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Better market access, cheaper fuel delivery as Railways allows LNG transportation

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The Indian Railways recently announced that it will now allow the transportation of Liquified Natural Gas (LNG) on its network. The access to Railways’ network for movement of gas will bring along multiple benefits of cheaper fuel delivery and better market access for ports that already have both natural gas re-gasification terminals and rail connectivity. The rail access will allow LNG import terminals in Gujarat and southern India to tap the entire domestic market.

Currently, for areas that do not have access to natural gas pipelines, the LNG is transported via road transportation i.e. trucks. However, post the Railways’ decision, the pressure on trucks will considerably reduce, along with tagging the plus point of economic transportation. “If one were to take a round trip distance of 500 kilometres from a Re0gasified Liquefied Natural Gas (RLNG) terminal, then transportation by rail would be cheaper by at least 30%,” said Sanjay Sah, Partner at Deloitte.

“Now, the entire country opens up as a market for a company that has an LNG terminal with a railway siding. Assuming that LNG prices were at a year ago levels, this development would result in at least 1.00-1.50 million tonnes of LNG moving by rail,” Ashish Agarwal, Managing Director of Seros Shipping & Logistics said, adding that gas-based power plants in northern India could become viable once fuel prices fall and logistics costs decline through rail delivery.

As far as the actual operations are concerned, the Railways had deliberated over a number of methods to transport LNG to destinations not connected to gas pipelines. However, the most safe and feasible way finalised is the usage of ISO tanks for LNG transportation since these tanks can be handled like containerised cargo.

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