Natural Gas in North America: Hit the Road, Jack
When leaders from the natural gas industry gathered at the North American Gas Forum in Washington, DC, one thing that was on their mind was how to create higher demand for natural gas.
Retrofitting diesel engines to burn natural gas was one way to “hit the road,” according to Jim Arthurs, President, Cummins Westport, Inc., who showed delegates a natural gas powered engine that was built on the very same assembly line as a 9 liter, 320hp diesel engine that was ideally suited for things like transit buses and garbage trucks.
“We introduced it in 2007 and have got over 21,000 of them in service,” he revealed.
However, admitted that petroleum was still the dominant fuel of the day for transportation, making up about one-third of North America's energy diet. “If you look at natural gas, it's second,” he observed, “with only a little bit for transportation.”
He explained the opportunity on the horizon: “What's happening is, because of the smart people in the energy industry, there's a lot more natural gas being found – production is going up – so where do you use it all?”
He offered electricity generation, industrial and exporting.
But Mr. Arthurs showed a big red bar on a graph which. he said was the biggest single use of energy in the entire economy – transport. The cost of natural gas, he said, was 80% less; however, it did take effort to get it to the pump. “When the underlying commodity costs 80% less, smart people are going to figure this out, and that's what we're working on.”
How about the 131 million cars in the US, which used, on average, 514 gallons of gas/year?
“If you're saving USD 2/gallon, you're saving about 1,000 bucks per year,” he commented, “which is not hugely compelling if the option costs you USD 10,000.”
But it especially made sense to use natural gas in heavy trucks, he said, which used about 20% of all fuel. “So you're saving USD 24,000 a year on fuel; if your upgrade to buy the natural gas is USD 40,000, you're well within a 2-year payback,” he explained.
Cummins Westport, he recalled, had started with buses, which led eventually to heavy trucks.
He said, “It's been all about the 'return-to-base' fleets initially. The next opportunity would be, according to Mr. Arthurs, would be long-haul trucks, locomotives and mine haul trucks.
Given all the cars, however, perhaps the most anticipated development on the horizon will be the greater proliferation of natural gas cars, but starts with light trucks.
“You don't see a lot of cars with natural gas,” he remarked. “One of the challenges is, not everyone wants to drive a Honda Civic (the only choice). There are some conversions available, but move people are not going to convert their cars; taxi fleets do.”
One development, according to him, that was worth watching was an “in-home refueling system.”
“So back to this 'return to base' idea,” explained Mr. Arthurs. “You install a compressor to your natural gas line in your garage. If you have natural gas at home, why go out for your fuel?”
The Natural Gas Association, he noted, had built six cars in the last year that were CNG capable, deciding that having a huge gas tank capacity was no longer necessary as the average person drove 30-50 miles per day, meaning they could just go home at the end of the day and fuel up.
The infrastructure sounds like it is, indeed, a work in progress, like the Natural Gas Highway Network, about which Todd Campbell, Vice President of Public Policy and Regulatory Affairs, Clean Energy Fuels, the largest owner/operator of natural gas fueling stations in the US, spoke. He said currently it had 450 stations coast-to-coast that provided both liquefied and compressed natural gas. (Incidentally, Clean Energy Fuels was founded by business magnate T. Boone Pickens.)
A former mayor of Burbank, California, Mr. Campbell recalled that natural gas was originally thought of as a “mitigation strategy” - not an economic proposition - by mayors in the US to improve the quality of life for residents of their cities. He said, “With the economic proposition, it really changes the game, turning it on its head.”
As a company, he explained, Clean Energy Fuels provided a turnkey solution for customers, owning and operating stations, or providing maintenance for such facilities. “We try to make the extra effort, because we know switching away from diesel to an alternative fuel such as natural gas – there's a learning curve.”
In terms of reducing carbon emissions via renewable natural gas, mitigating methane loss on the vehicle side, he said, “We see it as a complete mitigation strategy that can actually achieve the 2050 goals for the state of California. It's almost a 90% reduction of carbon content within transportation fuels. Renewable natural gas can be carbon negative.”
Mr. Campbell noted the durability of natural gas prices, saying it was possible to tack USD 3 onto the commodity cost and the cost of the equivalent of a gallon of natural gas would be around 98 cents – very competitive.
Significant markets included garbage trucks and school buses. “But heavy trucks is huge – we're talking about a 25 billion gallon/year market size. In comparison to other markets, we can see the significant fuel displacement. I think that this is going to be the market that's going to drive the infrastructure backbone for the country; this is why we decided to build the American Natural Gas Highway. These trucks will put us and our competitors in a position of building up regional networks, so we ultimately get down to the consumer vehicles in terms of natural gas penetration,” he opined.
Natural gas used in vehicles was something that her company could deal with, said Sherrie Merrow, Natural Gas Demand Generation, Encana Corporation, the third largest natural gas producer in North America.
She recalled that about 4 years ago Encana's CEO saw the low price of natural gas and its abundance and decided to look for a way to create demand for it in North America. “We had looked at switching to natural gas for power generation, industrial usages – there wasn't a lot we could personally motivate there, the price of gas was doing it all by itself. But natural gas vehicles and its use in transportation and equipment was something we could deal with.”
A small part of Encana, she said, began to produce CNG for the company fleet; now the company had eight stations with plans for two more, and even public access in the works.
“Our primary business is LNG,” she said, “liquefaction and distribution. We are working to start with the oil and gas community: drilling rigs, production, completion, any equipment that can run on that, but we have several other projects under way with railroads, mining companies and heavy trucking as well.”
Ms. Merrow said this showed that Encana “walked the talk” on using natural gas as a transport fuel and today 29% of the company's fleet ran on gas, while 57% of its drilling rigs did, too.