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Natural Gas Finds Room for Growth in the Transportation Industry

natural-gas-transportationFor many years in the past, the practicality of using natural gas to serve as a fuel source that’s comparable in volume and versatility to oil, gasoline and diesel was far from a sure thing.  However, the days of natural gas being limited to a home heating source appear to be numbered.

But as John C Maxwell notes, “Change is inevitable.  Growth is optional.”

And growth is abundant for the natural gas industry.  The recent boom in production, coupled with reports of prices increasing by only 3%-9% in the next 20 years has opened up a window of opportunity for natural gas vehicle (NGV) engine manufacturers, natural gas producers, and distribution companies to take advantage.  Although we may be some years away from a large domestic influx of natural gas fueling stations, the potential is not as far away as it used to be.

Oil and gas behemoth Royal Dutch Shell is definitely paying attention.  They’ve begun to work with Wartsila North America and General Electric’s transportation division to implement larger NGV engines for freight trucks and locomotives that would be able to run on either diesel or liquefied natural gas. (LNG)  After all, Shell will need to find new channels to distribute their natural gas; 2012 marks the first time in company history their natural gas production will surpass oil development.  They released a report last month illustrating their expectations for global LNG demand to double to 400 million tons per annum (mtpa) by 2020, and even surpass 500 mtpa five years after that.  President of Shell Oil Marvin Odum adds, “As global demand for transportation fuel increases, including LNG, Shell is well positioned to meet this demand…LNG will be a welcome addition to Shell’s portfolio of quality transportation fuels.”

Companies that use a large volume of freight trucks like FedEx, Saval Foodservice, AT&T and Waste Management have begun to embrace NGVs as well.  Out of the four companies mentioned, Waste Management has been the most diligent; they announced in May that 80% of all purchased trucks moving forward would be fueled by natural gas.  Eric Woods, head of fleet logistics for Waste Management, says that although each NGV costs $30,000 more to make, the company will instantly save at least $27,000/year from fuel expenditures.  In less than 5 years, they intend to be burning more natural gas than diesel in their 21,000 vehicle fleet.

As of the last couple years, the price of natural gas used for transportation has remained at least 25% cheaper than petroleum-based fuels and as much as 50% cheaper than diesel at the fuel pump.  In addition, studies have shown that natural gas engines run around 31% cleaner than gasoline engines, emitting considerably less carbon dioxide and other harmful carcinogens into the atmosphere.

Although the costs remain high for most companies to convert their fleet, the opportunity being presented for the industry is staggering.  35 billion gallons of diesel are consumed annually in the US between the main ‘big rig’ companies and freight service giants.  When you consider that NGVs only make up 112,000 of the vehicles on American roads today, representing a mere .1% of the industry, there’s really nowhere to go but up.

Kristopher Settle
Energy Curtailment Specialists, Inc.

Kris can be found on Twitter and Google+.

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