional fossil fuels like coal and oil. Governments and regulatory agencies worldwide are enacting policies and rules to encourage the use of cleaner fuels and lower greenhouse gas emissions. In 2023, the European Union (EU) encouraged using liquefied natural gas (LNG) as a transition fuel in the transportation industry. In 2022, the EU purchased more than 130 billion cubic meters (bcm) of LNG, representing a 60% increase over 2021. Global LNG supply is predicted to expand by 23 billion cubic meters in 2023, owing primarily to the rise in liquefaction projects in Africa and the United States. This has shifted supplies away from traditional buyers and toward the EU.

According to the International Energy Agency (IEA), global gas demand climbed by 0.5% in 2023, although losses in other regions somewhat offset the increase. The IEA expects worldwide gas demand to stay flat in 2023, with growth concentrated in Asia Pacific and Middle Eastern economies.

Additionally, in India, the government hiked energy subsidies to INR 3.2 lakh crore (USD 39.3 billion) in FY 2023, the highest level in nine years. Renewable and fossil fuel subsidies increased by around 40% during FY 2022. The government has also taken steps to improve national access to natural gas, such as expanding domestic pipeline networks and boosting the number of LNG terminals. Implementing clean energy regulations offers a favorable regulatory environment for small-scale LNG plants by promoting cleaner fuels and funding infrastructure development. This encourages investment in small-scale LNG infrastructure, accelerating market expansion.

Global Small-Scale LNG Market Restraints:

Market Uncertainty and Price Volatility

Global energy market dynamics, such as fluctuating natural gas prices, LNG supply and demand dynamics, and geopolitical issues, all impact the small-scale LNG business. Uncertainty in market conditions and price volatility can impact project economics, investment decisions, and overall growth in the small-scale LNG industry.

According to Statista, LNG prices in 2023 were less volatile than the previous year, with the Platts JKM, a global benchmark for LNG, showing a price volatility of 75%. However, according to ceenergynews.com, natural gas prices remained high in 2023, averaging more than 100 percent, the highest level ever recorded except 2022. Furthermore, European market prices averaged USD 11.3 per million British thermal units (MBtu) or €35.4 per megawatt-hour (MWh) in the second quarter of 2023, while Asian spot prices were USD 11.1 per MBtu.

As a result, market uncertainty and price volatility can have various implications for small-scale LNG plants. Fluctuations in natural gas and LNG spot prices can impact LNG's competitiveness as a fuel compared to other energy sources, influencing investment decisions and project feasibility. Market uncertainty can also cause project development and finance delays as developers and investors become more cautious in uncertain market conditions.

Global Small-Scale LNG Market Opportunity:

Maritime and Transportation Sector Growth

Due to tight emissions rules and a desire to lessen environmental effects, the maritime industry increasingly turns to LNG as a cleaner alternative marine fuel. Small-scale LNG infrastructure is critical for enabling the bunkering and refueling of LNG-powered ships, creating enormous prospects for market expansion in the marine and transportation sectors. The International Maritime Organization (IMO) established a GHG policy in July 2023 to reduce greenhouse gas emissions (GHGs) from international shipping, especially sulfur emissions, by 2050. The strategy contains indicative checkpoints, such as in 2030, when GHG emissions from international shipping should be 20% lower than in 2008, with a target of 30%. The policy also contains two new requirements that go into effect on January 1, 2023, to improve vessel efficiency and reduce carbon emissions. Many shipowners and operators are looking at cleaner fuel options like LNG to meet emissions requirements.

Thus, the expansion of LNG as a maritime fuel creates considerable prospects for the small-scale LNG sector, notably in terms of LNG bunkering infrastructure and supply chain solutions. Small-scale LNG infrastructure, such as bunkering terminals, small-scale liquefaction plants, and LNG bunkering vessels, is critical for supplying reliable and cost-effective LNG to fulfill the growing demand for LNG-powered ships.

Regional Analysis

Asia-Pacific Dominates the Global Market

The global small-scale LNG market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

Asia-Pacific is the most significant global small-scale LNG market shareholder, estimated to grow at a CAGR of 5.3% over the forecast period. Asia-Pacific has been a leader in executing small-scale LNG projects worldwide in recent years. Interest in using small-scale LNG (SSLNG) has grown recently as natural gas consumption rises in nations such as China, India, Singapore, Japan, and others. As of 2031, China is one of the critical countries globally contributing to increased LNG consumption. In 2023, China imported 71.32 million metric tons (mt) of liquefied natural gas (LNG), up 11.7% from 2022 and representing a 12.6% rise overall. This has made China the world's largest LNG importer, surpassing Japan. However, these figures remain below the 79 million mt imported in 2021.

Additionally, China's natural gas market comprises local production and imports through pipelines and LNG terminals. In China, small-scale LNG is in high demand from the industrial, residential, and power generation sectors, with the transportation sector showing the most potential. The increase in LNG trucks due to higher diesel prices compared to natural gas is predicted to be the primary driver for the growth of small LNG plants in China.

While small-scale LNG in India is still in its early stages, a few LNG installations transport LNG via LNG trucks. To boost natural gas's contribution to the energy mix to 15% by 2030, India will likely build small-scale LNG projects to distribute natural gas to remote areas without pipeline infrastructure. For example, in June 2022, GAIL Limited, a government-owned natural gas exploration and producer, planned to establish minor liquefaction facilities in places without access to LNG pipelines. Furthermore, GAIL plans to set up two small-scale liquefaction units as a test project.

In addition, the small-scale LNG business in Singapore is primarily driven by LNG bunkering facilities in Singapore's ports. Singapore is one of the world's busiest ports and is a global leader in international marine shipping. In May 2021, FueLNG and the Maritime and Port Authority of Singapore (MPA) completed the bunkering of Pacific Emerald, Singapore's first LNG-powered oil tanker.

North America is anticipated to exhibit a CAGR of 5.7% over the forecast period due to the rising demand for fiber cement and small-scale liquefied natural gas (LNG) in the region. LNG exports from the United States, Canada, and Mexico are increasing due to expanding supplies from businesses like Royal Dutch Shell Plc., ExxonMobil Corp., and Chevron Corp. The United States exported more liquefied natural gas (LNG) than any other country in 2023, with an average of 11.9 billion cubic feet per day (Bcf/d), a 12% increase over 2022. In December 2023, the United States averaged 13.6 Bcf/d, a record level. The United States also exported around 90 million metric tons (MT) of LNG in 2023, about 15% more than quantities exported in 2022.

The European small-scale LNG industry is expanding rapidly, owing to several causes, including the region's goal of lowering greenhouse gas emissions, boosting energy security, and switching to cleaner energy sources. Furthermore, Europe remains the largest importing market after Asia since LNG provides a source of supply diversification in the face of falling domestic output. Despite static demand, Europe's import requirements will likely climb by more than 10%, or 45 billion cubic meters per year, over the next five years. This is caused by rapidly falling domestic output in northwest Europe.

The Middle East and Africa hold a significant market share. Countries like Egypt, South Africa, and Nigeria increasingly need cleaner, more reliable energy sources to meet domestic demand and support economic growth. Small-scale LNG can help diversify the energy mix and reduce reliance on traditional fuels such as coal and oil.

Moreover, Middle Eastern gas demand will rise by approximately 100 billion cubic meters annually, reaching almost 660 billion cubic meters annually by 2025. The most significant increases come from Iran and Saudi Arabia (accounting for up to 70% of the overall consumption increase), aided by increased domestic supply availability. 

Segmental Analysis

The global small-scale LNG market is segmented based on type and application.

The market is further segmented by type into Liquefaction Terminal and Regasification Terminal.

The liquefaction category is expected to have the most significant market share over the projection period. Liquefaction terminals transform natural gas into liquefied natural gas (LNG) by chilling it to a temperature of around -162 degrees Celsius, at which point it becomes liquid. These terminals typically feature refrigeration units, compressors, and storage tanks for liquefying and storing LNG.

Additionally, liquefaction terminals are critical components of the small-scale LNG supply chain since they produce LNG that may be transported, stored, and distributed to end consumers. These terminals are frequently positioned near natural gas-producing locations or in areas with pipelines. The increased export of LNG, which must first be liquefied before being transported between ports, is driving the market's growth. Furthermore, the increased demand for LNG is driving the building of liquefaction plants worldwide.

Regasification terminals, or LNG import terminals, convert LNG back to a gaseous state for distribution and usage. These terminals receive LNG from storage tanks or transportation vessels. They employ regasification equipment, such as vaporizers or heat exchangers, to heat the LNG and convert it back to natural gas. Regasification terminals play an essential role in the small-scale LNG industry. They provide access to LNG for industries, power production, and transportation in places that need direct access to natural gas pipelines. These terminals are frequently built near ports or industrial areas to simplify delivery to end customers.

The market can be bifurcated by application into Utilities, Residential, Industrial, Commercial, Marine, and Transportation.

LNG is primarily used to fuel trucks and ships, owing to its economic and environmental benefits over diesel and fuel oil. Because LNG is non-corrosive and non-toxic, it can increase the life of a vehicle by up to thrice. Furthermore, because LNG has a shallow boiling point, converting it into a gaseous form at high pressure requires very little heat and negligible mechanical energy. This makes LNG a highly efficient transportation fuel. Handling LNG is daunting because even minor temperature differences can cause fuel to boil and vaporize, resulting in fuel waste.

As a result, passenger cars are far less viable than heavier vehicles like commercial trucks. This has hampered the use of LNG in the transportation sector. The usage of LNG as a transportation fuel is gaining popularity around the globe. China, the United States, and Europe have already begun deploying LNG-powered trucks, mainly for long-distance freight transportation. This is primarily owing to government programs and laws aimed at decarbonization and emission control, such as China VI and the European Green Deal.

Furthermore, new rising economies intend to establish the groundwork for the future of LNG for transportation. For example, Mitsui O.S.K. Lines (MOL) wants to launch 110 net zero-emission oceangoing vessels by 2035, beginning in April 2022. In addition to pushing widespread adoption of sustainable energy, the Japanese carrier plans to launch 90 LNG-powered boats by 2030.

The marine section focuses on using LNG for ships, ferries, and other marine vessels. Compared to traditional marine fuels such as heavy fuel oil (HFO) or marine diesel oil (MDO), LNG-powered ships emit less SOx, NOx, and particulate matter. Small-scale LNG infrastructure enables the bunkering and refueling of LNG-powered vessels, offering maritime operators a cleaner and more sustainable fuel source.

Recent Developments

• April 2024- With the mosaHYc project, ENGIE completed the first milestone in its objective to develop 700 km of hydrogen transport networks across Europe by 2030.
• March 2024- Conrad Asia Energy inked a memorandum of understanding (MOU) with Pertamina subsidiary PT Perusahaan Gas Negara for Conrad's two production sharing contracts (PSCs) offshore Indonesia. They will next seek cooperation in the development and maintenance of possible small-scale LNG infrastructure, as well as LNG sales.