Global Natural Gas Engine Market is Expected to Register a Healthy CAGR in the Forecast Period of 2019 to 2026

DRIVERS:

CLEAN AND EFFICIENT TECHNOLOGY FOR POWER GENERATION:

Low emissions and high efficiency in energy production play a key role in the investment for decisions. As emission requirements and regulations become more and more stringent, gas offers many advantages such as low carbon dioxide emissions, low nitrogen dioxide emissions, no Sulphur dioxide emissions and no particle emissions. Production of electricity from gas plants is more efficient than burning other fossil fuels because of their low operational and maintenance costs. It allows the global economy to reduce harmful air emissions and carbon, while complementing the development of renewables, and other innovative low-carbon energy technologies. In generating electricity, natural gas produces around half of the greenhouse gas emissions (GHGs) compared to coal.

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Also, air pollutants such as PM2.5, NOx, and SOx, are detrimental to human health and greater use of natural gas in power generation and transportation sectors will help to significantly reduce these harmful emissions. According to international gas union, the annual cost of air pollution globally was estimated at USD 3.8 trillion in 2015 and is projected to grow up to USD 30 trillion per year in 2060, with the cost being disproportionately born by the non OECD countries. Considering such factors, rising demand for clean and efficient technology for power generation.

Realizing the significant benefits offered by natural gas that require robust predictable policies and regulatory structures, policy frameworks that support switching from coal to natural gas in power generation and industry offers a fast and affordable way to meet demand while reducing carbon dioxide emissions that contribute to climate change.

GROWING ENVIRONMENTAL CONCERNS:

Exponential growth in global warming is raising the world environmental concerns, as it is being affected by greenhouse gas emissions. The Governments across the world have recognized the impact of lowering the greenhouse gas emissions as part of an international effort to limit global warming. Analysis suggests that reduction in greenhouse gas emissions per unit of economic output by 20-25% could be achieved through a range of low-cost and cost-saving measures including increased energy efficiency across its coal power fleet, increasing the share of hydro and wind in the generation mix, reducing power transmission and distribution losses and improving energy efficiency across all sectors of the economy which will need an effective policy framework to make this happen. In order to be prepared for the challenges of limiting carbon emission growth over the coming decades, world’s energy community has begun to focus on how different sectors within the economy could lower their carbon intensity for long term.

Also, the power sector is facing a significant challenge for developing a power generation system that effectively underpins its future economic development by keeping CO2 emissions under control. However, the high projected growth in demand for electricity in power generation technology is likely to build low carbon pathway.

The main provisions provided by government to reduce carbon-emission are:

  1. Declaring air pollution control across areas such as Industries which are granted permission to operate in these control areas are directed to install/modify new/existing pollution control equipment and chimneys in their units in order to meet standards regarding controlling of air pollution.
  2. Stipulation of instructions for ensuring that standards should meet for emissions from automobiles.
  3. Acquisition and testing of emission samples from industrial plants.
  4. Penalization for non-compliance with prescribed standards/norms.

INCREASED ADOPTION ACROSS COMMERCIAL SECTOR:

Natural gas engines are basically used for generating power by using a natural gas. Natural gas can be used for both emergency and portable generators and is observed as one of the most reasonable and operative fuels amongst non-renewable resources for generating power. Natural gas engines can be mainly applied in diverse sectors as in waste water treatment plants (WWT), coal mines, agricultural and food processing, green houses, electricity generation and others. For instance, according to the CEDIGAZ Insights, in India, natural gas consumed in different sector as in fiscal year 2015-2016 such as fertilizer (34%), electric power (23%), refining (11%), city gas distribution and transport (11%), and petrochemical industries (8%).

Moreover, according to the smart city act of Ministry of Housing and Urban Affairs in 2018, the total urban population impacted is approximately 99 million. Hence the demand of electricity in domestic sector will be high.

According to Gas Authority of India Limited (GAIL), the total sales of natural gas has been calculated to be around 62.0% in the country that includes 35.0% to the fertilizer sector and 30.0% to the power sector. Also, GAIL is providing around 49 MMSCMD of Natural Gas from domestic sources to customers across India. These customers range from the smallest of companies to mega power and fertilizer plants.

Whereas in commercial sector, PNG has been found to be very useful in applications like cooking, air conditioning and power generation. There is thus no hassle of handling, refilling and changing of cylinders. The uninterrupted supply of the natural gas as fuel to the commercial units helps them to provide better quality of service to its customers. When compared with other available alternative fuels like commercial LPG, PNG is cheaper. Further, GAIL’s CGD entities are supplying PNG to over 8424 commercial units. GAIL’s CGD entities are supplying PNG to over 1860 industrial units across the nation.

Thus, growing demand of electricity in domestic and commercial application and due to the globalization & urbanization and smart cities plans are expected to drive growth of the natural gas engine market.

DECREASED PRICES OF NATURAL GAS:

Decreased prices of natural gas are generally achieved by increased natural gas supply and therefore, decreased supply leads to the higher prices of natural gas. Lower prices tend to encourage the demand and supply of the natural gas. For an instance, annual US dry natural gas production increased from 2015 to 2017 as the amount of consumed natural gas in United States is generated by itself. In 2015, gas prices were dropped so quickly that a car’s entire tank could be filled for only USD 23.0  In the US, prices of natural gas have been decreased from the same period and have been volatile since 2010.

Moreover, natural gas market is also influenced by the strength of the economy. Consumption of natural gas in industrial sector can be witnessed during the period of economic growth as natural gas is consumed more for making products such as pharmaceuticals and fertilizers.

However, US manufacturing sectors have declined to switch fuels other than natural gas in past few decades but considerable fall in other fuels’ prices lead to competition for natural gas. The competition generated among fossil fuels and natural gas results into reduction in natural gas prices. Such favourable prices of natural gas encourage the usage of natural gas in manufacturing sectors for power generation.

RESTRAINTS:

DISPARITY OF NATURAL GAS PRICES ACROSS REGIONAL MARKETS:

Traditionally, North America has always had the lowest prices of natural gas amongst three major gas markets including Asia and Europe because high level of production is received from many producers in the United States whereas, European gas market prices depend on the gas supply type such as market-based priced LNG or oil-indexed priced pipe gas. Gas prices in Asian Organization for Economic Cooperation and Development (OECD) markets have always been high.

For an instance, India is the third-largest energy consumer in the world after China and the United States. India’s energy mix is dominated by coal and oil, which accounted for 57% and 30% respectively of total primary energy supply (TPES) in 2016. The share of natural gas was only 6.2%. The increase in the natural gas prices was driven by an increase in the average gas prices prevalent at the reference hubs over the period July 2016 to June 2017. According to economic times, the average henry hub (U.S.) gas prices increased by 19 per cent to USD 3 per mmBtu for the current reference period of July 2016- June 2017 compared to USD 2.5 per mmBtu for the previous reference period. Due to this, Asian gas prices were hiked by 16 per cent to USD 2.89 per unit for the six months period beginning October, 2017.

Considering these values, we observe that disparity exists among prices of natural gas based on their regions. This disparity may restrain the market region wise as prices are considerably high in Asian countries and some other regions. Hike in prices lead to limit the growth of the market.

LACK OF NATURAL FOSSIL FUEL RESERVES RESULTS IN HIGH IMPORT COST:

Asian countries are highly dependent on the import of crude oil to meet its energy demand and imports have been steadily rising over the years as energy consumption has grown at a much more rapid rate in the still developing countries than industrialized countries of Organization for Economic Cooperation and Development (OECD). For instance, during period of 1970 to 1990, the energy consumption increased at 178% for non-OECD Asia i.e., 5.3% per year and increased at 36% for OECD countries i.e., 1.6% per year. This rapid growth in energy consumption results into lack of natural fossil fuels reserves of any nation. Moreover, India imports half of its gas from the net consumed gas which costs it more than its double the domestic rate. 

Also, oil and natural gas also play a critical role in deciding the inflation rate, the rising prices for these energy commodities have long been a point of contention in political uncertainties.

OPPORTUNITIES:

SHIFT TOWARDS GAS FIRED POWER PLANTS:

Gas-fired power plants have low capital investment, short construction period and dynamic response in operation and have clear economic advantages.

Reductions in CO2 emissions can be obtained by making improvement in the efficiency of existing power generation plants by employing more advanced technologies using the same amount of fuel. Replacement of natural gas single-cycle turbine with any other cycle e.g., combined cycle (CCGT) of similar output capacity would help in reducing CO2 emissions per unit of output by around 36%.

For an instance, natural gas producers Oil & Natural Gas Corporation Ltd. (ONGC), Oil India Limited (OIL), JVs of Tapti, Panna-Mukta & Ravva and Reliance Industries Limited (RIL) which have discovered gas in the Krishna Godavari basin at its KG D6 block in the east cost of Andhra Pradesh. December 2009, Out of the total domestic production of 132.83 MMSCMD of gas about 43% is produced by Reliance Industries Ltd. and approximately 57% of the gas is produced by others. June 2011, the Central Electricity Authority, the total installed capacity of Gas based power plants in India is 17,706.35 MW.

In the PJM Interconnection, the average annual capacity factors for natural-gas-fired generators, have increased significantly over last few years in the United States which is reflecting greater use of natural gas-fired generators in that particular region.

According to the most stringent quality standards and manufactured all Tenaris products for gas-fired power plants are designed and certified under the certified quality system (ISO 9001). Quality control procedures include process, statistical process controls and product audits as well as traceability systems covering all the manufacturers involved.

Natural gas is a clean fuel compared to coal. It can be efficiently used in generation of power. As the domestic coal supply is of low quality with low calorific values, high degree of ash content and its adverse impacts to the environment, government of India encourage gas based power generation in India. The use of gas in power-generation was initially promoted by the government primarily with a view towards environmental considerations.

Gas-fired thermal power plants are expected to see a capacity of around 126 MW in 2016-17 and capacity addition of ~4.3 GW. Authorizing of this capacity has been assumed in 2019-20. This is considering various gas infrastructure capacities in gas fired thermal power plant in terms of LNG terminals as also gas pipelines, especially in eastern India.

However, increase in benefits of natural gas engines over other gas engines leading shifting of these engines on natural gas based, this step acts as an opportunity for the natural gas engine market.

TECHNOLOGICAL ADVANCEMENTS LEADING TO EFFICIENT POWER GENERATION:

Power generation from natural gas is projected to increase by a factor of nine by 2050. This requires accelerated exploration and development of offshore gas fields, construction of liquefied natural gas (LNG) terminals and gas pipelines, and deployment of natural gas combined cycle (NGCC) power plants.

July 2015, Yanmar Energy System Co., Ltd. has a gas engine co-generation systems in the 100 to 1,000 kW range with high share of the market, with an existing product range made up of its EP370G and EP700G mid-range (300 kW+) gas co-generation systems for 50 Hz regions, and the EP400G for 60 Hz. Yanmar set the development of the EP800G to increase its 60 Hz product range and satisfy the requirements. Yanmar has developed system with high efficiency and robustness in system to ensure that it does not shutdown easily. For this, the frequency of system shutdowns is achieved by improved power supply.

November 2017, Siemens AG introduced the SGT-A45 TR, a mobile 44-MW aero derivative gas turbine designed for fast power market. Siemens’ interest in distributed generation also points to a prominent direction in which the future of gas power may be heading.

August 2016, Cummins Inc., world’s leading manufacturer of diesel and natural gas engines for power generation, industrial and automotive markets launched the new 250 kVA generator set based on the L9 (8.9 litres) engine platform.

Increase in technological advancement in gas engine for more outcome and more benefits in natural gas engine, has automatically increased the demand for gas engines, which will definitely act as an opportunity for the natural gas engine market.

TECHNOLOGICAL ADVANCEMENTS LEADING TO EFFICIENT POWER GENERATION:

Power generation from natural gas is projected to increase by a factor of nine by 2050. This requires accelerated exploration and development of offshore gas fields, construction of liquefied natural gas (LNG) terminals and gas pipelines, and deployment of natural gas combined cycle (NGCC) power plants.

MARINE APPLICATION FUELING DEMAND FOR GAS ENGINES:

LNG is odorless and colorless flammable gas ignitable by static electricity. It is extremely cold and volatile liquid. Fire is caused by vapor forms highly flammable mixtures with air. The boiling point is -161.5°C at normal conditions. The flash point is -187.8°C and auto-ignition temperature is 537°C

LNG is marine fuel for more than 50 years. Reason for use of LNG as marine fuel is efficiency. The propositions are dual fuel (DF) or three fuel (TF) engines. The engines may work on heavy fuel oils, if necessary on marine diesel oils (during manoeuvre or low loads) and also natural gas.

Liquefied Natural Gas is in liquid state when transported. Since it is already seen as a supplement fuel, it can create an even bigger impact when used as ship fuel. LNG fueled ships are able to emit almost zero sulfur oxide emissions. Due to lesser carbon content in LNG, release of the harmful carbon dioxide gas is reduced by nearly 25 percent.

After almost a decade in development of liquid natural gas (LNG) technology, now, near about 30 floating vessels are (Liquefied Natural Gas) LNG fueled. M/V Bit Viking is considered the largest of the vessels afloat and in service with approx. 25, 000 dwt powered by LNG.

October 2013, Scania, Commercial vehicles and engine manufacturer has launched its marine engine platform with the high-output 16-litre V8, the powerful 13-litre and the new 9-litre engines at INMEX India. With the launch Scania has appointed Aries Technical Services, Mumbai as their authorized dealers for marine engines in segment of auxiliary, propulsion and marine gensets for all institutional segments.

LNG vapor is lighter than air and consist of less pollution causing particles. The price of LNG is cheaper. On the other hand, LNG is very pure fuel. Due to this fuel, operational costs of engines are decreasing, engines are in the better technical states and number of emergency situations and failures is decreasing.

Due to many benefits like pollution free fuel, less cost for operation and less number of failure in natural gas engine leading automatically increase in the demand for gas engines, which will definitely act as an opportunity for the natural gas engine market.

CHALLENGES:

LIMITED RESERVES OF THE NATURAL GAS:

Natural Gas which is a new age fuel is the freshest, effectual, non-polluting, environmental friendly and fairly economical of the fossil fuels in the modern day industrial society. Natural Gas Pipeline Infrastructure unites several gas sources to other gas markets to meet the existing/ future natural gas demand of various Powers, Fertilizer, CGD and other industries in the Country. The Government and Regulatory identifies the requirement of the natural gas transmission infrastructure across the nation and has delivered continual support towards development of natural gas pipeline which is shaped up into Natural Gas Grid (NGG).

A big challenge occurs while connecting the physical gap between demand and supply centers in an efficient, safe and eco-friendly manner. Pipeline transportation of gas offers a safe, economic and environmentally sound alternative to most other modes of energy transport.

Moreover, according to Cedigaz Organization, in sector of the natural gas automotive, growth is reserved by infrastructure in scene there is around 26,455,793  CNG vehicles across the globe whereas only 31,246 CNG filling stations which includes 18,509,677 natural gas vehicles and 18,735 CNG filling stations from Asia Pacific, 18,509,677 natural gas vehicles and 18,735 CNG filling stations from Europe, 18,509,677 natural gas vehicles and 18,735 CNG filling stations from North America, 18,509,677 natural gas vehicles and 18,735 CNG filling stations from Latin America and 18,509,677 natural gas vehicles and 18,735 CNG filling stations from Africa. These stats demonstrate the lack of limited reserves of CNG.

CONCERNS FOR THE DEVELOPMENT OF INFRASTRUCTURE:

Natural Gas Pipeline Infrastructure unites several gas sources to other gas markets to the meet the existing/ future natural gas demand of various Powers, Fertilizer, CGD and other industries across the globe. A robust natural gas infrastructure is really critical to ensure reliable delivery of natural gas to the customers. The United States has more than 300,000 miles of major interstate and intrastate gas pipelines which is the world’s most extensive natural gas pipeline system.

For an instance, the United States has added 142 billion cubic feet per day (Bcf/d) of pipeline capacity since 2007 and has completed addition of 79 Bcf/d by 2018 which is equivalent to 1000 cubic feet of natural gas and natural gas needs of any household for 4 days. 

For an instance, in order to develop gas grid infrastructure across any nation, about 15000 Km long additional pipeline network has been identified. Out of the imagined 15000 Km additional gas pipeline, PNG RB/GoI has already authorized entities to construct about 14500 Km long pipelines and same is under development. At present, 4 LNG terminals with total regasification capacity of 26.3 MMTPA (95 MMSCMD) are operational on the western coast of the country. In year 2007, Government of India established Petroleum and Natural Gas Regulatory Board (PNGRB) under the PNGRB Act 2006. Under the Act, PNGRB grants the authorization to the entities for developing a City Gas Distribution (CGD) network (including PNG network) in a specified Geographical Area (GA) of the country. CGD sector has four distinct segments – Compressed Natural Gas (CNG) predominantly used as auto-fuel, and Piped Natural Gas (PNG) used in in domestic, commercial and Industrial segments.

Moreover, according to the Indian Ministry of Petroleum and Natural Gas, in 2017 there are 31 City gas distribution centers are constructing and operating in 81 Geographical Areas in 20 states in India. As per infrastructure, there are approx. 3.87 Million number of natural gas in household connections, 25,180 in commercial, 7,079 in industrial connections and 12,73 number of CNG stations.

The rapid growth in demand for natural gas is driving the need for its pipeline infrastructure which involves high cost investment and needs to ensure reliable delivery of natural gas. Need for such reliable pipeline infrastructures are posing a challenge for the market growth of natural gas engines.

Market Trends:

On the basis of engine family, the market is segmented into spark ignited engine, dual fuel type engine, and high pressure direct injection.

On the basis of power output, the market is segmented into 15KW – 100KW, 100KW – 399KW, 400KW – 800KW, 1000KW – 2000KW, and 3000KW – 4500KW.

On the basis of application, the market is segmented into natural gas gensets, natural gas automotive, and decentralized energy generation (vehicles, gasoline stations).

Major Players: Global Natural Gas Engine Market

Some of the prominent participants operating in this market are Cummins Inc., Siemens, Caterpillar, Doosan Corporation, DEUTZ AG, Wartsila, GPI, YANMAR CO. LTD., Kawasaki Heavy Industries Ltd., Rolls-Royce plc, MITSUBISHI HEAVY INDUSTRIES, LTD., MAN SE, Liebherr Group, Niigata Power Systems Co. Ltd., JFE Engineering Corporation, Westport, INNIO and others.