Apr-2025

Gas-based products dominate low-carbon fuels growth

Market demand, infrastructure, and technological innovation are making gas-based projects more scalable, cost-competitive, and sustainable.

Rene Gonzalez
Editor, PTQ

Article Summary

Investment in gas-based products, primarily liquefied natural gas (LNG), continues expanding with the upstream discovery and development of new gas fields in the Middle East, Africa, US (shale-based gas production). Closely connected to midstream pipeline/terminal infrastructure, a fleet of very large LNG carriers, real-time integrated fleet monitoring systems, and other enablers have made LNG the dominant gas-based product.

Diversification into decarbonised power sources such as solar and wind continues falling short of meeting demand for new power and fuel sources, while growth in the EV market has yet to meet expectations. Meanwhile, emerging LNG consumer markets at a mega scale (for example, India) and a small scale (for example, Caribbean Basin) favour the construction of LNG liquefaction facilities along the US Gulf Coast, The Middle East, Africa, and elsewhere.

While a detailed review of LNG and other gas-based technology is beyond the scope of this article, suffice it to say that several liquefaction processes have been developed, with the main differences seen in the type of refrigeration cycles used. These processes can be broadly classified into two groups: mixed refrigerant processes and cascade liquefaction processes (using pure components as refrigerants).

LNG is seen as a bridge fuel in the shift away from coal and oil, providing lower emissions and supporting global climate goals. Rising energy consumption in China, India, and Southeast Asia supports increased LNG imports as these regions transition from coal to cleaner energy sources, although coal consumption is still reportedly high. Industries and power plants are increasingly using LNG as a reliable energy source due to its efficiency and lower carbon footprint.

Countries are looking to diversify energy supply sources to reduce dependency from specific regions (for example, Europe reducing reliance on Russian gas), leveraging flexible LNG supply solutions based on large-scale and small-scale LNG (ssLNG) trains to liquefy natural gas down to -162°C for storage and transportation. The size of modular ssLNG units makes them ideal for sites near cities and industrial parks to fuel electric generators and power data centres to meet the demands of AI workload.

Another example more closely related to the refining industry is the Stockholm ssLNG terminal, which can supply LNG to the neighbouring Nynas Nynäshamn refinery. From this source, the refinery can generate the hydrogen it needs for its hydroprocessing units. According to recent projections, the switch to natural gas from naphtha will reduce the facility’s CO₂ emissions by more than 57,000 tonnes per year.

As LNG production scales, costs continue to decrease, making LNG more competitive against coal, oil, and renewables in certain markets. As with AI-centric data centres, new types of consumers are reducing cost factors. For example, the shipping and maritime industries are shifting towards LNG as a fuel source to comply with IMO (International Maritime Organization) emissions regulations.

Other emerging LNG consumers include expanding mining operations (such as lithium and cobalt for EVs and other rare earth metals), shifting remote temporary power requirements from diesel-fuelled generators to natural gas-fired generators in the 100 kW to 1.0 MW range. Elsewhere, higher natural gas liquid (NGL) volumes are providing feedstock for steam cracker-based olefins production. Other developments in reducing LNG industry costs include floating LNG (FLNG) plants. These modular plants lower project costs, reduce environmental footprint, and bring new supply to market. Other enablers involve larger, more efficient LNG carriers (tankers) where advancements in ship design, such as Q-Max and Q-Flex LNG carriers, reduce transportation costs and improve efficiency (see Figure 1).

Long-term vs short-term opportunities
Improved liquefaction and regasification technologies based on new processing techniques enhance LNG production efficiency, lowering capital and operating costs. This includes advancements in LNG storage and cryogenic technology. For example, more efficient storage solutions, including floating storage regasification units (FSRUs), make LNG accessible to more markets. In support of these developments, AI-driven predictive maintenance and automation improve plant uptime, reduce operational costs, and enhance safety.

In the long term, the potential to blend hydrogen with LNG could position it as a long-term transition fuel towards a low-carbon future. However, this involves significant challenges. For starters, LNG is stored at around -162°C, while hydrogen liquefies at -253°C, making it difficult to store and transport them together efficiently. Hydrogen can cause embrittlement in steel pipelines and infrastructure, potentially leading to safety concerns. Hydrogen has a higher flame speed and lower energy density than natural gas, requiring modifications to turbines, burners, and engines.

At present, there are around 70 LNG terminals worldwide. Small-scale facilities such as the one in Nynäshamn are still the exception but offer a significant benefit, which is now boosting demand in other regions such as the Caribbean basin. The LNG market is projected to grow at a compound annual growth rate (CAGR) of more than 4.9% between 2025-2030, with most capacity coming from mega-LNG facilities. However, many of the niche margin opportunities are coming from ssLNG operations. Unlike mega facilities, modularised ssLNG facilities in the 0.5 to 2 million metric tonnes per annum (mmtpa) range can be brought online relatively quickly, reducing overall cost and complexity, such as the Eagle LNG Partners project in Jacksonville, Florida.

Long-term ssLNG market prospects are favourable as island nations and smaller countries transition towards LNG as a fuel option. Consequently, flexible US cargoes may prove to be attractive options. Currently, the mega-LNG owners are more exposed to price sensitivity regarding long-term contracts and other tolling agreements, making shut-ins of one or more LNG trains more likely in the short term. For example, the lack of a reliable power grid on the Caribbean islands predicates the benefits of modular LNG-powered generators in the 50 MW or less range.

Demand for power
India has become a major influencer in the global LNG market as it develops the infrastructure for importing LNG. Recent press reports noted that India’s gas-fired power generation doubled in the spring of 2024 to 8.9 billion kilowatt-hours (kWh) compared with the same period in 2023. More than 75% of India’s power generation was from coal in 2023, while gas-fired plants have accounted for only about 2% in recent years, largely because of the high cost of gas relative to coal, which is why Indian refiners are making efforts to increase gas recovery from different refinery offgas and flaring operations.

India’s domestically produced gas is largely being used for fertiliser production and cooking fuel in cities. Indian LNG imports are forecast to reach more than 28 million metric tons in 2025, up from 22.1 million tons in 2023, according to Independent Commodity Intelligence Services (ICIS). This is why other gas sources, such as refinery offgas (ROG) recovery and the opportunity for cogeneration (from offgas), are important considerations going forwards.