Industry Market Trends

Are Liquefied Natural Gas Vehicles Here for the Long Haul?

Jan 02, 2013

The economic and environmental benefits of LNG vehicles are clear. So why has adoption lagged? Credit: Stephen Petit.

A milestone of sorts was reached the week before Christmas: Nicole Lussier, president of Excellence Peterbilt, announced that the company had put "Canada's first heavy-duty rental truck powered by liquefied natural gas into service."

Collaborating with their partners -- Peterbilt Motors, PacLease, Gaz Metro Transport Solutions and Westport HD -- Excellent Peterbilt, according to Lussier, is "offering private and for-hire transporters an opportunity to test drive and compare the economic and environmental benefits of this alternative technology."

LNG is seen as a possible alternative to conventional diesel gasoline in heavy trucks. According to a recent news advisory from CNW Telbec, Gaz Metro Transport Solutions says heavy diesel trucks "emit 28% of the GHG emissions in Québec, while representing only 2% of all vehicles." If a significant portion of that fleet can be switched to LNG, greenhouse gas emissions can be lowered. This makes LNG politically attractive.

The fuel is growing in popularity: In 2011, according to Saadallah al Fathi,  former head of the Energy Studies Department in Opec Secretariat in Vienna, world trade in LNG was almost 331 billion cubic metres, or about 245 million tons per annum (mta), 21 mta over 2010 and 62 mta over 2009.

Where is the Technology  Today?

Today LNG technology is highly useful for bringing online gas from what are called "stranded" gas fields, places where there's a whole lot of gas but where a pipeline really isn't feasible. So the gas is liquefied, which makes it transportable, and then usually regasified at its destination.

The most interesting technological development today is in the field of Floating LNG. This requires building vessels near stranded natural gas fields to produce and liquefy LNG for carrier ships to pick up. Traditional LNG facilities aren't low-cost undertakings in ideal circumstances, and many of the stranded gas fields exploitable by LNG are in places like Nigeria, Oman, Indonesia and Qatar, where the costs and risks would be much higher.

Floating LNG production facilities can be moved to a new location much more easily than land-based ones once the gas field has been exhausted, and as industry journal TransWorld News notes, "offshore LNG facilities can also avoid inland environmental laws."

There aren't any FLNG vessels currently operating, although TransWorld finds that there are "a total of 20 FLNG regasification terminals planned across 13 countries for 2012-2016," and in 2011 the Financial Times wrote that Royal Dutch Shell was green-lighting the construction of an FLNG in Australia.

Shell is betting heavily on natural gas: According to Forbes, Shell officials expect "the global demand for LNG to double to 400 million tons by 2020 and to potentially as much as 500 million tons by 2025."

The point being, vehicles powered by LNG will be a great deal  more economically feasible once the world supply of LNG can be more readily accessed and brought to the markets where the LNG vehicles actually are. Which appears to be where Shell's putting its chips.

What Does the Infrastructure Look Like?

Shell's Prelude FLNG vessel. Credit: Royal Dutch Shell.

One advantage of LNG as a transportation fuel is that the infrastructure is roughly similar to conventional gas stations. According to the U.S. government's Alternative Fuels Data Center, LNG stations, like gasoline and diesel stations, "both deliver a liquid fuel." Therefore the methodology is going to be fairly common, although LNG requires more safety precautions during fueling.

As the AFDC notes, you have three options for LNG fueling: mobile, containerized, and customized large stations. Mobile fueling is where a tanker truck comes to your location with the fuel, bringing its own metering and dispensing equipment. A containerized -- or "starter" -- station is a place with a storage tank, as well as all the necessary dispensing and metering equipment.

And a custom station is pretty much what the name suggests: Heavily committed users of LNG for their vehicle fleets need much greater storage capacity than most, and construct dispensing stations "tailored to meet fleets' needs."

They're not cheap -- building an LNG station can run anywhere from $1 million to $4 million, according to the AFDC. And right now there simply isn't the infrastructure to support a national-ranging LNG schedule. It's not like you can drive from New York to Los Angeles and count on having your LNG truck filled whenever needed. But if your deliveries tend to be within a day's drive of your fleet center, like a UPS or FedEx delivery truck, it could work.

So what obstacles exist from a manufacturing perspective that prevent widespread adoption of LNG-powered trucks? Right now, you'd just have to say, "Inertia." Human nature. Although LNG can be shown to be cheaper and cleaner than conventional gas, the simple fact is that people know diesel, they're comfortable with it, they know it works so why change?

The infrastructure is a consideration. If your fleet makes overnight deliveries, LNG probably won't work for you and you're not going to buy LNG-powered trucks.

Nevertheless, global energy business observer Ken Silverstein, writing in Forbes, is bullish on LNG vehicle manufacturing, saying "all roads lead to natural gas," LNG for heavy-duty trucks and Compressed Natural Gas for cars and lighter vehicles.

Silverstein notes that yes, Shell realizes the lack of an extensive infrastructure is going to dampen demand for the manufacture of LNG-powered vehicles, but says the company's working with Wartsila North America 'to develop larger engines that could run on the fuel," as part of its large bet on natural gas, and is "partnering with GE's transportation division to assist the rail industry in building locomotive engines that can function on both diesel and LNG."

Shell believes the numbers are on the side of LNG manufacturers. "Natural gas used for transportation cost 25 percent less than petroleum," Silverstein writes to explain the reasoning behind Shell's focus on natural gas, adding that Weld County, Colo. received its first LNG truck in July 2012 and "has already realized a 22 percent reduction in fuel costs, or $25,000 a year in fuel savings per truck."

Silverstein quotes Jay McDonald, a country supervisor, as saying, "Right now, it is costing us 20 percent less per mile to run our LNG trucks versus our diesel trucks."

And in May of 2012, GreenMan Technologies officials announced that the company's American Power Group subsidiary and Linde North America "established a formal business relationship to introduce and expand the use of liquefied natural gas (LNG) for APG retrofitted dual-fuel diesel engines and diesel pumps in the oil and gas industry."

Displacing such an entrenched industry as diesel might take some time, but as long as LNG remains cleaner and cheaper than diesel, it will continue to gain market share. One can bank on that.